DoubleDown Interactive Co., Ltd.

Good afternoon, and welcome to Double Down's Interactive Earnings Conference Call for the second quarter ending in June 30th, 2024. My name is Lisa, and I will be your operator for this afternoon. Prior to this call, Double Down issued its financial results for the second quarter of 2024 in a press release, a copy of which has been furnished in a report on Form 6K filed with the SEC and is available in the Investor Relations section of the 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 CEO, Mr. N. Cookin, and its CFO, Mr. Joe Segrist. Following their remarks, we will open the call for questions. 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 Security Exchange Act of 1934 as amended. And the company hereby claims 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, and other similar terms. Forward-looking statements include and are not limited to those regarding the company's future plans, mergers, an acquisition strategy, strategic and financial objectives, expected performance, and financial outlook. Forward-looking statements are subject to numerous risks and uncertainties that can cause actual results to differ materially and adversely from what the company expects. Therefore, you should exercise caution in interpreting and relying on them. The company refers you to Double Down's annual report on Form 20F, filed with the SEC March 28, 2024, and other SEC filings for more detailed discussion of the risks that could impact future operating results and financial conditions. 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 the call, management will discuss non-GAAP 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 GAAP. A full reconciliation of these measures to the most directly compatible comparable gap measure is available in the earnings release and in the form 6K filed with SEC prior to this call. 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. It's now my pleasure to turn the call over to Double Down's CEO. And, Kim, you may begin.

Thank you, Risa. Good afternoon, everyone. Thank you for joining us on our 2024 second quarter earnings call. This afternoon, we reported total Q2 revenue of $88.2 million, comprised of $80.3 million generated by our social casino free-to-play games, and $7.9 million generated by SuperNation, our iGaming business. Q2 was the third consecutive quarter of year-over-year revenue growth for our free-to-play social casino business, as it was up 7% compared to Q2 2023. Our social casino revenue growth reflects our ability to gain market share and outperform the industry as Eiler and Classic Gaming recently reported an estimated Year-over-year, overall top-line decline for the social casino segment at large. Importantly, our top-line growth is being achieved within our criteria of consistently converting revenue to profit and cash flow. Adjusted EBITDA for the second quarter rose 34% year-over-year to $37 million and cash flow from operations. was $34.4 million. Double Down Casino continues to be the driver of our strong results, as we again generated year-over-year increase in some of our most important KPIs, including ARP DAU, average monthly revenue per payer, and payer conversion rates. As we've previously discussed, we believe The recent growth of our social casino business is in part due to last year's release of new meta features for Double Down Casino. These features are consistent with our focus on player and payer retention as we continue to deliver even more excitement to Double Down Casino players. In this second quarter, the social casino business also benefited from our initiative to provide players with greater options to buy chips from direct channels. Revenues from these efforts, which benefit our profitability, are beginning to ramp noticeably. In summary, our strategy for Social Casino is to continue enhancing the entertainment value of Double Down Casino while remaining disciplined in our user acquisition and R&D spend to drive strong profitability and free cash flow. Turning to SuperNation, Q2 was the second full quarter of our ownership of this iGaming business. Revenues of $7.9 million per SuperNation in Q2 continued to be above our estimate of what the business quarterly run rate was prior to our acquisition in late 2023. In Q2, we pulled back somewhat on player acquisition spending compared to Q1. As we've gained more experience with the business, we are beginning to fine-tune our plans and efforts to scale In this business, we believe we have many opportunities to leverage our core strengths, including our game developers' expertise in game creation and our marketing platform to scale SuperNation profitably. And over the next several quarters, we expect to continue to find the investment sweet spot in the business to optimize both top-line growth and cash flow generation. The early progress we are having with SuperNation confirms our thesis that we can leverage our core strengths and balance sheets to further diversify our business into new gaming categories that have a highly addressable market opportunity. We are continuing to invest in new internally developed mobile games including those we expect to launch in the second half of this year, with the commitment to undertake these efforts in a manner that creates additional value for shareholders. Given our excellent financial foundation, we will continue to evaluate opportunity to expand into new markets, both organically and through M&A. Now I turn it over to our CFO, Joe Sigrist, to walk us through our financials before providing my closing remarks. Joe?

Thank you, IK, and good afternoon, everyone. Our revenues for the second quarter of 2024 were $88.2 million and were comprised of $80.3 million in revenues from our social casino free-to-play games and $7.9 million of revenues from SuperNation. This compares to total revenues from our social casino free-to-play games of $75.2 million last year. As Ike mentioned, Q2 social casino free-to-play revenue was up 7% year-over-year, which is in contrast to Eiler's recently published estimate of a Q2 year-over-year social casino industry top-line decline. Going forward, our goal is to continue to outperform the overall social casino market as we monitor and react to changes in the macroeconomic environment and overall consumer sentiment. In the second 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 $1.33 in Q2 2024 from $1.05 in Q2 2023, marking a 27% increase. Payer conversion ratio, which is the percentage of players who pay within the social casino app environment, increased to 6.7% in Q2 2024 compared to 6.0% in Q2 2023. And average monthly revenue per payer increased 23% to $288 in Q2 2024 from $235 in Q2 2023. Operating expenses rose on a year-over-year basis to $52.0 million compared to $47.7 million in the second quarter of 2023. Operating expenses for the 2024 second quarter include the operating expenses associated with our operation of SuperNation, which we did not own in Q2 of last year, and which were partially offset by lower sales and marketing and research and development expenses for our social casino operations. Sales and marketing expenses for the second quarter of 2024 were $11.1 million, a decline of 15% compared to Q2 2023, and down 25% on a quarterly sequential basis. In Q2, we began to fine-tune our approach to ramping the top line of SuperNation, while at the same time managing this business to establish the foundation to generate consistent profitability and cash flow. Our sales and marketing costs focused on acquiring new social casino players continue to reflect our focus on spending to ensure we deliver the best return on this investment. For Q3, we anticipate that overall sales and marketing expenses will be in line with Q2 levels. Net income for the second quarter of 2024 was $33.3 million or $13.39 per diluted share and 61 cents per ADS compared to net income of $24.4 million or $9.83 per diluted share and 49 cents per ADS in the second quarter of 2023. Adjusted EBITDA for the second quarter of 2024 increased 34% to $37.0 million compared to $27.6 million for the prior year quarter. Adjusted EBITDA margin was 41.9% for Q2 2024, representing a 520 basis point improvement from 36.7% in Q2 of 2023. Net cash flows provided by operating activities for the second quarter of 2024 were $34.4 million compared to net cash flows used in operating activities of $37.6 million in the second quarter of 2023. The increase is primarily due to higher net income and a lower deferred tax asset impact, as well as the final payment of $95.25 million towards the Benson litigation settlement that occurred in the second quarter of last year. And finally, turning to our balance sheet, as of June 30, 2024, we had $339 million in cash, cash equivalents, and short-term investments with a net cash position at quarter end, including the outstanding loan with our controlling shareholder, W Games, of approximately $303 million or approximately $6.12 per ADS. While we had previously indicated that we intended to pay off loan amounts of approximately $35 million from our controlling shareholder in May, we made the decision to instead extend this loan for an additional two years at the same 4.6% interest rate of the original loans. That completes my financial summary. Now I will turn the call over to I.K. for closing remarks.