DoubleDown Interactive Co., Ltd.

Good afternoon and welcome to Double Down Interactive's earnings conference call for the first quarter ended March 31, 2025. My name is Michelle and I will be your operator this afternoon. Prior to this call, Double Down issued its financial results for the first quarter of 2025 in a press release, a copy of which is available in the investor relations section of the company's website at .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. Nkuk Kim and its CFO, Mr. Joe Segrist. Following their remarks, we will open the call for your questions. Before we begin, Richard Land, the company's investor relations advisor, will make a brief introductory statement. Mr. Land?

Thank you, Michelle. Before management begins their formal remarks, we need to remind everyone that some of the 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 acquisitions 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 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. 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 2024 fourth quarter, Double Down is reporting its financial results in accordance with IFRS. As such, the financial results for the 2025 first quarter reflect IFRS as the comparable period for 2024. 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, Nkuk Kim.

Thank you, Rach. Good afternoon, everyone. Thank you for joining us on our 2025 first quarter earnings call. This afternoon, we reported first quarter results with consolidated revenue of $83.5 million and adjusted EBITDA of $30.8 million. Q1 revenue was comprised of $17.3 million generated by our social casino Freak Play and $13.2 million generated by our iGaming business SuperNation. In Q1, we again executed 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, up more than $5 million from Q1 2024. This strong conversion of revenue to cash flow is a hallmark for Double Down, and we will continue to focus on it this year, even as we count against the strong social casino performance we had last year. And we also continue to expect strong cash flow conversion, even as we continue to increase marketing to acquire new players at SuperNation. Despite the decline in revenue from our social casino business, our Freak Tip Double Down Casino app continues to be the engine for profit and cash flow generation. In Q1, while average DAUs and MAUs were down from last year, we continued to have strong performance in our most important monetization KPIs, including ARPDAO and Payor conversion rate, which both increased compared to Q1 of 2024 and were in line with Q4 2024. And while average monthly revenue per payer was down slightly year over year and sequentially, it remains at a level we believe is at or near the top of the industry. The key driver of our strong monetization metrics continues to be our consistent focus on enhancing the entertainment value of the Dumb Casino to drive player and payer retention. And we continue to invest in marketing activities focused on the retention of existing players and reactivation of left payers. We also continue to focus on increasing -to-consumer revenue in our social casino operations, which further enhances profitability as we offer players different ways to make purchases. In Q1, -to-consumer revenue was over 10% of our social casino business as we worked to achieve our target for 2025, which is to exceed 15%. Turning to supernation, Q1 revenues of $13.2 million represent the highest quarterly performance of the business since our acquisition in late 2023 and was up over $4 million from the first quarter of 2024. Supernation continues to see success in both the UK and Sweden, driven by increases in our new player acquisition investment. The success we have had to date with scaling supernation confirms our rationale for the acquisition and we see additional significant opportunities to further scale in existing markets even as we look to expand in other regulated European iGaming markets. Our experience in owning and operating supernation over the last 18 months and our success with the operations and more recently driving very healthy levels of top-line growth makes us increasingly confident that we can leverage our core strengths, financial discipline and strong balance sheets to further diversify our company into new gaming categories that have highly addressable market opportunities. Along those lines, we continue to engage in discussions regarding potential acquisitions that meet our criteria for expanding our operations into new markets while further diversifying our revenue and cash flow sources to create new value for shareholders. Regarding our internal game development efforts, after extensive testing, we have decided to not move forward with a commercial launch of a new Metis 3-star game. Given our mantra of focusing on ensuring we can deliver strong player engagement and monetization to ensure we drive cash flow generation, we will be very disappointed around the launch of new games in new categories and will do so only when our extensive testing provides the evidence that a new game fits our broader business priorities. We continue to develop new game concepts and look forward to evaluating them in trials over the next several months. Now I will turn it over to our CFO Joe Sigrist to walk us through our financial support providing my closing remarks. Joe? Thank

you, IK, and good afternoon everyone. 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. The financial statement implications in 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 reported adjusted EBITDA slightly higher. Our revenues for the first quarter of 2025, as IK mentioned, were $83.5 million and were comprised of $70.3 million in revenues from our social casino free to play games and $13.2 million of revenues from SuperNation. This compares to total company revenues of $88.1 million last year. On a -over-year basis, as expected given our strong social casino performance in Q1 last year, social casino revenues declined 12% while our iGaming revenues increased 59%. As IK 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 ARPDAU increased to $1.29 in Q1 2025 from $1.26 in Q1 2024. Payer conversion, which is the percentage of players who pay within the social casino increase to .9% in Q1 2025 compared to .4% in Q1 2024. And average monthly revenue per payer continued to be strong at $276 in Q1 2025, which is down just slightly from $281 in the prior year period. As noted on the fourth quarter call, industry revenues were forecast to decline in 2025. These industry forecasts, combined with our strong performance throughout 2024, will make -over-year social casino growth a challenge in 2025. However, we have the right strategies in place, including our focused on product development improvements, live operation enhancements, and marketing initiatives to support player tension and monetization to help us maintain our industry position. 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. Operating expenses were $53.9 million for the first quarter of 2025 compared to $57.0 million in the first quarter of 2024. We had lower research and development expenses for our social casino -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 and administrative expenses. Sales and marketing expenses for the first quarter of 2025 were $14.3 million compared to $15.1 million in the first quarter of 2024. In Q1, we continue to focus on optimizing spending to acquire new players for our flagship social casino app, Double Down Casino. 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. 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. Profit excluding non-controlling interest for the first quarter of 2025 was $23.9 million or $9.65 per diluted share and $0.48 per ADS compared to profit excluding non-controlling interest of $30.3 million or $12.24 per diluted share and $0.61 per ADS in the first quarter of 2024. 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 .9% for Q1 2025 as compared to .1% in Q1 2024. Net cash flows provided by operating activities in Q1 2025 were $41.1 million compared to $35.7 million in Q1 2024. And finally, turning to our balance sheet, as of March 31, 2025, we had $455.7 million in cash, cash equivalents and short-term investments with a net cash position at quarter end of approximately $422 million or approximately $8.51 per ADS. That completes my financial summary. Now I'll turn the call back to IK for closing remarks.

Thank you, Joe. As highlighted in our Q1 results, our discipline in investing as appropriate in our two main business allows Double Down to continue generating strong profitability and free cash flow. We will maintain our capital efficiency discipline going forward as we focus on both product improvements and live ops enhancements in Double Down Casino to maintain its strong comparative position. For Super Nation, we will continue to selectively increase our investments in new player position as we target additional top line growth this year. It is important to note that at scale, iGaming businesses can be highly profitable and our execution today is moving us closer and closer toward achieving that needed level of scale. In closing, we expect to extend 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&A opportunities. We are now happy to take your questions. Michelle?

Hi, Michelle, are you there?

Hi.

No,

Michelle,

we cannot hear you.

Just asked if you want to stand by the operator is 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.

Okay, thanks, Rich.

I'm sorry about that. Ladies and gentlemen, if you would like to ask a question at this time, please press star 1 on your telephone. And it looks like our first question is going to come from the line of Aaron Lee with McCorry. Your line is open. Please go ahead.

Hey, good afternoon. Thanks for taking my question. Nice job on the SuperNation growth 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, I mean, the continued 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 and to scale that. We spent quite a bit of money from a marketing perspective in Q1 on SuperNation. And you'll actually see that sequentially the sales and marketing spend for the company went up quite a bit. And the bulk of that increase from Q4 was in what we spent with SuperNation. But again, the really good news is the very rapid payback that we've seen with that. And that includes both in Sweden and in the UK. And given that they're really a very small fish in both those markets gives them kind of room to run relative to growing market share from a very small current number. And so from that standpoint, I think we're just really, really pleased with the execution of the monetization of new players. I'm sorry, Aaron, could you repeat your question about

sporting

events?

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 customer acquisition standpoint?

Actually, our revenue portion is lots of portion of slots.

It's all iGaming. So yeah, there's no event-based, I don't know, from a marketing promotion standpoint, there may be some tie-in from an advertising perspective, but this is all a lot. So it's just really the engagement of our players and their excitement to be playing slot games.

Gotcha. Okay, that makes sense. And then just looking for an update from an M&A perspective, has anything changed in terms of the opportunities or your focus, especially given all the experience you have now growing SuperNation? And can you speak to the dynamics of the M&A environment? Has the current macro uncertainty changed anything there? Thank you.

Yeah, no, I think the flow of opportunities continues. And that is inclusive of both free to play or kind of mobile gaming, if you will, as well as iGaming. And we've had a few iGaming opportunities cross our desk recently, albeit small ones. But there's been interest. And I think as we get our name as SuperNation and double down gets its name more well known in the iGaming space, I think we're going to see potentially even more opportunities on the iGaming side. But as we've in the past, we're not only looking at iGaming, although we do now have, I think with SuperNation, a really nice platform to build from, especially in Western Europe. 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 interest or certainly in people pitching us, which I think is always a good thing.

Okay, thank you. Appreciate the call. Sure, thank you.

Thank you. And one moment for our next question. Our next question is going to come from the line of Josh Nichols with B. Riley. Your line is open. Please go ahead.

Yeah, thanks for taking my question. Just to dig a little bit deeper on the SuperNation iGaming piece of the business, you know, again, pretty phenomenal growth, almost 60%. Do you feel that this level, you know, the 13 million for the quarter is kind of like a base and you would expect to expand that and commensurate with that, you expect that this like elevated level of sales and marketing to kind of persist for the foreseeable future? Effectively, do you think that the SuperNation business is going to be growing, you know, throughout the rest of the year from this current base that you just hit in one queue, that's a new record?

Well, as I said, we are excited about what the returns have been in our investment in acquiring new players and frankly haven't seen a drop from that more recently. So we would expect unless something changes to continue to be investing at or even above this level and to be seeing, you know, the requisite revenue result from that investment.

And that's still running to your point, I think, like EBITDA breakeven this year, then flipping to EBITDA positive or is this higher revenue base going to push you to EBITDA profitability a little bit earlier than previously anticipated?

Well, and as we said in our remarks, we know that iGaming businesses at some point can be quite profitable at scale. We're not there yet, to your point on being kind of at or even at this point, at least slightly below EBITDA breakeven, but the way 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.

Yep, and then thanks. Just touching on the social casino, I think you're a pretty tough comp, right? Looking at this for like the first half of the year, they get a bit better in the second half. Any color on the expectations for what you're thinking in terms of like the rate of decline for that business? I know you said it would be difficult to grow right year over year given that it was expected to shrink, but overall is this 12% decline that you saw in one queue expected to kind of abate a little bit and ultimately in the back half gets a kind of like a low single-digit decline or maybe even growth by the time we get to like four queues?

Well, there's no doubt you've got it exactly right, Josh. There's no doubt that the first half of the year is the toughest comp for us and specifically the first quarter and so I think that lends itself to the 12% compare with the most recently concluded quarter. The comps definitely get easier in the second half of the year. Given what we've seen in the results of our peers even more recently, I think it's going to be a challenge to grow even in the second half of the year, quarter over quarter, but I do think the compares do get better as we look to queue three and certainly to queue four.

Last question for me, you mentioned it on the prepared remarks. The user acquisition cost has been getting a little bit more expensive on the social casino side presumably because of elevated investments being made by some of these sweepstakes competitors. Are you seeing that? Is it really just impacting new user acquisition costs or are you seeing a little bit more churn of some of the existing legacy base that you guys have moving over to sweepstakes as opposed to social casino or is it just more on user acquisition costs for trying to bring new users into the funnel?

Well, it's a really good question, Josh. It's really hard for us to tell what we may be losing from a player perspective to sweepstakes. We just know that there's been no abatement in the aggressiveness that advertisers 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. Although it can't be scientifically confirmed, we do believe that part of that is because we are competing with those that are also doing sweepstakes. That's really our theory around the impact of the sweepstakes apps on the pricing for new user acquisition.

Thank

you. Great. Thanks, Josh.

Thank you. In one moment for our next question. Our next question is going to come from the line of Greg Gibbous with Northland Securities. Your line is open. Please go ahead.

Hey, good afternoon, IK and Joe. Congrats on the strong SuperNation results. Thanks for taking the questions here. If I could just follow up on that, given that nice strength, nice year over year growth, you spoke to liking the spend efficiency. Would you say it's improving or kind of leveled out here? I guess I would just ask, other than kind of the attractive return on your spend for player acquisition, could you maybe speak to any of the other drivers of strength with SuperNation?

Sure. Yeah. Listen, I think the marketing story is such a good story and such a short-term driver that I appreciate you asking about other things that are going well with SuperNation, including product and some of the continued good work the team and Malthar are doing from a product development standpoint. We've also really benefited from the fact that the company has three brands. I know when we acquired the company, we talked about Duels. There is and continues to be a lot of excitement around Duels, 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 the term legacy brands, but brands that have been around and associated with the company for a little longer. The life of those brands has not dissipated, frankly. So we've been able to lean in as we applied additional marketing dollars, lean into those brands, as well as the Duels brand. So we're continuing to do product improvements and of course, refreshes and the various things that we do from a live ops standpoint to, as I said, to lean into all three of those brands.

Got it. Very helpful. If I could follow up to your prepared remarks, you talked about not moving forward with the commercial launch of a new game. Maybe could you discuss what you're not happy with there? Do you have any other kind of in-house developments over the foreseeable future? How should we maybe think about the timeline of new developments?

We currently have several new game concepts in development and we've been expanding our capabilities, particularly in casual genres, by incorporating AI assisted production pipeline. These tools allow us to iterate faster and have more ideas, which is especially valuable in today's environment, where user acquisition costs remain elevated. That said, we continue to take a very disappointing approach to green lighting new titles, as we saw with the recent Backstreet project. Even well-developed concepts may not meet our internal threshold for player engagement or monetization. We believe that long-term success in new categories requires patience, rigorous testing and a willingness to work away when the data doesn't support a commercial launch. While we are optimistic about the tools and teams we are building, we remain cautious and metrics driven in our execution. Our goal is not just to launch games, it's to launch games that can scale profitably. Thank you.

Understood, thanks.

Thank you. 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 disconnect. Everyone have a great day.

Thank you, Michelle. Thanks, everyone.