Earnings call transcript: Doubledown Interactive Q4 2024 shows steady growth

Doubledown Interactive Co Ltd (DDI) reported its financial results for the fourth quarter of 2024, revealing a slight decline in quarterly revenue but a significant increase in annual revenue. The company’s stock saw a modest rise of 2.56% in aftermarket trading, closing at $11.05, following the announcement. Despite the slight dip in quarterly revenue, the company achieved a 10% increase in full-year revenue, highlighting its growth trajectory in a challenging market.

Key Takeaways

• Q4 2024 revenue decreased slightly to $82 million from $83.1 million YoY.
• Full-year 2024 revenue increased by 10% to $341.3 million.
• Adjusted EBITDA for the year rose by 16% to $141.9 million.
• The company maintained strong cash flow from operations, reaching $148.5 million in 2024.
• Stock price increased by 2.56% in aftermarket trading.

Company Performance

Doubledown Interactive demonstrated robust annual performance with a 10% increase in full-year revenue to $341.3 million, despite a slight year-over-year decline in Q4 revenue. The company’s adjusted EBITDA also showed a healthy growth of 16% year-over-year, reaching $141.9 million. This performance underscores Doubledown’s resilience in a competitive gaming industry, marked by its strategic focus on enhancing player engagement and monetization.

Financial Highlights

• Revenue: $82 million for Q4 2024, down from $83.1 million in Q4 2023.
• Full-year revenue: $341.3 million, up 10% from 2023.
• Adjusted EBITDA: $35.1 million for Q4, down from $37 million in Q4 2023.
• Cash flow from operations: $148.5 million for 2024, significantly up from $24.1 million in 2023.
• Cash and equivalents: $415 million as of December 31, 2024.

Outlook & Guidance

Doubledown Interactive expects to generate attractive free cash flow in 2025, with plans to explore growth in adjacent gaming categories. The company aims to increase its market share in the UK and Sweden, focusing on the Super Nation market. Analyst consensus is strongly bullish, with price targets ranging from $19 to $21, suggesting significant upside potential. Additionally, potential mergers and acquisitions in the gaming sector are on the horizon, which could further bolster its market position. InvestingPro subscribers can access 8 additional key insights about DDI’s financial health and growth prospects through the comprehensive Pro Research Report.

Executive Commentary

CEO In Kook Kim expressed confidence in the company’s strategic direction, stating, "We are confident that our continued focus on enhancing the entertainment value of Dokdang Casino (EPA:CASP) will help us maintain our competitive position." CFO Joe Siegrist highlighted the positive returns on marketing investments, noting, "The ROI associated with acquiring new users has room to run."

Risks and Challenges

• The social casino industry is expected to decline in 2025, posing a challenge for sustained growth.
• Doubledown faces challenging year-over-year comparisons, necessitating innovative strategies to maintain momentum.
• Market saturation and intense competition could impact future revenue streams.
• Macroeconomic pressures may affect consumer spending in the gaming sector.
• Potential regulatory changes in key markets could influence operational strategies.

Q&A

During the earnings call, analysts inquired about the Super Nation acquisition and its potential impact on market share. Executives discussed the positive ROI from marketing investments and the company’s exploration of new game development in casual gaming categories. These insights reflect Doubledown’s strategic initiatives aimed at sustaining growth and enhancing its competitive edge.

Full transcript - Doubledown Interactive Co Ltd (DDI) Q4 2024:

Operator: Good afternoon, and welcome to Double Down Interactive’s Earnings Conference Call for the Fourth Quarter and Full Year Ended 12/31/2024. My name is Marvin, and I’ll be your operator this afternoon. Prior to this call, Double Down issued its financial results for the fourth quarter of twenty twenty four 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 a link to the Investor Relations section at the top of the homepage. Joining us on today’s call are Double Down’s CEO, Mr.

N. Cook Kim and its CFO, Mr. Joe Siegrist. Following their remarks, we will open the call for questions. Before we begin, Richard Land, the company’s Investor Relations Advisor will begin a brief introductory statement.

Mr. Lan?

Richard Land, Investor Relations Advisor, Double Down Interactive: Thank you, Marvin. 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 provisions 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 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, mergers 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.

Therefore, you should exercise caution in interpreting and relying on them. We refer you to Double Down’s annual report on Form 20 F filed with the SEC on 03/28/2024, and other SEC filings for a more detailed discussion

Operator: of the risks that could impact

Richard Land, Investor Relations Advisor, Double Down Interactive: future operating results and 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. As noted in this afternoon’s press release, beginning with the twenty twenty four fourth quarter, Double Down is reporting its financial results in accordance with IFRS. As such, the financial results for the twenty twenty four fourth quarter and full year periods reflect IFRS as do the comparable periods for 2023.

Previously, the company reported its financial results in accordance with GAAP accounting standards. The change to IFRS aligns Double Down’s financial reporting with the financial reporting standards of its controlling shareholder in Korea. 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. 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.

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 Down’s website. With that, it’s now my pleasure to turn the call over to Double Down’s CEO, In Kook Kim.

In Kook Kim, CEO, Double Down Interactive: Thank you, Richard. Good afternoon, everyone. Thank you for joining us on our twenty twenty four first quarter earnings call. This afternoon, we reported financial results for the first quarter with consolidated revenue down slightly year over year to $82,000,000 and adjusted EBITDA of $35,100,000 Total (EPA:TTEF) Q4 revenue was comprised of $73,000,000 generated by our social casino free to play games and $9,000,000 generated by Supernation, our iGaming business acquired in Q4 twenty twenty three. Importantly, we continue to drive a high conversion of revenue to profit and cash flow, the hallmark of our operating priorities.

We again generated significant cash flow from operations in the quarter, contributing to our ability to generate over $148,000,000 of cash flow from operations in full year 2024. Double Down Casino continues to have a solid competitive position in the social casino industry, while average DAU and MAU were down in Q4 from Q3 twenty twenty four, we again generated strong year over year increases in some of our most important monetization KPIs, including ARPDAU, average monthly revenue per payer and payer conversion rate. These strong monetization metrics largely reflect the success of our focus on continued enhancement of the entertainment value of Double Down Casino, including from the introduction of meta features, which have proven popular with players. Focusing on player and payer retention, we continue to adjust and enhance these features to deliver high levels of excitement and engagement among Double Down Casino players. Turning to Super Nation.

Q4 revenues of $9,000,000 represent the highest quarterly performance of the business since our acquisition in late twenty twenty three. In fact, Superannuation’s Q4 revenue was more than 30% higher than our estimates of what the business quarterly loan rate was prior to our acquisition. We are continuing to gain experience and expertise in operating Super Nation and believe we can further grow the business top line in 2025 as we increase our investment in new player acquisitions. With a year of owning and operating SuperNations as an example, we are increasingly confident that we can leverage our core strengths, financial discipline and strong balance sheet to further diversify our company into new gaming categories that have a highly addressable market opportunity. This diversification can include internally developed new games such as a casual match three style game.

As you know, we are very cautious with our approach to launching product in new gaming categories as we conduct extensive player trialing prior to committing to invest in a commercial launch. As the beta trial period for our Magestry game has continued, we are refining and optimizing features around both player retention and monetization based on the feedback we’ve received. We also continue to evaluate M and A opportunities that would meet our criteria for expanding operations into new markets, while further diversifying our sources of revenue and cash flow, thereby creating new value for shareholders. With the success we are achieving with Supranation, we are optimistic that we can identify, acquire and integrate companies that can be long term driver of revenue, cash flow and growth for the company. The strength of our balance sheet give us the foundation to pursue additional opportunities that bring with them more scale compared to Super Nation as we generally believe that the effort to integrate a company two or three times the size of Super Nation is essentially the same as what we have already proved we can do successfully.

If the right value creating opportunity presents itself, we are ready to act. Now I will turn it over to our CFO, Joe Siegrist, to walk us through our financials before providing my closing remarks. Joe?

Joe Siegrist, CFO, Double Down Interactive: Thank you, IK, and good afternoon, everyone. As was highlighted at the beginning of this call, we are now reporting our financial results in accordance with IFRS. The impacts on our financial statements and switching to IFRS from GAAP are generally insignificant. The biggest change is how our leases are treated as some amounts are now included in depreciation and amortization under IFRS. This makes our reported adjusted EBITDA slightly higher.

And from an income statement presentation perspective, depreciation and amortization is not called out as a separate line item, rather items associated with depreciation and amortization are included in their functional expense categories. This is a presentation change only and again is consistent with IFRS. Our revenues for the fourth quarter of twenty twenty four were $82,000,000 and were comprised, as I. K. Mentioned, of $73,000,000 in revenues from our social casino free to play games and $9,000,000 of revenue from Super Nation.

This compares to total company revenues of $83,100,000 last year. In the fourth quarter, several KPI metrics for our social casino business improved again compared to the year ago period, including average revenue per daily active user or ARPDAU increased to $1.3 in Q4 twenty twenty four from $1.24 in Q4 twenty twenty three. Payor conversion ratio, which is the percentage of players who pay within the social casino apps increased to 6.9% in Q4 twenty twenty four compared to 6.4% in Q4 twenty twenty three. An average monthly revenue per payer increased to $282 in Q4 twenty twenty four from $279 in Q4 twenty twenty three. For the full year 2024, total revenue was $341,300,000 a 10% increase from $308,900,000 in full year 2023.

Most of this increase reflects the acquisition of Super Nation, which closed on 10/31/2023. Our social casino business grew slightly in 2024 as compared to 2023, even as overall industry revenues were estimated to have declined. Analysts are forecasting industry revenues to decline again in 2025. These industry forecasts combined with our comps for 2024 will make year over year growth within the social casino category a challenge in 2025. That being said, you can expect us to continue to strive for improvements in the retention and monetization of our players through the ongoing focus on product development and LiveOps enhancements, allowing us to generate attractive margins and strong free cash flow.

Operating expenses were $47,800,000 compared to $47,400,000 in the fourth quarter of twenty twenty three, essentially flat. Operating expenses for the twenty twenty four fourth quarter include the operating expenses associated with our full quarter of Super Nation operations as compared to the sixty one days we own the business in the twenty twenty three fourth quarter. The somewhat higher expenses of operating Super Nation were partially offset by lower marketing and research and development expenses for our social casino free to play operations. Sales and marketing expenses for the fourth quarter of twenty twenty four were $10,400,000 in line with the fourth quarter of twenty twenty three and slightly higher than the third quarter of twenty twenty four. In Q4, we continue to focus on optimizing spending to acquire new players for our flagship social casino app, Double Down Casino.

This is particularly important as the cost to acquire new players continues to rise due to the large investments now being made by sweepstakes games publishers. At the same time, we increased our sales and marketing efforts for Super Nation as we focus on ramping the top line. As I. K. Noted, Supernation had its highest quarterly revenue under our ownership in Q4.

With a full year of operating Supernation under our belt, we are focused on growing its market share this year in their main UK and Sweden markets. Profit excluding non controlling interest for the fourth quarter of twenty twenty four was $35,600,000 or $14.37 per diluted share and $0.72 per ADS compared to net income of $29,900,000 or $10.47 per diluted share and $0.52 per ADS in the fourth quarter of twenty twenty three. Adjusted EBITDA for the fourth quarter of twenty twenty four was $35,100,000 compared to $37,000,000 for the prior year quarter. Adjusted EBITDA margin was 42.8% for Q4 twenty twenty four as compared to 44.5% in Q4 twenty twenty three. For the full year 2024, adjusted EBITDA was $141,900,000 compared to $122,100,000 in 2023 with an adjusted EBITDA margin in 2024 of 41.6% compared to 39.5% in 2023.

While I highlighted that the full year revenue increase was primarily due to the acquisition of Supranation, the full year increase in adjusted EBITDA was entirely due to our ability to generate higher profitability from our social casino operations. For the full year, net cash flows provided by operating activities were $148,500,000 in 2024, compared to $24,100,000 in 2023. As you may recall, 2023 cash flow from operation included a final $95,300,000 payment for the Benson Legal Center. And finally, turning to our balance sheet, as of 12/31/2024, we had $415,000,000 in cash, cash equivalents and short term investments with a net cash position at quarter end of approximately $381,000,000 or approximately $7.69 per ADS. That completes my financial summary.

Now I’ll turn the call back to IK for closing remarks.

In Kook Kim, CEO, Double Down Interactive: Thank you, Joe. We are proud of our results in 2024 with total revenue of $341,000,000 up 10% compared to 2023 and adjusted EBITDA up nearly 16% year over year to $141,900,000 And as we highlighted earlier, we generated more than $148,000,000 in cash from operations. For both our social casino and iGaming operations, our strategy in 2025 is to continue driving player engagement and monetization, while maintaining our capital efficiency discipline. We do recognize that the social casino category is much worse and this sets up some challenging comparisons for 2025. That said, we are confident that our continued focus on enhancing the entertainment value of Dokdang Casino will help us maintain our competitive position, while our discipline around user acquisition and R and D expense will result in continued strong profitability and free cash flow.

We will also continue to focus on increasing direct to consumer revenue, which will further enhance the profitability of our digital casino operations as we offer players different ways to make purchases. We made good progress with these efforts in 2024 and expect additional success this year. With a full year of experience operating SuperNations, we expect to achieve additional top line growth this year. We are encouraged by SuperNations results in 2024 and see opportunities to increase our investment in acquiring new players in both Sweden and The UK’s per nation’s main market. In closing, we expect to expand our track record of consistently generating attractive free cash flow this year.

As we do so, we will further strengthen our balance sheet and the foundation. We have established to pursue growth by exploring opportunities in adjacent gaming categories through our in house development efforts and through potential M and A opportunities. We are now happy to take your questions. Marvin?

Operator: Thank you. And our first question comes from the line of Aaron Lee of Macquarie. Your line is now open.

Aaron Lee, Analyst, Macquarie: Hey guys, thanks for taking my question. I wanted to start with Super Nation. As you pointed out, it’s been a year since the acquisition. So could you just reflect on your accomplishments with that over the past year? What went right?

Maybe what’s been surprising? And you talked about increasing SuperNations market share with increased marketing spend. Any other initiatives you would highlight maybe from a LiveOps or content standpoint? Thank you.

Joe Siegrist, CFO, Double Down Interactive: Yes, I think the marketing I’ll speak to the marketing execution and maybe IK you want to talk about product content or product development. But I highlight the marketing execution, because what we’ve learned and found is that the ROI associated with acquiring new users has room to run. And as we have continued to test various different ways of acquiring new users. We have optimized around a set of channels and techniques that seem to be working. And this has allowed us to acquire more users, spend more money, but most importantly do it profitably with the return that is well within our target.

And so that gives us increased as the year went on, really gave us increased confidence that we could spend more money in the acquisition of new players. I mean, if you look at Q3 versus Q4 of this year, we as a company spent more somewhat more money in marketing and that was entirely in spending more money with Supernation. And that just reflects the confidence we have that that will pay off and it has almost immediately in the sense of ramping the revenue.

In Kook Kim, CEO, Double Down Interactive: Yes. To support Joe’s comment, the most important thing for us now is to find scalability to get a bigger market share. Geo expansions and brand enhancement and marketing UA investments are the priorities. Given that now we have three attractive scalable brands, MI Spins, Bududrins and DUOZ, We are seeking we are seeing these brands’ potential to grow recently. And in addition, we will seek additional differentiated opportunity by offering compelling features as we are doing in social casino platform.

Currently, we will focus more on improving our users’ lifetime value as we develop social casino KPIs. That’s our core strength in recent years. So this virtuous cycle should be essential to scale up the business from ROI perspective as well. Thank you.

Aaron Lee, Analyst, Macquarie: Great. Thank you. That’s good color. And then as a follow-up, over the last couple of quarters, we’ve seen the success you’ve had with introducing new meta features and growing monetization. With regard to the product roadmap, can you just help us understand how you’re positioning yourselves to continue the momentum, given that you’ll be lapping some tough comps from your success this year?

In Kook Kim, CEO, Double Down Interactive: Yes. Let me start first. Most effective event features combination are mainly, for example, these three combinations in DTC. Actually, the first one is daily, weekly missions, light mission passes plus leaderboard challenges. This encourages daily log ins and fuel competitive speed.

The second one is kart collection events like Wonder Karts plus seasonal events like VIP races and journey. This maintains long term retention and attracts less users. Actually, the third one is, we are researching now personalized experiencing using AI systems. This can enhance our users’ interaction and boost user engagement. So we believe, as a result, this kind of efforts are ongoing efforts will help us maintain user attraction and longevity and we are working very hard to bring and refresh them.

Aaron Lee, Analyst, Macquarie: That’s great. Thank you. Appreciate all the color.

Operator: Thanks, Aaron. Thank you. One moment for our next question. And our next question comes from the line of Greg Givas of Northland Securities. Your line is now open.

Aaron Lee, Analyst, Macquarie: Hey, good afternoon, IK and Joe. Thanks for taking the questions. One of the follow ups on Super Nation. Can you discuss, I guess, the efforts and investments you’re making for market share growth? You talked about UK and Sweden.

What kind of investments are you making there to grow your market share? And then kind of separately, like do you expect to expand Super Nation at the new iGaming market?

Joe Siegrist, CFO, Double Down Interactive: Yes. I think the major investment, as I mentioned a minute ago, that is very visible and has almost frankly an immediate impact is in marketing and in acquiring new users. And the monetization of new users is especially in The UK, but also in Sweden is incredibly fast. And so our ROI targets, our payback period targets, the ones that we have from our social casino business are almost too modest compared to what we’re seeing with the iGaming business. And so we really feel good about within reason, of course, spending more money there.

And that’s why you saw, for instance, in Q4, the fact that we increased marketing as a company pretty much solely on the back of the investment in Supernation. And IK mentioned also leveraging the brands and product development. I mean, all of that is really in the focus on the kind of the high entertainment iGaming player. One of the things that you’ll perhaps recall is the thing that attracted us most or one of the things that attracted us most to Super Nation is, they were just weren’t looking for the churn and burn gambler. They also have this idea of the entertainment style online slot player, and that really speaks to the fact that there’s been a good investment in product development and feature development and brand development around the three major brands that they have.

Aaron Lee, Analyst, Macquarie: Got it. That’s helpful. And as it relates to your commentary on future games, what categories maybe make the most sense for development? And wanted to get a sense of if you could share any timing of potential new titles to come?

Joe Siegrist, CFO, Double Down Interactive: Well, the most near term is the Match three game that we have currently in beta. That’s totally internally developed game that we’re working on now. And as IK mentioned, we’re tweaking, optimizing during its beta period. And then the pipeline of additional games that we have fall into other casual gaming categories that I can’t be too specific about relative to the schedule or timing. But from an organic standpoint, we are focused on the casual gaming category.

From M and A perspective, of course, the aperture widens. We’re looking at all sorts of different types of gaming opportunities, both in the regulated side of the business, as well as, of course in the casual game category or even hyper casual category. But that’s also kind of an ongoing focus of the company.

Aaron Lee, Analyst, Macquarie: Got it. Thanks for the color.

Operator: Thank you. 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.

Joe Siegrist, CFO, Double Down Interactive: Thank

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