Good afternoon, and welcome to DoubleDown Interactive's Earnings Conference Call for the First Quarter ended March 31, 2024. .

My name is Briana, and I will be your operator this afternoon.

Prior to this call, DoubleDown issued its financial results for the first quarter of 2024 in the press release, a copy of which has been furnished in a report on 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 the link to the Investor Relations section at the top of the homepage. .

Joining us on today's call are DoubleDown CEO, Mr. In Keuk Kim; and CFO, Mr. Joe Sigrist. Following the remarks, we will open the call for questions.

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 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, or other similar terms.

Forward-looking statements include and are not limited to, those regarding the company's future plans, mergers and acquisition strategies, 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 DoubleDown's annual report on Form 20-F filed with the SEC on March 28, 2024, 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 obligations 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 comparable GAAP measure is available in the earnings release and on DoubleDown's Form 6-K filled with the 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 DoubleDown's website. It's now my pleasure to turn the call over to DoubleDown's CEO, In Keuk Kim. .

Thank you, Briana. Good afternoon, everyone. Thank you for joining us on our 2024 First Quarter Earnings Call. Today, we announced that total Q1 revenue was $88.1 million with $79.8 million generated by our social casino free-to-play games and $8.3 million coming from the operations of SuprNation, our recent iGaming acquisition.

Q1 revenue from our social casino free-to-play games was up 1% on a quarterly sequential basis and up 3% compared to Q1 2023. And we continue to do an excellent job in converting revenue to profit and cash flow with adjusted EBITDA for the first quarter rising 26% year-over-year to $31.9 million and cash flow from operations at $35 million.

Our social casino game, DoubleDown Casino or DDC, continues to be the driver of our strong results as we generated year-over-year increases in our some of our most important KPIs, including average monthly revenue per payer and payer conversion rate.

More specifically, we are growing monetization with our core paying players as they continue to recognize the great entertainment experience and compelling value that we offer. .

We believe our revenue growth reflects the benefits we are seeing from the introduction of new meta features within DoubleDown Casino.

These features such as Lucky Orbs and Flame Power, which I mentioned during last quarter's call, add to the fun of playing DDC, thereby driving player engagement and retention, and we believe leading to higher overall monetization.

In addition, during this second quarter, we plan to launch [indiscernible], which offers players daily, weekly and monthly quests alongside their casino games play.

Our strategy in social casino is to continue enhancing the entertainment value of DDC while remaining disciplined in user acquisition and R&D spending to drive strong profitability and free cash flow. Turning to SuprNation. Q1 represented our first full quarter of operation of this iGaming business.

Our focus at this early stage is to scale the business, and we were pleased with the results so far with SuprNation's Q1 revenue contribution of $8.3 million. .

The iGaming sector represents an exciting growth opportunity for DoubleDown, and we are very pleased to be up to such a strong start with plans for continued improvement. The SuprNation acquisition is just an initial step in our goal to diversify our business into new gaming categories that have highly addressable market opportunities.

Given our excellent financial foundation, we continue to evaluate ways to expand into these markets, both organically and through M&A. .

As we execute on this strategy, we will apply the same capital discipline we have exhibited over the years. As an example, on our first quarter call, I highlighted the launch of our first game in the skill-based gaming category.

However, after ramping up marketing investments to higher players in Q1, its performance metrics did not meet our requirements, and as such, we have decided not to proceed with additional user acquisition activities going forward. .

We are continuing to invest in new internally developed mobile games, including those we expect to launch in 2024, but our overriding principle -- when we undertake these new game launches is to ensure we are deploying our capital and expertise in a manner that creates additional value for sale hurdles.

If that proves not to be the case, we have demonstrated that we will quickly move on. .

Now I will turn it over to our CFO, Joe Sigrist, to walk us through our financials for providing my closing remarks.

Joe?.

Thank you, Ik, and good afternoon, everyone. Our revenues for the first quarter of 2024 were $88.1 million, comprised of $79.8 million in revenues from our social casino free-to-play games and $8.3 million of revenues from SuprNation. This compares to total company revenues of $77.6 million in Q1 2023.

As IK mentioned, social casino free-to-play revenue in the first quarter of 2024 was up 1% sequentially from the fourth quarter of 2023 and 3% year-over-year. .

In the first quarter, several KPI metrics for our social casino business again improved compared to the year-ago period, including average revenue per daily active user, or ARPDAU, increased to $1.26 in Q1 2024 from $1.03 in Q1 2023, marking a 22% increase.

Payer conversion ratio, which is the percentage of players who pay within the social casino apps increased to 6.4% in Q1 of 2024 compared to 5.8% in Q1 of 2023 and average monthly revenue per payer at $281 in the first quarter of 2024 increased 27% from $221 in Q1 of 2023.

Operating expenses rose on both a year-over-year and quarterly sequential basis to $57.1 million compared to $52.2 million in the first quarter of 2023 and $47.5 million in the fourth quarter of 2023.

The OpEx increase in Q1 was primarily due to the inclusion of SuprNation's operating expenses as this was the first full quarter consolidation of its financial results into those of DoubleDown..

Sales and marketing expenses for the first quarter of 2024 were $14.8 million, a decline of 8% compared to Q1 2023 and up nearly 50% on a quarterly sequential basis.

The sequential increase was comprised of the first-time full quarter inclusion of SuprNation sales and marketing expenses as well as the acquisition of players for the skill-based gaming app IK noted earlier.

Sales and marketing costs directed at acquiring new social casino players continue to reflect our focus on spending to ensure we deliver the best return on this investment. For the next several quarters, we anticipate that overall sales and marketing expenses for the company will stay relatively close to or below the Q1 level. .

Net income for the first quarter of 2024 was $30.4 million or $12.23 per diluted share and $0.61 per ADS, a rise of 28.3% to 28.1% and 27.1%, respectively, compared to the net income of $23.7 million or $9.55 per diluted share and $0.48 per ADS in the first quarter of 2023.

Adjusted EBITDA for the first quarter of 2024 increased 26% to $31.9 million compared to $25.4 million for the prior year quarter. .

Adjusted EBITDA margin was 36.2% for Q1 2024, representing an improvement from 32.8% in Q1 2023. Net cash flows from operations were $34.9 million for the first quarter of 2024 compared to net cash flow from operations of $19.2 million in the prior year period. Finally, turning to our balance sheet.

As of March 31, 2024, we had $310 million in cash, cash equivalents and short-term investments with a net cash position at quarter end of approximately $272 million or approximately $5.50 per ADS, excluding the outstanding loans with our controlling shareholder DoubleU Games. .

That completes my financial summary. Now I'll turn the call over to IK for closing remarks. .

Thank you, Joe. We began 2024, demonstrating our ability to further expand the operating and financial performance momentum of the company with strong Q1 results in our core social casino business and an excellent start to our new iGaming business.

In our core social casino business, we will continue enhancing and improving double-down casino through ongoing product development, marketing initiatives and life of efforts. We see this as a capital-efficient way to continue driving engagement and monetization that also delivers high cash flow.

As we mentioned during last quarter's call, we also are focused on enhancing our already strong margins by increasing our direct-to-consumer payment volume..

While it is holidays with this initiative, we are beginning to expand the options that players have to purchase chips for DoubleDown Casino. In the near term, at SuprNation, our focus is to invest to grow the player base in both the U.K. and Sweden.

We look forward to continued positive impact of this effort to scale the business, and we will continue to pursue growth through participation in adjacent categories of gaming through both our organic efforts and as we continue to evaluate M&A opportunities. .

We're now happy to take your questions.

Briana?.

[Operator Instructions] Our first question comes from Aaron Lee of Macquarie. .

Congrats on the quarter. So I wanted to get some more color on the SuprNation business and get a sense for, first, how the quarter performed relative to your expectations? It sounds like it came in above. And secondly, how should we be thinking about the balance of the year? I believe there's some summer seasonality in there.

But do you expect momentum to build sequentially as we go through 2Q to 4Q?.

Yes. Thanks, Aaron. Appreciate the questions. So with regard to the Q1 performance of SuprNation, we are pleased with the results. We feel like now, I guess, after the end of the first quarter to the first 5 quarters of having their business as part of ours has been very positive.

As we mentioned, the focus initially has been on scaling new user acquisition activity. And we have been pleased to see the fairly quick ability to acquire players and then turn them into meaningful revenue contributors. .

As it relates to the rest of the year, I mean we'll have to see if we can continue to see that quick conversion, if you will, from marketing investment into playing, depositing and ultimately, revenue. And we'll see how it plays out, but we -- as I had said, we're very pleased with the start of this. .

Got it. Understood. And then just a quick housekeeping item.

With this being the first full quarter of SuprNation within your results, how should we think about your cost structure? Is 1Q OpEx a good level to run forward for expenses like R&D and G&A?.

Yes. By and large, I think everything is kind of full quarter included in Q1. And relative to the expense categories, I mean, the only variability is going to be on the marketing side.

As I mentioned, marketing will likely be at or below where we have been or where we were in Q1 for the rest of the year on a quarterly basis, primarily because of the fact that we won't be investing in our first skill-based game, any longer to acquire new players. But other than that, I think the run rates will pretty much hold true. .

Our next question comes from Greg Gibas of Northland Securities. .

IK and joe, congrats on the results. I wanted to follow up on just the core business like SuprNation. Nice to see that up year-over-year considering it's been challenging for social casino as a whole. Just kind of curious if you could discuss maybe what you think drove that. .

Yes. I think as we mentioned last quarter, which also we were pretty pleased with relative to our results within the core business. It's a lot about the product and product differentiation and being able to incent players to continue to play. And then ultimately, we know that leads into monetization. .

So IK mentioned the ongoing development of new meta features. These are features that span the various individual casino and slot games that we have in DoubleDown Casino. And we're continuing to focus on that and developing additional -- really fun, I mean, at the end of the day, people have fun when they play DoubleDown Casino.

And certainly, they have fun when they play our individual games, individual slots, but we also want them to have fun as they return to play and they have additional journeys and quests and things that we add on, if you will, on top of the individual games that add to the fun.

And at least over the last couple of quarters, we think that's been a good part of why people are so excited to still be with us and continue to play into pay. .

Great. That's good to hear. Cool. And then switching over to SuprNation. My understanding is pretty strong results out of them.

Wondering if you could just kind of talk about your rough expectations there? And do you have kind of how that performance compared to a year ago quarter with them? And if you could maybe just discuss kind of seasonality and if it differs from your core business?.

Yes. I mean it's early days with SuprNation being part of us. I mean we're learning the iGaming business, but we also do know that the initiatives that we and they have been working on with their business and for their business on the marketing side has contributed to the strong results that we reported today in their business.

And that's why we want to continue those. And they're also very focused on product differentiation as well. So their focus is, I think, we've described in the past, not just on the hardcore iGaming player but also on the more entertainment-oriented and kind of fun-oriented gambler is important. .

So their main brand called Duelz, it's an important part of their product differentiation strategy, which allows not just, as I said, the really committed gambler, but also other folks who want to have fun, obviously attempting to win money, but also to be competing against their friends who are also playing and winning the so-called Duelz or competitions with a group of players.

It's all part of the strategy they have, which seems to be working out quite well relative to the focus on players going to their brand. .

Interesting. Got it. I guess last one, just wanted to get your updated thoughts on buybacks going forward. Would -- are you kind of seeing better uses of cash? I just wanted to get reputed thoughts there. .

Well, as we've described in the past, we -- absolutely, we -- the Board, controlling shareholder, absolutely believe the best use of cash, at least for the foreseeable future, our cash, our strong balance sheet is in potential acquisition, M&A activity, doing the things that we have done with SuprNation again, and we are continuing to look toward opportunities, and we have our screens and our filters and our actions that allow us to take a look at the market and see what companies or businesses are available to help us grow the business.

.

Thank you. [Operator Instructions] This now concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect..