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][13] - 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 [16] - Cash flow from operations increased to $41.1 million, up more than $5 million from Q1 2024 [7][17] 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% [13][14] - 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][24] - The company noted that the competitive landscape for user acquisition costs has intensified due to increased spending by sweepstakes game publishers [15][41] 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 [18] - There are ongoing discussions regarding potential acquisitions to diversify revenue and cash flow sources [10][29] - The company has decided not to launch a new match-three style game after extensive testing, emphasizing a cautious approach to game development [10][51] Management's Comments on Operating Environment and Future Outlook - Management expects to continue generating attractive free cash flow and strengthen the balance sheet while exploring growth opportunities in adjacent gaming categories [19] - The first half of 2025 is anticipated to be challenging for social casino growth due to tough year-over-year comparisons, but conditions are expected to improve in the second half [14][39] Other Important Information - The company switched its financial reporting from GAAP to IFRS, which has generally insignificant implications for financial statements [4][12] - As of March 31, 2025, the company had $455.7 million in cash and short-term investments, with a net cash position of approximately $422 million [17] Q&A Session Summary Question: Trends in Super Nation's markets and major sporting events - Management noted that the investment in acquiring new players has yielded a quick ROI, allowing continued marketing investment, particularly in Sweden and the UK [24][25] Question: Update on M&A opportunities - The flow of opportunities remains strong, with interest in both iGaming and casual games, and no recent changes in the M&A environment [29][30] Question: Expectations for Super Nation's growth and sales/marketing spending - Management expects to continue investing at or above current levels, anticipating revenue results from that investment [35] Question: Rate of decline for social casino business - The first half of the year presents the toughest comparisons, but management believes conditions will improve in the second half [39] Question: Impact of user acquisition costs and competition - Increased user acquisition costs are primarily affecting new user acquisition, with no clear evidence of churn from existing players [41]