DoubleDown Interactive(DDI) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2025 was $83.5 million, a decrease from $88.1 million in Q1 2024, reflecting a 12% decline in social casino revenues and a 59% increase in iGaming revenues [6][12] - Adjusted EBITDA for Q1 2025 was $30.8 million, down from $32.7 million in the prior year, with an adjusted EBITDA margin of 36.9% compared to 37.1% in Q1 2024 [15][16] - Cash flow from operations increased to $41.1 million, up more than $5 million from Q1 2024 [7][16] - Profit excluding non-controlling interest was $23.9 million, or $9.65 per diluted share, compared to $30.3 million, or $12.24 per diluted share in Q1 2024 [15] Business Line Data and Key Metrics Changes - Social casino free-to-play games generated $17.3 million, while iGaming business Super Nation generated $13.2 million, marking the highest quarterly performance since its acquisition [6][9] - Average revenue per daily active user (ARPDAU) increased to $1.29 in Q1 2025 from $1.26 in Q1 2024, and payer conversion rate rose to 6.9% from 6.4% [12][8] - Direct-to-consumer revenue accounted for over 10% of social casino business, with a target to exceed 15% by 2025 [8][9] Market Data and Key Metrics Changes - Super Nation's revenue growth was driven by increased investments in new player acquisition, particularly in the UK and Sweden [9][23] - The company noted that the iGaming market presents significant opportunities for growth, especially in regulated European markets [9][10] Company Strategy and Development Direction - The company aims to maintain capital efficiency while focusing on product improvements and live operations enhancements to sustain its competitive position [17] - There is an ongoing strategy to explore potential acquisitions to diversify revenue and cash flow sources [10][17] - The company has decided not to launch a new match-three style game after extensive testing, emphasizing a cautious approach to new game development [10][48] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges in achieving year-over-year growth in the social casino segment due to strong performance in the previous year [13] - The company expects to continue generating attractive free cash flow and strengthen its balance sheet while pursuing growth opportunities [18] - Management remains optimistic about the scalability and profitability of the iGaming business as it continues to grow [17] Other Important Information - The company switched its financial reporting from GAAP to IFRS starting Q4 2024, with minimal implications for financial statements [4][11] - Operating expenses for Q1 2025 were $53.9 million, down from $57 million in Q1 2024, reflecting lower R&D expenses and cost of revenue [14] Q&A Session Summary Question: Trends in Super Nation's markets and major sporting events - Management noted strong ROI from new player acquisition investments and expressed satisfaction with marketing spend in Q1 [23] Question: Update on M&A opportunities - The company continues to see a flow of opportunities in both iGaming and casual games, with no recent changes in interest [28] Question: Expectations for Super Nation's growth and sales/marketing spending - Management expects to maintain or increase investment levels in Super Nation, anticipating continued revenue growth [33] Question: Rate of decline in social casino business - Management indicated that the first half of the year presents tough comparisons, but expects easier comps in the second half [36] Question: User acquisition costs and competition from sweepstakes - Management acknowledged rising user acquisition costs due to competition but could not confirm player losses to sweepstakes [39]