Q1 2025 DoubleDown Interactive Co Ltd Earnings Call
Michelle: Good afternoon and welcome to Double Down Interactive Earnings Conference call for the first quarter ended March 31st, 2025. My name is Michelle and I will be your operator this afternoon.
Michelle: Prior to this call, double down issued its financial results for the first quarter of 2025 in a press release.
Michelle: 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.
Michelle: Joining us on today's call, our Double Down CEO , Mr. In Kim and its CFO , Mr. Josie Gris following their remarks, we will open a call for your questions. Before we begin, Richard Land, the company's investor relations advisor will make a brief introductory statement. Mr. Land?
Richard Land: Thank you, Michelle. Before management begins their former remarks, we need to remind everyone that some of management's comments today.
Richard Land: will be forward-looking statements within the meeting 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 Provisions of the Private Securities Litigation Reform Act of 1995.
Richard Land: Full-looking statements or statements about future events and include expectations and projections, not present or historical facts and can be identified by the use of words such as
Richard Land: May, might, will, expect, assume, believe and tend, as to may continue, should, anticipate, or other similar terms.
Richard Land: Forward-looking statements include and are not limited to those regarding the company's future plans, mergers and acquisition strategy, strategic and financial objectives, expected performance, and financial outlook.
Richard Land: Therefore, you should exercise caution in interpreting and relying on them.
Richard Land: We refer you to Double Downs Annual Report on Form 20F, filed with the SEC on April 21, 2025, and other SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition.
Richard Land: 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 accept as required by law.
Richard Land: As noted in this afternoon's press release, beginning with the 2024-4th quarter, double down as reporting its financial results in accordance with IFRS.
Richard Land: As such, the financial results for the 2025 First Quarter Reflect IFRS at the Comparable Period for 2024.
Richard Land: Previously, the company reported its financial results in accordance with Gap Accounting standards, the change to IFRS aligns double-dounce financial reporting with the financial reporting standards of its controlling shareholder in Korea.
Richard Land: During today's call, management will discuss non-IFRS financial measures which are believed by management to be useful in evaluating the company's operating performance.
Richard Land: These measures should not be considered superior to in isolation or as a substitute for their 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.
Speaker Change: I would like to remind everyone that this call is being recorded and will be made available for replay via a link in the Investor Relations section of Double Downs website. With that, it's now my pleasure to turn the call over to Double Down CEO in Cook Kim.
Speaker Change: Thank you, Rach. Good afternoon, everyone. Thank you for joining us on our 20-25-4th quarter-onix call.
Speaker Change: This afternoon, we reported first quarter results with consolidated revenue of $83.5 million, and they'll just hit EBITDA of $30.8 million.
Speaker Change: 21 Revenue was comprised of $17.3 million generated by our social casino free play games and $13.2 million generated by our iGaming Business Supernation.
Speaker Change: In 2-1, we again, FQT, on our key operating priority of driving a high conversion of revenue to profit and cash flow, as cash flow from operations were $41.1 million.
of more than $5 million from Q1 2024.
Speaker Change: This strong conversion of revenue to cash flow is a whole month for double down and we will continue to focus on it 50 years.
Speaker Change: Even as we comped against the strong social scene of performance we had last year.
Speaker Change: And we also continue to expect strong cash flow conversion, even as we continue to increase marketing to acquire new players at SuperNation.
Speaker Change: Despite the decline in revenue from our social casino business, our reflective double-down casino app continues to be the engine for profit and cash flow generation.
Speaker Change: In Q1, while average GDA use and MA use were down from last year, we continued to have strong performance
Speaker Change: In our most important monetization KPIs, including ARPADAL and PAIR conversion rates, which both increased compared to 2021 of 2024, and were in line with 2024.
Speaker Change: And while average monthly revenue per payer was down slightly year over year and sequentially, it remains at a level we believe is at the top of the industry.
Speaker Change: The key driver of our strong monetization metrics continues to be our consistent focus on enhancing the entertainment value of the Xeno to drive player and pay retention.
Speaker Change: and we continue to invest in marketing activities focused on the retention of existing players and the activation of left players.
Speaker Change: We also continue to focus on increasing direct-to-consumer revenue in our social casino operation, which further enhances profitability as we offer players different ways to make purchases.
Speaker Change: In Q1, direct consumer revenue was over 10% of our social business, as we worked to achieve our target for 2025, which is to save 15%.
Speaker Change: Sonny 2 Supernation, Q&A revenues of $13.2 million, represents the high quarterly performance of the business since our acquisition in late 2023, and was of over $4 million from the first quarter of 2024.
Speaker Change: Superonation continues to see success in both the UK and Sweden, driven by increases in our EU player acquisition investment.
The success we have had to date.
Speaker Change: with scaling support nation conforms our rationale for the Constitution, and we see additional significant opportunities to further scale in existing markets, even as we look to expand in other regulated European eye gaming markets.
Speaker Change: Our experience in owning and operating supernation over the last 18 months is...
Speaker Change: and our success with integrating the operations and more recently driving very healthy levels of top-line growth makes us increasingly confident that we can leverage our core strength.
Along those lines,
Speaker Change: We continue to engage in discussions regarding potential or conditions that meet our criteria.
Speaker Change: for expanding our operations into new markets while further diversifying our revenue and cash flow sources to create new value for shareholders.
Speaker Change: Regarding our internal game development efforts, after extensive passing, we have decided to not move forward with a commercial launch of a new match to start game.
Speaker Change: Given our mantra of focusing on ensuring we can deliver strong player engagement and monetization to ensure we drive cash flow generation.
Speaker Change: We will be very disappointed around the launch of new games in new categories, and we'll do so only when our extensive testing provides the evidence.
that a new game fits our broader business priorities.
Speaker Change: Now I will turn it over to our Seattle Joe Sigrist to walk us through our financial providing by closing remarks. Joe
Thank you, I came. Good afternoon, everyone.
Speaker Change: As Rich mentioned earlier, beginning with the fourth quarter of 2024, we are now reporting our financial results in accordance with IFRS and the comparisons of our 2025 first quarter results to 2024 first quarter results reflect that change for the prior year period under IFRS.
Speaker Change: The financial statement implications and switching to IFRS from GAP are generally insignificant. With the biggest change being how our leases are treated, as some amounts are now included in depreciation and amortization under IFRS, this generally makes our report adjusted to EBITDA slightly higher.
Speaker Change: Our revenues for the first quarter of 2025, as I came mentioned, were 83.5 million dollars and were comprised of 70.3 million dollars in revenues from our Soficino pre-to-play games and 13.2 million dollars of revenues from Super Nation. This compares to total company revenues of 88.1 million dollars last year.
Speaker Change: On a year-over-year basis, as expected, given our strong social casino performance in Q1 last year, social casino revenues decline 12%, while our eye-gaming revenues increased
Speaker Change: As I say noted, we continue to generate strong monetization in the business with several KPI metrics for our social casino business improving again compared to the year ago period, including average revenue per daily active user or ARP Dow increased to $1.29 cents.
in Q1 2025 from $1.26 in Q1 2024.
Speaker Change: Pair conversion, which is the percentage of players who pay within the social casino apps increased to 6.9% in Q1 2025 compared to 6.4% in Q1 2024.
Speaker Change: and average monthly revenue per payer continue to be strong at $276 in Q1 2025, which is down just slightly from $201 in the prior year of period.
Speaker Change: As noted on the fourth quarter call, industry revenues were forecasted decline in 2025. These industry forecasts, combined with our strong performance throughout 2024, will make year-over-year social casino growth a challenge in 2025.
Speaker Change: However, we have the right strategies in place, including our focus on product development improvements, live operation enhancements, and marketing initiatives to support player retention and monetization to help us maintain our industry position.
Speaker Change: And, as is our hallmark, our operating priorities for the social casino business will emphasize our focus on generating attractive margins and strong free cash flow.
Speaker Change: Operating expenses were $53.9 million for the first quarter of 2025, compared to $57.0 million in the first quarter of 2024.
Speaker Change: We had lower research and development expenses for our social casino free-to-play operations and a decline in the cost of revenue reflecting the lower revenue in the period, which were partially offset by higher general administrative expenses.
Speaker Change: Sales and marketing expenses for the first quarter of 2025 were 14.3 million dollars compared to 15.1 million dollars in the first quarter of 2024.
Speaker Change: In Q1, we continue to focus on optimizing spending to acquire new players for our flagship social casino app, Double Down Casino.
Speaker Change: This focus helps us maintain margins in the business as the cost to acquire new players continues to rise due to, we believe, the large investments now being made by sweepstakes, games publishers.
Speaker Change: At the same time, we continue to increase sales and marketing spending for Supernation, focused on the acquisition of new players primarily in the UK and Sweden and you can see the positive impact in the recent results we've seen with Supernation.
Speaker Change: Profit, excluding non-controlling interest for the first quarter of 2025 was $23.9 million or $9.65 per alluded share, and $0.48 per ADS.
Speaker Change: Compared to profit-excluding non-ctrolling interest of $30.3 million or $12.24 per diluted share and 61 cents per ADS in the first quarter of 2024.
Speaker Change: Adjusted EBITDA for the first quarter of 2025 was $30.8 million compared to $32.7 million for the prior year quarter. Adjusted EBITDA margin was $39.36.9% for Q1 2025.
As compared to 37.1% in Q1 2024.
Speaker Change: Net Cash Flow is provided by operating activities in Q1 2025, or $41.1 million, compared to $35.7 million
2024.
Speaker Change: with a net cast position at quarter end of approximately $422 million, or approximately $8.51 per
Speaker Change: That completes my financial summary. Now I'll turn the call back to IK for closing remarks.
Thank you, Joel.
Speaker Change: As highlighted in our two-unresults, our data plane in investing has appropriated in our two main business, allows double down to continue generating strong profitability and free cash flow.
Speaker Change: We will maintain our capital efficiency this plane going forward as we focus on both product improvements and live-ups enhancements in double down casino to maintain its strong comparative position.
Speaker Change: For Super Nation, we will continue to selectively increase our investment in new player position as we target additional top-line growth this year.
Speaker Change: It is important to note that at scale, eye-gaming businesses can be highly profitable and our execution today is moving as closer and closer toward achieving that needed level of scale.
Speaker Change: In closing, we expect to extend our track records of consistently generating attractive free cash flow this year.
Speaker Change: As we do so, we will further strengthen our balance and the foundation we have established.
Speaker Change: to pursue growth by exploring opportunities in objects and gaming categories through our in-house development efforts and through potential MNA opportunities.
Alfredo.
Speaker Change: I'm just asking if we want to stand by the operators just having trouble with her phone, so we'll just give her a minute to try and fix that and then we'll get to Q&A.
Speaker Change: And it looks like our first question is going to come to the line of Aaron Lee with McCory. Your line is open. Please go ahead.
Erin Lee: Hey, good afternoon. Thanks for taking my question. Nice job on the Supernation Group this quarter. Can you just speak to what trends you're seeing in Supernation's markets? And are there any major sporting events we should be mindful of that are important from either a handle or customer acquisition standpoint? Thanks.
Well, it means the...
The continued
Erin Lee: Benefit of the quick ROI attributed to the investment in acquiring new players has been what's allowed us to continue to feel good about.
Investing in Marketing and...
to scale that. We spent, um,
Erin Lee: Quite a bit of money from a marketing perspective in Q1 on supernation and you'll actually see that
Erin Lee: in what we spent with Supernation, but again, the really good news is,
The very rapid
Erin Lee: Payback that we've seen with with that and that includes both in Sweden and in the UK and
Erin Lee: You know, given that they're really a very small fish in both those markets.
Erin Lee: gives them kind of room to run relative to growing market share from a very small
Erin Lee: Small current number and so from that standpoint I think we're
Erin Lee: You know, we're just really pleased with the execution of the monetization of new players.
Erin Lee: I'm sorry, Aaron, could you repeat your question about sporting events?
Aaron: Yeah, just wondering if there's any major events we should be mindful of that are coming up that are either important from a handle or a customer acquisition standpoint.
Aaron: Actually, our revenue portion is lots of portion of slots. It's all eye-gaming, so yeah, there's no event-based, you know, I don't know, from a marketing...
Aaron: Promotion standpoint, there may be some tie in from an advertising perspective, but you know this is all slots, so it's you know it's just really the the engagement of of our players and their time to be playing slot games.
Gotcha, okay, that makes sense [inaudible]
Speaker Change: And then just looking for an update from an M&A perspective, has anything changed in terms of the opportunities or your focus?
Aaron: especially given all the experience you have now growing supernation and can you speak to the dynamics of the MNA environment you know has the current macro uncertainty changed anything there thank you.
Aaron: that is inclusive of both free to play or kind of mobile call it mobile gaming if you will as well as eye gaming and we've had a few eye gaming opportunities across our
Aaron: You know, cross our desk recently. I'll be at small ones, but there's there's been interest. And I think as we get our name, a supernation and double down get it.
gets its name more.
Aaron: More well-known in the eye-gaming space, I think we're going to see potentially even more opportunities on the eye-gaming side, eye-gaming side, but as we said in the past, we're not only looking...
Aaron: At Eye Gaming, although we do now have, I think, the Super Nation a really nice platform to build from, especially in Western Europe .
Aaron: But we're also obviously looking at the casual game opportunities as well and those continue. So yeah, I don't think anything has changed recently, I don't see a drop-off in either...
Aaron: interest, or certainly in people pitching us, which I think is always a good thing.
Okay, thank you. Appreciate the call.
Aaron: Thank you. Thank you and one moment for our next question.
Speaker Change: Our next question is going to come from the line of Josh Nichols with B. Riley. Your line of open please go ahead.
Josh Nichols: Yeah, thanks for taking my question, just to dig a little bit deeper.
Speaker Change: on the supernation I gave in peace to the business, you know, again, a phenomenal growth of almost sixty percent.
Speaker Change: Growing throughout the rest of the year from this current base that you just hit in one cute, that's your new record.
Speaker Change: Well, as I said, we are excited about what the returns have been in our investment in acquiring new players and...
and frankly, haven't seen it drop.
Speaker Change: from that more recently, so we would expect unless something changes to continue to be investing at or even above this level and be seeing the requisite revenue result from that investment.
Speaker Change: And that's still running to your point, I think, like EBITDA break even this year, then flipping the EBITDA positive, or is this higher revenue base going to push you to EBITDA possibility a little bit earlier than previously anticipated.
Speaker Change: Well, as we said in our remarks, we know that eye gaming businesses at some point can be quite profitable at scale. We're not there yet to your point.
Speaker Change: on being kind of at, or even at this point, slightly below even a break even, but the way to
Speaker Change: to both grow revenue and get to EBITDA positive is to continue to scale the business and that's what we're really excited about doing the rest of the year.
Speaker Change: Yep, and then thanks just touching on the social casino. I think you're pretty...
Speaker Change: Tough comp, right, looking at this for like the first half [inaudible]
of the year. They get a bit better.
Speaker Change: In the second half, any color on the expectations for what you're thinking in terms of, like...
Speaker Change: The rate of decline for that business, and then you said it would be difficult to grow.
Speaker Change: right year over year, given that it was expected to shrink, but overall is this 12% decline that you saw on one queue expected to kind of abate a little bit and ultimately in the back basket to kind of like a low single digit decline or maybe even growth by the time we get to like 4 queue.
Speaker Change: Well, there's no doubt you've got it exactly right, John . There's no doubt that the first half of the year is the toughest.
comp for us, and specifically the first quarter.
Speaker Change: and so I think that lends itself to the 12 percent.
Speaker Change: with the most recently concluded quarter. The comps definitely do get easier in the second half of the year.
I mean, given what we've seen.
You know, in the results of our peers.
Speaker Change: Even more recently, I think it's going to be a challenge, you know, to grow even in the second half of the year, your core over quarter, but I do think that, you know, the compares do get better as we look to Q3 and certainly to Q4.
Speaker Change: And just last question for me, you mentioned it on the prepared remarks.
Speaker Change: The user acquisition cost has been getting a little bit more expensive on the social casino side for some reason really because of
Speaker Change: Elevate Investments being made by some of these like sweepstakes competitors, are you seeing that, is it really just impacting?
Speaker Change: New User Acquisition Costs, or using a little bit more churn of some of the existing legacy basic that you guys have moving over to sweepstakes as opposed to social casino or just more.
Speaker Change: On User Acquisition Costs, we're trying to bring new users into the funnel.
Speaker Change: Well, it's really hard, I mean, it's a really good question, Josh. I mean, it's really hard for us to tell what, you know...
We may be losing from a player perspective.
Speaker Change: to the sweepstakes. We just know that there's been no abatement in the...
Aggressiveness that advertisers are—
Speaker Change: are using to price especially for social casino companies because they know how well we monetize and they frankly use that to set their pricing and you know although it can't be
Speaker Change: Impact of the sweepstakes apps on the pricing for new user acquisition.
Thank you.
Speaker Change: Great. Thanks, Josh. Thank you in one moment for our next question.
Speaker Change: Thank you. Good afternoon, I.K. and Joe. Congrats on the strong supernation results. Thanks for taking the questions here. If I could just follow up on that, you know, given that's, you know, nice strength, nice year of your growth, you know, you spoke to liking the spend efficiency. Would you say it's improving or kind of leveled out here? And I guess I would just ask, you know, [inaudible]
Speaker Change: Other than kind of the, you know, attractive return on your stand for player acquisition, you know, could you maybe speak to any of the other drivers of strength and supernation?
Sure, yeah.
Listen, I think the-
Speaker Change: The Marching Story is such a good story and such a...
Speaker Change: Short-term driver that I appreciate you asking about other things are going well, supernation, including product.
Speaker Change: and some of the continued good work the team and multi are doing from a product development standpoint.
We've also really benefited from the fact that
Speaker Change: The company has three brands and I know when we acquired the company we talked about duels. There is a lot there is and continues to be a lot of excitement around duels.
Speaker Change: But they have two other brands that have shown to be quite strong as well. They're kind of more, I don't want to use a term legacy brands, but brands that have been around and associated with the company for a little longer. And that
the life of those brands.
Speaker Change: Lee Ninde, those brands as well as the Duals brand and so we're continuing to do product improvements and of course refreshes and the various things that we do from a live on standpoint to as I said to lean into all three of those brands.
Speaker Change: I've got it very helpful. If I could follow up to your prepared remarks, you talked about now moving forward with the commercial launch of a new game. Maybe to discuss what you're not happy with there, and do you have any other kind of in-house developments over the foreseeable future, and how should we maybe think about the timeline of kind of new development?
Speaker Change: We currently have several new game concepts in development and we've been expanding our capabilities, particularly in casual downloads by incorporating AI-assisted production
Speaker Change: These tools allow us to iterate better and past more ideas, which is especially valuable in today's environment where a user or physician caused to remain elevated.
Speaker Change: That's that. We continue to take a very disappointing approach to greenlining your title.
as we saw with the recent factory project.
Speaker Change: Even well-developed concepts may not be at our internal threshold, or player engagement or monetization.
Speaker Change: We believe that long-term success in new categories requires patience, rigorous testing, and no willingness to walk away when the data doesn't support a commercial launch.
Speaker Change: So, while we are optimistic about the tools and things we are building, we remain cautious and metrics driven in our execution. I will go with not just to launch games, but to launch games that can scale properly.
Thank you.
Understood, thanks.
Speaker Change: Thank you and this is going to conclude today's question and answer session. This is also going to conclude today's conference call. Thank you for participating and you may now just connect. Everyone, have a great day.