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00:04 Good afternoon and welcome to DoubleDown's Interactive Earnings Conference Call for the Fourth Quarter and Full-Year 2021 Financial Results ended December 31, 2021. My name is , and I will be your operator this afternoon.

00:19 Before this call, DoubleDown issued its financial results for the fourth quarter and full-year 2021 in a press release, a copy of which has been furnished in a report Form 6-K filed with the SEC and 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. 00:46 Joining us on today's call are DoubleDown's CEO, Mr. In Keuk Kim; and CFO, Mr. Joe Sigrist. Following their remarks, we will open the call for questions. Before we begin, Mr.

Grampp, the company's outside Investor Relations Adviser, will make a brief introductory statement. Mr.

Grampp?.

01:06 Thank you.

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.

01:30 Forward-looking statements are statements about future events and include expectations and projections, not present of historical facts, and it 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 our future plans, mergers and acquisition strategy, strategic and financial objectives, expected performance and financial outlook.

02:00 Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially and adversely from what we expect. Therefore, you should exercise caution in interpreting and relying on them.

We refer you to DoubleDown's annual report on Form 20-F and other SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition. 02:20 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.

02:34 During the call, management will discuss non-GAAP measures, which are believed 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 comparable GAAP measures is available in the earnings release and on our Form 6-K filed with the SEC prior to this call.

02:55 I would like to remind everyone that this call is being recorded and will be made available for replay via a link available in the investor relations section of DoubleDown’s website. 03:03 Now, I would like to turn the call over to DoubleDown’s CEO, Mr. In Keuk Kim..

03:08 Thank you, Jeff. Good afternoon everyone. Thank you for joining us on the earning call for our Q4 and full-year 2021 results.

In the first quarter of 2021, we continued to execute on our strategy to both leverage our leadership in the social casino game through our flagship DoubleDown Casino and expand through the launch of gaming app adjacent to social casino.

03:36 Q4 revenue was down slightly from the Q3 2021 results consistent with our understanding of the performance of the overall social casino gaming industry.

To maximize the ongoing opportunity in social casino game, we plan to continue to exciting new slot game within DoubleDown Casino every one to two weeks, as well as to integrate new meta features focused on further improving our industry leading monetization metrics.

04:12 We finished a successful 2021 by growing revenue to a record of over $363 million, which represents 33% growth compared to 2019 results. Adjusted EBITDA at approximately $120 million remained relatively stable, compared to 2020 and represent growth of 18% compared to our 2019 results.

04:45 I highlight 2019 since 2020 represents a difficult comparable period for this year, given the worldwide stay-at-home measures that significantly benefited our business especially at the onset of the COVID-19 pandemic.

The fact that our 2021 results were materially better than our 2019 results, demonstrates the value of our platform and important of the ongoing player engagement with our games.

05:23 Throughout 2021 and inclusive of the first order we continued our of cash positive orders with $20.4 million in that operating cash flow for Q4 and 96.1 million for the full year. As a result, we ended the first quarter with a cash balance of $242.1 million giving us a strong financial position.

Importantly, we believe our business model will continue to generate positive free cash flow each quarter. 06:05 Now I will hand it over to our CFO, Joseph Sigrist to walk you through our financials before providing my closing remarks.

Joe?.

Hero Survival. 09:51 Going forward, we expect to continue to incur advertising expenses both to acquire and retain players for DoubleDown Casino and for the ramp up of our new app initiative.

It is also worth noting that depreciation and amortization expenses in Q4 2021 or $2.2 million compared to $7.6 million in Q4 2021 and were $17.9 million for the full year 2021, compared to $31.6 million for the full-year 2020.

The decreases were due to the completed amortization of certain identifiable intangible assets for which we use purchase price allocation at the time of the 2017 DoubleDown Interactive acquisition.

10:42 Net income for the fourth quarter of 2021 increased to $17.5 million or $7.08 per diluted share, compared to $15.5 million or $6.99 per diluted share in the fourth quarter of 2020.

For the full-year of 2021, net income increased to $78.2 million or $33.96 per diluted share, compared to net income of $53.6 million or $26.20 per diluted share in the full-year of 2020. 11:27 Adjusted EBITDA for the fourth quarter of 2021 was $25.8 million, compared to $29.9 million in the prior year quarter.

Adjusted EBITDA margin of 29.9% represents a reduction of approximately 296 basis points, compared to Q4 2020. The quarterly year-over-year decline in adjusted EBITDA and adjusted EBITDA margin is primarily attributable to lower revenue and higher sales and marketing costs as I previously discussed.

12:05 For the full-year of 2021, adjusted EBITDA remained relatively stable, compared to 2020 at approximately $120 million. 2021 full-year adjusted EBITDA margin was 33.1% slightly below last year's result of 33.6%. Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures, which we believe are useful in evaluating our operating performance.

12:33 A full reconciliation of these measures to the most directly comparable GAAP measure is available in the earnings release. Cash flow from operations for the fourth quarter of 2021 was $20.4 million, compared to $36.1 million in the prior year period. We did not incur any material capital expenditures during the quarter.

12:57 For the full-year, cash flow from operations was $96.1 million, compared to cash flow from operations of $99.9 million during the 12-months of 2020. 13:11 And finally, turning to our balance sheet, at the end of the fourth quarter, we had $242.1 million of cash and cash equivalents, compared to $223.1 million at the end of Q3 2021.

The improvement in our net cash position was due to the aforementioned net cash flow from operations as we continue to remain in a state of positive cash flow generation. 13:41 That completes my financial summary. Now, I will turn the call back over to IK for closing remarks..

Hero Survival. We were encouraged by the player engagement metrics immediately after on that worldwide launch in late September. We expect to continue to optimize our monetization strategy and the future set of the game as we path forward more material monetization while building a critical math of players for long-term value creation.

15:09 In parallel, we are preparing for the of our next non-social casino app meaning in state, which we currently expect will be available to players in the summer of 2020. We believe that we are in an excellent position to capitalize on the last element of our gross strategy.

15:33 M&A due to our strong balance sheet will start by late September IPO and our track record of post-merger acquisition of that. We continue to evaluate opportunities is to accelerate our organic growth potential and have been encouraged by the recent broader M&A activities within the gaming industry. 15:59 We are now happy to take you questions.

Operator?.

16:07 Thank you, sir. Now, our first question will come from David Bain with B. Riley. Your line is open..

16:28 Great. Thanks. IK and Joe, once again nice cash flow conversion. I guess my first question would be if you could bifurcate the core DoubleDown Casino MAUs and DAUs from Undead World for the quarter.

Do you have any metrics we can ?.

16:48 Yeah, Dave, Thanks.

As I said, in my comments, the total company MAUs did increase and obviously, as you've been following us and the industry, that's for the first time in a while, I think while I can't break it out separately, certainly MAUs and DAUs are still falling somewhat in the social casino business and are being augmented or offset if you will by what we've seen with Undead World, which if you think back to what we described earlier and during the IPO process, is exactly part of the strategy or at least the hopeful outcome of our strategy to expand through adjacent areas, which is to grow our overall player base by moving into social casino ..

17:50 Right. Okay. Okay.

And we've been hearing a lot about the Metaverse or Blockchain in mobile games, are these opportunities that DDI is working on? And what could that look like from just a timing or just overall perspective?.

18:11 Yes. Thanks Dave. Yes, there's no doubt that the Metaverse and Blockchain and NFT, all those terms have been used a lot in gaming more recently.

And certainly, we think it's a very exciting potential for the future of gaming and we're very interested in leveraging, especially in Korea where the gaming industry is definitely really the forefront of some of the Metaverse NFT activity in gaming frankly there that we leverage the expertise available in Korea.

18:52 So, with that maybe I'll ask IK to talk a little bit about what our strategy is at this point..

18:59 Yes. Thank you Joe, and thanks David. We believe it will be one of our future opportunities. Technically I believe our internal – we are ready to adopt and now we are thinking how to leverage it with our own utilizing outside opportunity like M&A and. 19:27 So hope this helps..

19:29 Yeah. I guess additional comment I'll make and Dave as you know, one of the things that we are very frankly cautious about is, creating a thing of value in the social casino context relative to gambling strategies etcetera. So, we also are looking a need to investigate and look at the whole area through that lens as well..

19:59 Understood. Okay. And then if I can go one over, we noticed that DoubleU, the parent offered its first ever dividend since being public and understanding growth is still the priority for DDI. Is the company open to dividends down the road.

If you don't find a suitable or large enough target for diversification at the right price and then just on that end, just any sort of commentary on the M&A market, kind of what you're looking at, what your discussions are sort of bringing in terms of topics or ideas or anything around that would be helpful..

20:41 Sure. Well, at least around on the dividend side, you're right, DoubleU has actually paid a dividend annually ever since it went public several years ago, which is – it's my understanding fairly normal for companies that are listed in Korea. 21:00 Relative to DoubleDown, certainly that’s ultimately one option for us given our cash balance.

But as we've said, especially as we continue to look at M&A opportunities, we know that having a , if you will, at least for a while as we pay some of these more interesting M&A opportunities to the ground is important for us. 21:30 And so at least for now, that's really been our – the focus of our – if you will balance sheet activities.

And we'll look at other options down the road. Relative to M&A progress, obviously I can't speak to anything very specific, but I will say that we are fully engaged in looking at opportunities, and there's been – in a broader mobile gaming market, quite a bit of an M&A activity on the one hand.

22:10 On the other hand, I think to be honest, a valuation expectation and this is good for a potential acquirer, valuation expectations have started to become a little more realistic. And so we were interested in seeing how these will play out..

22:29 Okay. Great. Thanks IK. Thanks Joe..

22:32 Thanks Dave..

22:36 Our next question coming from the line of Greg Gibas with Northland Securities. Please proceed..

22:42 Hi, good afternoon. IK and Joe. Thanks for taking the questions. Appreciate it.

I was wondering you've had a couple of quarters now with year-over-year headwinds related to the state home orders, any thoughts on when you expect to getting back to year-over-year revenue growth? And if we think about the resurgence of COVID cases in January here, you know would that positively impact play time in Q1?.

23:09 Yes, there's no question that the comparables we mentioned earlier on the call to 2020, you know have been somewhat difficult.

That being said, the comparison to 2019 still shows a significant bump in revenue and we are continuing to look to grow from what is a much higher base kind of steady state base of the business than we were two years or less than two years ago.

23:46 If I compare us to what I'm hearing and what we're reading about the social casino industry and how it performed at the end of 2021, as a whole, I think we're all as an industry continuing to do things to create that growth given the bump that we all had over the last 18 months to 24 months.

24:12 I mean, certainly the things that IK mentioned around game improvements within DoubleDown improvements within DoubleDown Casino and meta features are marketing and marketing activities and continued focus on improving our and using our advertising partners positively to acquire good paying new users.

24:38 All that is toward growth within social casino. And then, as we've discussed on top of that, the expansion into social casino adjacencies is extremely important for us.

Very early days, obviously, with just the first few months of the Undead World launch and we have other games in flight in our development teams, but that is going to augment whatever growth that we will ultimately see with Social Casino..

25:11 Great, very helpful, Joe. And I know you already spoke on kind of your M&A and dividend thoughts. So, no need to repeat yourself.

But wanted to follow-up in terms of the balance sheet being strengthened cash generation and conversion strong this quarter, just wondering if you can maybe from a high level discuss upcoming capital deployment or uses in terms of your priorities?.

25:39 Yes. Well, again, I think M&A for us is the top priority. Actually, let me step back and say, the top priority is maximizing shareholder value. And that is first and foremost what we're about. And we see our strong balance sheet as a tool to be used to maximize shareholder value.

26:04 For us, the main focus or the main priority to use what that tool is towards growth. And that growth, obviously, is continuing to do the things that we've been talking about from an organic standpoint, but also the potential through M&A for inorganic growth, as we optimize the use of our cash balance.

And so that's, I think, the best way to answer your question there, Greg..

26:37 Yes, appreciate that. That's helpful. Last one for me just related to Undead World.

Now that we have a handful of months since its launch, do you – just wondering if you could talk, I guess a little bit more about its performance, whether it's kind of lived up to your early expectations? And then do you have a sense of maybe what that game can contribute in 2022? Or any sense of run rate, or really any metrics you'd be willing to share?.

27:04 Yes. So Undead World, we've had three, four months now in worldwide launch. And I'd say, we're very encouraged by player engagement. And that means the reaction to how players are engaging with the game. And certainly, from a metric standpoint, how players are retaining, especially new players, and numbers are especially strong.

Where we continue to be focused is monetization. 27:45 So, taking that excitement, interest, if you will, in the game, and converting that into not only the first time payment activity, but ongoing payment. And so, where we really need to focus based on what we've seen so far is payer retention.

And so, one of the important things that we're doing now is continued development in the game from an economy standpoint, from a feature standpoint, so that we can improve the monetization metrics, and especially the payer retention metrics.

28:25 And so, over the next few months, you're going to see more features released of that sort and improvements there that we expect to aid us in the monetization of the game..

28:42 Got it. Yeah. Thanks for the color, and thanks for taking the questions..

28:47 Thanks, Greg..

28:50 Our next question coming from the line of Aaron Lee with Macquarie. Your line is now open. Please proceed..

29:02 Hey, good afternoon. Thanks for taking my question. I appreciate all your comments on marketing and M&A. So, just a quick one for me.

Just more broadly speaking, when you think about your growth in 2022 and the building blocks for growth, where do you see the biggest opportunities? Do you expect most of your growth to come from converting more users or growing ARPDAU or how do you think about that?.

29:29 Yes. Well, if you look at – I’ll answer in two pieces, right? Obviously, on the social casino side, we are continuing to see improvements in revenue per payer. So the payers that we have continue to be very passionately engaged with the DoubleDown Casino specifically.

And based on the activities that we are giving them like new games, new slot games, etcetera, we're seeing their propensity to pay continue to increase and we certainly see that being a big contributor to 2022 growth. 30:09 We also are adding new players every day, right? So, new user acquisition is extremely important.

It's the biggest single area of discretionary spend in the company. And so, we continue to, we think, do a very good job managing our advertising partners, optimizing the associated with our – with that investment to get new players into the game, and to continue to retain them as payers.

30:38 And so for us, that's really the focus for the social casino side of the business.

Obviously, on the new app side, it's – the ability for us to grow our payer – our player base, first and foremost, as we add new players to like Undead World and ultimately Spinning In Space, and then to get those players to monetize, clearly, that's – it's all incremental revenue to us, in a sense, since we don't have a base of any non-social casino revenue prior to the fourth quarter of 2021.

So, that's obviously another important element of our growth strategy in 2022..

31:23 Great, that's helpful. Just a follow-up – quick follow-up for me. Any updates on how your user acquisition costs have trended post the IDFA change? I think last quarter, you talked about CPI is trending higher in the summer before pulling back in the fall around September, October.

So, I'm curious, how would they trended since then and into early 2022? Thanks..

31:49 Yeah. So, as I think we mentioned – as you said last time, when IDFA initially was deployed, we certainly saw, well, a couple of phenomenons. First of all, there was a big shift towards Android and in the demand, if you will. And so, as a result, the Android CPIs increased significantly.

And that really occurred through the summer, let's say, into the early fall. 32:24 Starting in Q4, we saw Android CPIs actually begin to fall. And fast forward to today, or to the start of Q1, we see Android CPIs essentially back to where they were a year ago. And then relative to iOS, it's really been a volatile environment post-IDFA.

But if you again, fast forward to today, we generally just see the normal volatility that we've experienced in the past around seasonality. So, December spikes, January fall off, just essentially back to the kind of normal fluctuation..

33:11 Okay, got it. Awesome. That's really helpful. Thank you very much..

33:20 At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Sigrist..

33:31 Okay, operator, thank you so much for monitoring this call today. And thanks – a big thank you to everyone who has joined us today for this call and your interest in DoubleDown. And we will continue to keep you updated with further status as we continue to innovate and grow the business and we hope you have a great rest of your day. Thank you..

34:01 Ladies and gentlemen, thank you for joining us today for DoubleDown’s earnings call. You may now disconnect..