Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DoubleDown Interactive Co Ltd (DDI, Financial) reported total Q2 revenue of $88.2 million, marking the third consecutive quarter of year-over-year revenue growth for its social casino business.
- Adjusted EBITDA for the second quarter rose 34% year-over-year to $37 million, indicating strong profitability.
- Cash flow from operations was $34.4 million, showcasing robust financial health.
- The company’s social casino business outperformed the industry, with a 7% year-over-year revenue increase despite an overall industry decline.
- Key performance indicators (KPIs) such as ARPDAU, average monthly revenue per payer, and payer conversion rate showed significant improvements.
Negative Points
- Operating expenses rose to $52.0 million from $47.7 million in the second quarter of 2023, partly due to the inclusion of SuprNation's operating expenses.
- Sales and marketing expenses for the second quarter of 2024 were $11.1 million, a decline of 15% compared to Q2 2023, indicating a potential reduction in aggressive market expansion.
- The company is still in the early stages of its direct-to-consumer (D2C) initiatives, making it difficult to quantify its impact on revenue.
- There is uncertainty regarding the long-term sustainability of the current EBITDA margins, especially with potential increases in marketing spend for new game launches.
- The company extended a $35 million loan from its controlling shareholder for an additional two years, which could indicate a reliance on external financing.
Q & A Highlights
Q: Can you provide more details on the EBITDA margins and the impact of direct-to-consumer (D2C) transactions?
A: (Joseph Sigrist, CFO) Our recent quarters have shown EBITDA margins over 40%, driven by efficient spending, particularly in sales and marketing. We expect Q3 marketing spend to be consistent with Q2. Regarding D2C, it's still early days, but we've made good progress, and it has started to impact our results positively.
Q: How do you view the impact of Sweepstakes games on the social casino industry?
A: (Joseph Sigrist, CFO) It's difficult to comment on our peers, but we are very focused on running our business. Our investments in meta features and new content have made DoubleDown Casino more entertaining, which has driven player engagement and monetization.
Q: What is driving the upside with SuprNation, and what are your expectations for its run rate?
A: (Joseph Sigrist, CFO) Our investment in additional marketing has helped ramp SuprNation's business. We see opportunities to invest more in marketing with positive ROI, particularly in Sweden and the UK. We will continue to leverage our game development and marketing expertise to grow this business.
Q: What meta features are driving growth in the social casino segment?
A: (In Keuk Kim, CEO) We have introduced several retention meta features like Lucky Orbs & Flame Power, Wonder Cards, and Mission Pass. These features enhance user experience and retention, contributing to our growth.
Q: Where do you see the most opportunity for M&A?
A: (Joseph Sigrist, CFO) We are looking at opportunities across various categories, including social casino, iGaming, and other mobile gaming categories like Puzzle Match. We are open to areas that meet our efficiency criteria and offer growth potential.
Q: Can you comment on the impact of a competitor's licensing agreement with IGT?
A: (Joseph Sigrist, CFO) The agreement does not affect our business. We have perpetual exclusive licenses for most of the IGT games we use. Additionally, we have pivoted towards developing our own content and licensing from our controlling shareholder, reducing our reliance on new IGT content.
Q: What are your plans for new game launches and marketing spend?
A: (Joseph Sigrist, CFO) We plan to launch a new organically developed game later this year, which may increase marketing spend towards the end of the year. However, Q3 marketing spend will be consistent with Q2 levels.
Q: How do you plan to leverage your strengths to scale SuprNation?
A: (Joseph Sigrist, CFO) We will continue to invest in marketing to acquire new players and leverage our game development, technology platform, and live ops expertise to scale SuprNation profitably.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
