Financial News
DoubleDown Interactive Reports Third Quarter 2022 Results
SEATTLE, Nov. 08, 2022 (GLOBE NEWSWIRE) -- DoubleDown Interactive Co., Ltd. (NASDAQ: DDI) (“DoubleDown” or the “Company”), a leading gaming company, delivering unique player experiences across a variety of genres, today reported its unaudited financial results for the third quarter ended September 30, 2022.
Third Quarter 2022 Summary vs. Third Quarter 2021
- Revenues decreased from $87.0 million in the third quarter of 2021 to $78.8 million in the third quarter of 2022.
- Operating costs increased from $59.2 million in the third quarter of 2021 to $124.1 million in the third quarter of 2022, primarily due to a $70.25 million charge related to the previously announced agreement to settle the Benson class action and associated proceedings.
- Operating costs decreased to $53.9 million when excluding the charge of $70.25 million. Such charge was recorded as General and Administrative expenses, reflecting the incremental charge associated with the agreement in principle to settle the Benson class action complaint and associated proceedings as previously announced on August 29, 2022.
- Adjusted EBITDA decreased from $30.2 million for the third quarter of 2021 to $25.0 million for the third quarter of 2022, resulting in an Adjusted EBITDA margin of 31.7% for the third quarter of 2022, compared to an Adjusted EBITDA margin of 34.7% for the third quarter of 2021. Such decreases were primarily due to lower revenue in the third quarter of 2022.
- Net income was a loss of $24.0 million, or a loss of $9.69 per common share on a fully diluted basis (a loss of $0.48 per American Depositary Share (“ADS”)) in the third quarter of 2022, compared to net income of $22.8 million, or $9.91 per common share on a fully diluted basis ($0.50 per ADS) in the third quarter of 2021. Note each ADS represents 0.05 share of a common share.
- Average Revenue Per Daily Active User (“ARPDAU”) remained consistent at $0.96 in the third quarter of 2022 and 2021.
- Average monthly revenue per payer increased from $224 in the third quarter of 2021 to $225 in the third quarter of 2022.
“DoubleDown generated solid results in the third quarter of 2022 with another quarter of positive free cash flow and Adjusted EBITDA margin being above 30%, demonstrating the stickiness of our customer base and long-term engagement by our players,” said In Keuk Kim, Chief Executive Officer of DoubleDown. “Revenue in the third quarter of 2022 was 14% higher than the third quarter of 2019, the most recent comparable period prior to the COVID pandemic, which we believe validates our success in capturing and retaining growth in our customer base and player spending over the past few years. Further, we were able to maintain our ARPDAU and average monthly revenue per payer metrics from the year-ago period, despite global inflationary pressure and recession concerns that have impacted player behavior, demonstrating the resilience of our business.
“Furthermore, during the third quarter, we reached an agreement in principle to settle the Benson class action complaint and as a result, recorded an associated charge on our income statement. Although the settlement remains subject to court approval, we do not expect to record any future charges related to Benson class action and are pleased to have this case resolved in principle, of course subject to final court approval. Looking ahead, we plan to launch our newest title, Spinning in Space, before year-end, while simultaneously developing additional new titles for 2023 and innovating our flagship DoubleDown Casino title as we look to grow our business. We will also continue to evaluate potential strategic M&A transactions that may offer opportunities to leverage our core capabilities and diversify our revenue stream. With $130 million of cash and equivalents, net of debt and Benson case accrual, we believe that we remain in a strong financial position.”
Summary Operating Results for Double Down Interactive (Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||
| Revenue ($ MM) | $ | 78.8 | $ | 87.0 | $ | 244.9 | $ | 276.9 | ||||||||||
| Total operating expenses | 124.1 | 59.2 | 313.5 | 201.8 | ||||||||||||||
| Loss Contingency | 70.3 | - | 141.8 | 3.5 | ||||||||||||||
| Adjusted EBITDA ($ MM) | 25.0 | 30.2 | 76.9 | 61.0 | ||||||||||||||
| Net income ($ MM) | $ | (24.0 | ) | $ | 22.8 | $ | (39.6 | ) | $ | 60.7 | ||||||||
| Net income margin | (30.5 | %) | 26.2 | % | (16.2 | %) | 21.9 | % | ||||||||||
| Adjusted EBITDA margin | 31.7 | % | 34.7 | % | 31.4 | % | 22.0 | % | ||||||||||
| Non-financial performance metrics | ||||||||||||||||||
| Average MAUs (000s) | 2,267 | 2,254 | 2,301 | 2,447 | ||||||||||||||
| Average DAUs (000s) | 907 | 985 | 941 | 1,033 | ||||||||||||||
| ARPDAU | $ | 0.96 | $ | 0.96 | $ | 0.96 | $ | 0.98 | ||||||||||
| Average monthly revenue per payer | $ | 225 | $ | 224 | $ | 225 | $ | 218 | ||||||||||
| Payer conversion | 5.2 | % | 5.7 | % | 5.3 | % | 5.8 | % | ||||||||||
Third Quarter 2022 Financial Results
Revenue in the third quarter of 2022 was $78.8 million, a 9% decrease from the third quarter of 2021. The decrease was primarily due to the lifting of stay-at-home orders and other COVID-related restrictions compared to the prior year, as well as changes in player behavior relating to inflation and global economic concerns during 2022.
Operating expenses in the third quarter of 2022 were $124.1 million, a 110% increase from the third quarter of 2021. The increase was due to a charge of $70.25 million recorded in in General and Administrative expenses reflecting the incremental charge associated with the agreement in principle to settle the Benson class action complaint and associated proceedings as announced on August 29, 2022. In accordance with the agreement in principle, which remains subject to court approval, DoubleDown has agreed to contribute $145.25 million to the settlement. The incremental charge for the third quarter is in addition to amounts accrued in previous quarters of an aggregate of $75 million.
Net income in the third quarter of 2022 reflected a loss of $24.0 million, or a loss of $9.69 per common share (a loss of $0.48 per ADS) on a fully diluted basis, compared to net income of $22.8 million, or $9.91 per common share ($0.50 per ADS) on a fully diluted basis, in the third quarter of 2021. Note each ADS represents 0.05 share of a common share.
Adjusted EBITDA in the third quarter of 2022 was $25.0 million, a decrease compared to $30.2 million in the third quarter of 2021. The decrease was primarily due to lower revenue.
Net cash flows provided by operating activities for the third quarter of 2022 was $22.2 million, compared to $33.7 million in the third quarter of 2021. The decrease was primarily driven by the decline in operating income.
Conference Call
DoubleDown will hold a conference call today (November 8, 2022) at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss these results. A question-and-answer session will follow management's presentation.
To access the call, please use the following link: DoubleDown Third Quarter 2022 Earnings Call. After registering, an email will be sent, including dial-in details and a unique conference call access code required to join the live call. To ensure you are connected prior to the beginning of the call, please register a minimum of 15 minutes before the start of the call.
A simultaneous webcast of the conference call will be available with the following link: DoubleDown Third Quarter 2022 Webcast, or via the Investor Relations page of the DoubleDown website at ir.doubledowninteractive.com. For those not planning to ask a question on the conference call, the Company recommends listening via the webcast.
A replay will be available on the Company's Investor Relations website shortly after the event.
About DoubleDown Interactive
DoubleDown Interactive Co., Ltd. is a leading developer and publisher of digital games on mobile and web-based platforms. We are the creators of multi-format interactive entertainment experiences for casual players, bringing authentic Vegas entertainment to players around the world through an online social casino experience. Our flagship title, DoubleDown Casino, has been a fan-favorite game on leading social and mobile platforms for years, entertaining millions of players worldwide with a lineup of classic and modern games.
Safe Harbor Statement
Certain statements contained in this press release are “forward-looking statements” about future events and expectations for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on our beliefs, assumptions, and expectations of industry trends, our future financial and operating performance, and our growth plans, taking into account the information currently available to us. These statements are not statements of historical fact. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Therefore, you should not place undue reliance on such statements. Words such as “anticipates,” “believes,” “continues,” “estimates,” “expects,” “goal,” “objectives,” “intends,” “may,” “opportunity,” “plans,” “potential,” “near-term,” “long-term,” “projections,” “assumptions,” “projects,” “guidance,” “forecasts,” “outlook,” “target,” “trends,” “should,” “could,” “would,” “will,” and similar expressions are intended to identify such forward-looking statements. We qualify any forward-looking statements entirely by these cautionary factors. We assume no obligation to update or revise any forward-looking statements for any reason or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Use and Reconciliation of Non-GAAP Financial Measures
In addition to our results determined in accordance with the accounting principles generally accepted in the United States of America (“GAAP”), we believe the following non-GAAP financial measure is useful in evaluating our operating performance. We present “adjusted earnings before interest, taxes, depreciation and amortization” (“Adjusted EBITDA”) because we believe it assists investors and analysts by facilitating comparison of period-to-period operational performance on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. The items excluded from the Adjusted EBITDA may have a material impact on our financial results. Certain of those items are non-recurring, while others are non-cash in nature. Accordingly, the Adjusted EBITDA is presented as supplemental disclosure and should not be considered in isolation of, as a substitute for, or superior to, the financial information prepared in accordance with GAAP, and should be read in conjunction with the financial statements furnished in our Form 6-K to be filed with the SEC.
In our reconciliation from our reported GAAP “net income before provision for taxes” to our Adjusted EBITDA, we eliminate the impact of the following six line items: (i)depreciation and amortization; (ii) loss contingency related to the Benson case; (iii) interest expense; (iv) foreign currency transaction/remeasurement (gain) loss; (v) short-term investments (gain) loss; and (vi) other (income) expense, net. The below table sets forth the full reconciliation of our non-GAAP measures:
| Reconciliation of non-GAAP measures | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| (in millions, except percentages) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Net income | $ | (24.0 | ) | $ | 22.8 | $ | (39.6 | ) | $ | 60.7 | ||||||
| Income tax expense | (4.9 | ) | (7.2 | ) | (10.9 | ) | (16.7 | ) | ||||||||
| Income before tax | (28.9 | ) | 30.0 | (50.5 | ) | 44.0 | ||||||||||
| Adjustments for: | ||||||||||||||||
| Depreciation and amortization | 0.0 | 2.4 | 3.8 | 15.7 | ||||||||||||
| Loss contingency | 70.3 | - | 141.8 | 3.5 | ||||||||||||
| Interest expense | 0.4 | 0.5 | 1.4 | 1.5 | ||||||||||||
| Foreign currency transaction/remeasurement (gain) loss | (9.3 | ) | (0.8 | ) | (17.0 | ) | (1.4 | ) | ||||||||
| Short-term investments (gain) loss | (5.7 | ) | - | 0.2 | - | |||||||||||
| Other (income) expense, net | (1.9 | ) | (1.9 | ) | (2.6 | ) | (2.3 | ) | ||||||||
| Adjusted EBITDA | $ | 25.0 | $ | 30.2 | $ | 76.9 | $ | 61.0 | ||||||||
| Adjusted EBITDA margin | 31.7 | % | 34.7 | % | 31.4 | % | 22.0 | % | ||||||||
We encourage investors and others to review our financial information in its entirety and not to rely on any single financial measure.
Company Contact:
Joe Sigrist
ir@doubledown.com
+1 (206) 773-2266
Chief Financial Officer
https://www.doubledowninteractive.com
Investor Relations Contact:
Cody Slach or Jeff Grampp, CFA
Gateway Group
1-949-574-3860
DDI@gatewayir.com
DoubleDown Interactive Co., Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
| September 30, | December 31, | |||||
| 2022 | 2021 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 310,468 | $ | 242,060 | ||
| Accounts receivable, net | 19,916 | 21,875 | ||||
| Prepaid expenses, and other assets | 7,647 | 6,817 | ||||
| Total current assets | $ | 338,031 | $ | 270,752 | ||
| Property and equipment, net | 348 | 384 | ||||
| Operating lease right-of-use assets, net | 4,455 | 6,830 | ||||
| Intangible assets, net | 50,048 | 53,679 | ||||
| Goodwill | 633,965 | 633,965 | ||||
| Deferred tax asset | 1,843 | 2,616 | ||||
| Other non-current assets | 1,300 | 1,582 | ||||
| Total assets | $ | 1,029,990 | $ | 969,808 | ||
| Liabilities and Shareholders' Equity | ||||||
| Accounts payable and accrued expenses | $ | 14,743 | 14,752 | |||
| Short-term operating lease liabilities | 3,138 | 3,076 | ||||
| Contract liabilities | 2,166 | 2,246 | ||||
| Loss Contingency | 145,250 | - | ||||
| Other current liabilities | 6,107 | 730 | ||||
| Total current liabilities | $ | 171,404 | $ | 20,804 | ||
| Long-term borrowings with related party | 34,848 | 42,176 | ||||
| Long-term operating lease liabilities | 2,103 | 4,688 | ||||
| Deferred tax liabilities, net | 1,232 | 28,309 | ||||
| Loss Contingency | - | 3,500 | ||||
| Other non-current liabilities | 7,358 | 6,453 | ||||
| Total liabilities | $ | 216,945 | $ | 105,930 | ||
| Shareholders' equity | ||||||
| Common stock, KRW 10,000 par value - 200,000,000 Shares authorized; | ||||||
| 2,477,672 issued and outstanding | 21,198 | 21,198 | ||||
| Additional paid-in-capital | 619,470 | 671,831 | ||||
| Accumulated other comprehensive income | 11,761 | 23,033 | ||||
| Retained earnings | 160,616 | 147,816 | ||||
| Total shareholders' equity | $ | 813,045 | $ | 863,878 | ||
| Total liabilities and shareholders' equity | $ | 1,029,990 | $ | 969,808 | ||
DoubleDown Interactive Co., Ltd.
Condensed Consolidated Statement of Income and Comprehensive Income
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | 78,801 | $ | 87,007 | $ | 244,857 | $ | 276,902 | ||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenue(1) | 27,119 | 30,485 | 83,464 | 96,823 | ||||||||||||
| Sales and marketing(1) | 17,214 | 17,161 | 55,056 | 56,913 | ||||||||||||
| Research and development(1) | 4,691 | 4,537 | 13,704 | 14,635 | ||||||||||||
| General and administrative(1) | 4,821 | 4,674 | 15,771 | 14,184 | ||||||||||||
| Loss Contingency(1)(2) | 70,250 | - | 141,750 | 3,500 | ||||||||||||
| Depreciation and amortization | 45 | 2,359 | 3,751 | 15,704 | ||||||||||||
| Total operating expenses | 124,140 | 59,216 | 313,496 | 201,759 | ||||||||||||
| Operating income (loss) | $ | (45,339 | ) | $ | 27,791 | $ | (68,639 | ) | $ | 75,143 | ||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (431 | ) | (500 | ) | (1,356 | ) | (1,521 | ) | ||||||||
| Interest income | 1,948 | 25 | 2,742 | 108 | ||||||||||||
| Gain on foreign currency transactions | 541 | 634 | 856 | 1,040 | ||||||||||||
| Gain (loss) on foreign currency remeasurement, net | 8,748 | 215 | 16,163 | 353 | ||||||||||||
| Gain (loss) on short-term investments | 5,651 | - | (155 | ) | - | |||||||||||
| Other, net | (42 | ) | 1,853 | (98 | ) | 2,261 | ||||||||||
| Total other income (expense), net | $ | 16,415 | $ | 2,227 | $ | 18,152 | $ | 2,241 | ||||||||
| Income (loss) before income tax | $ | (28,924 | ) | $ | 30,018 | $ | (50,487 | ) | $ | 77,384 | ||||||
| Income tax (expense) benefit | 4,925 | (7,185 | ) | 10,926 | (16,713 | ) | ||||||||||
| Net income (loss) | $ | (23,999 | ) | $ | 22,833 | $ | (39,561 | ) | $ | 60,671 | ||||||
| Other comprehensive income (expense): | ||||||||||||||||
| Pension adjustments, net of tax | 102 | (81 | ) | (185 | ) | (121 | ) | |||||||||
| Gain (loss) on foreign currency translation | (6,115 | ) | (800 | ) | (11,087 | ) | 415 | |||||||||
| Comprehensive income (loss) | $ | (30,012 | ) | $ | 21,952 | $ | (50,833 | ) | $ | 60,965 | ||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | (9.69 | ) | $ | 9.91 | $ | (15.97 | ) | $ | 27.03 | ||||||
| Diluted | $ | (9.69 | ) | $ | 9.91 | $ | (15.97 | ) | $ | 27.03 | ||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 2,477,672 | 2,303,192 | 2,477,672 | 2,244,404 | ||||||||||||
| Diluted | 2,477,672 | 2,303,192 | 2,477,672 | 2,244,404 | ||||||||||||
| (1) Excluding depreciation and amortization | ||||||||||||||||
| (2) Litigation Loss Contingency (refer to Note 11) | ||||||||||||||||
DoubleDown Interactive Co., Ltd.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
| Nine months ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flow from (used in) operating activities: | ||||||||
| Net Income (loss) | $ | (39,561 | ) | $ | 60,671 | |||
| Adjustments to reconcile net income to net cash from operating activities: | ||||||||
| Depreciation and amortization | 3,751 | 15,704 | ||||||
| (Gain)Loss on foreign currency remeasurement | (16,163 | ) | (353 | ) | ||||
| (Gain)Loss on short-term investments | 155 | - | ||||||
| Deferred taxes | (26,716 | ) | 3,524 | |||||
| Working capital adjustments: | ||||||||
| Accounts receivable | 703 | 2,006 | ||||||
| Prepaid expenses, other current and non-current assets | (1,391 | ) | (2,628 | ) | ||||
| Accounts payable, accrued expenses and other payables | 1,033 | (795 | ) | |||||
| Contract liabilities | (80 | ) | (868 | ) | ||||
| Income tax payable | - | (7,035 | ) | |||||
| Loss Contingency | 141,750 | 3,500 | ||||||
| Other current and non-current liabilities | 8,215 | 3,858 | ||||||
| Net cash flows from operating activities | $ | 71,696 | $ | 77,584 | ||||
| Cash flow (used in) investing activities: | ||||||||
| Purchases of intangible assets | (3 | ) | (12 | ) | ||||
| Purchases of property and equipment | (164 | ) | (116 | ) | ||||
| Disposals of property and equipment | 27 | 3 | ||||||
| Purchases of short-term investments | (366,449 | ) | - | |||||
| Sales of short-term investments | 366,293 | - | ||||||
| Net cash flows (used in) investing activities | $ | (296 | ) | $ | (125 | ) | ||
| Cash flow from (used in) financing activities: | ||||||||
| Issuance of new shares - IPO | - | 86,452 | ||||||
| Net cash flows from (used in) financing activities: | $ | - | $ | 86,452 | ||||
| Net foreign exchange difference on cash and cash equivalents | (2,992 | ) | (4,035 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | $ | 68,408 | $ | 159,875 | ||||
| Cash and cash equivalents at beginning of period | $ | 242,060 | $ | 63,188 | ||||
| Cash and cash equivalents at end of period | $ | 310,468 | $ | 223,062 | ||||
| Cash paid during year for: | ||||||||
| Interest | - | - | ||||||
| Income taxes | $ | 11,415 | $ | 13,698 | ||||
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