Good afternoon, and welcome to DoubleDown Interactive's Earnings Conference Call for the Fourth Quarter and Year ended December 31, 2023. My name is Josh, and I will be your operator this afternoon. Prior to this call, DoubleDown issued its financial results for the fourth quarter of 2023 in a press release, a copy 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 home page. Joining us on today's call are DoubleDown's CEO, Mr. In Keuk Kim; and its CFO, Mr. Joe Sigrist. Following their remarks, we will open the call for questions. Before we begin, Richard Land, the company's outside Investor Relations adviser, will make a brief introductory statement. Mr. Land?

Thank you, Josh. Before management begins their formal remarks, we need to remind everyone that some of 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 we hereby claim 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 strategy, 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 31, 2023, 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 our Form 6-K filed 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. With that, it's my pleasure to turn the call over to DoubleDown's CEO, In Keuk Kim. Please go ahead, sir.

Thank you, Richard. Good afternoon, everyone. Thank you for joining us on our 2023 fourth quarter earnings call. Total Q4 revenue was $83.1 million with $78.8 million generated by our social casino, free-to-play games and $4.3 million coming from the operations of SuprNation in the months of November and December. The Q4 revenue from our social casino, free-to-play games was up nearly 8% on a quarterly sequential basis, and up 3% compared to Q4 2022. Adjusted EBITDA for the first quarter rose sequentially and year-over-year to $36.2 million, while cash flow from operations was $29.7 million. Our flagship social casino game, DoubleDown Casino or DDC continues to be the driver of our solid results at full year 2023, adjusted EBITDA reached nearly $119 million and cash flow from operations for the 2023 full year exceeded $116 million, excluding the final Benson class action settlement payment earlier in the year. We continue to generate year-over-year increases in our -- some of our most important KPIs, including average monthly revenue per payer and payer conversion rate, which indicates our great ability to offer compelling entertainment value to our core paying players. These results largely reflect the propensity of DDC players to make email purchases and the continued increase in the amount paid by payers. In addition, we released new [indiscernible] meta features in the first quarter focused on increasing player retention and engagement, including the lucky or and swing [ph] power features, which we believe aids overall monetization. As we've discussed in the past, DDC revenue largely reflects activity by our long-term base of players who have enjoyed our casino site games in many cases for several years. To put this in perspective, in 2023, approximately 94% of our revenue was generated from our 2010 to 2022 player cohorts. In other words,…

Thank you, IK, and good afternoon, everyone. Our revenues for the fourth quarter of 2023 were $83.1 million and were comprised of $78.8 million in revenues from our social casino free-to-play games and $4.3 million of revenues from SuprNation for the 61 days when we owned the company following the October 31 acquisition close. This compares to revenues of $76.2 million last year. As IK mentioned, Q4 social casino free-to-play revenue, excluding SuprNation, was up 8% sequentially from the third quarter of 2023 and 3% year-over-year. In the fourth quarter, several KPI metrics for our social casino business improved compared to the year ago period. including average revenue per daily active user, or ARPDAU, increased to $1.24 in Q4 2023 from $0.98 in Q4 2022. Payer conversion ratio, which is the percentage of players who play within the social casino apps increased to 6.4% in Q4 2023, compared to 5.4% in Q4 2022, and average monthly revenue per payer increased 23% from $227 in Q4 2022 to $279 in Q4 of 2023. On a quarterly sequential basis, total operating expenses increased from $43.3 million in the third quarter of 2023 to $47.5 million in the fourth quarter of 2023, reflecting in part the new operating expenses associated with our ownership of SuprNation. Even with these new operating costs, operating expenses for Q4 2023 declined from $51.5 million in Q4 last year excluding the non-cash goodwill impairment charge of $269.9 million taken in that period. This decrease was primarily due to lower cost of revenue and lower sales and marketing expenses from the year ago period. Sales and marketing expenses for the fourth quarter of 2023 were $9.9 million, a decline of 41% compared to Q4 2022, and 7% lower on a quarterly sequential basis. Our efforts to acquire new social…

Thank you, Joe. We began 2024 for considerable momentum based on the Q4 results of our core social casino business, the recent close of our first post-IPO position and the launch of our internally developed game in the skill-based category. In our core social casino business, we will continue to focus on enhancing the entertainment value of DoubleDown Casino with the goal of driving more engagement and even greater monetization. We also are focused on generating more of our switcher casino purchases through direct-to-consumer methods, thereby improving margins in the largest part of our company's business. With SuprNation, our goal is to grow the business from its current revenue level with a combination of increased marketing investments and by leveraging the skills and expertise DoubleDown brings to this combination. 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 are now happy to take your questions. Operator?

Thank you. [Operator Instructions] Our first question comes from Aaron Lee with Macquarie. You may proceed.

Hey, good afternoon. Thanks for taking my question. It just -- you have a few more months under your belt with SuprNation, can you just help us with any guidelines to help us think about the growth potential in 2024? And are there any major milestones we should look out for as you grow that business?

Yes. Thanks, Aaron. I appreciate it. As we've discussed, the most important near-term lever for us is marketing investment. And we want to do that in support of the way they have already been marketing and acquiring new players and high ROI new players. And we also are augmenting that with assistance and other ways of finding players through, for instance, performance marketing, that kind of thing. Relative to growth, as I think we've also discussed, our primary -- again, this is very short-term objective is to scale the business greater in their existing strong markets, which are Sweden and the U.K. and only turn to newer markets after we have worked on that for some time. So at this point, we aren't giving guidance relative to what we think the business can ultimately do in the shorter term. But I would just say that their market share in both Sweden and the U.K. is quite low, I mean, single-digit market share. And so there's significant opportunity just within those two countries in the short-term.

Got you. Okay. And then a quick follow-up. I wanted to dig into your fourth quarter average multi revenue per payer, which was up really nicely over 20% year-over-year. Can you just kind of unpack what drove that and what you did differently versus past quarters?

Yes. I think the most important thing we want to highlight is the fact that we've been investing in the product itself, in DDC. And maybe IK can talk a little bit about some of our newer monetization and retention features, the meta features that we have especially started to implement in Q4. We'll do more this quarter. So IK, do you want to talk a little bit about our focus in adding new meta features and how important that is to get payers to want to pay increasing amounts with us?

Yes. Hi, Aaron. I can explain about our new meta features like [indiscernible] Power. Those meta features are getting more reverse features as users play more simply could raise slot-playing users retention board. So for example, about the feature itself, look, you are awarded on slot wins of [indiscernible] or more or as we heard from its dedicated, specifically single and daily challenges, those all kind of ring meta features could increase user engagement and retention. So it helps users to play more and more. So that's what I just wanted to highlight our product features.

Okay, great. Got it. Thank you very much. Pre-quarter.

Thank you. Our next question comes from Greg Gibas with Northland Securities. You may proceed.

Hey, IK and Joe. Thanks for taking the questions, congrats on the nice results. Wanted to just maybe dive in a little bit more like maybe what you attribute that, I think, 8% sequential growth in the core casino or social casino and then 3% year-over-year. What do you kind of attribute that to? And then also what's driving that lower cost of revenue year-over-year?

I'm sorry, what was the second part of that, Greg, you were a little light on the volume there for me, sorry.

Sorry about that. Yes, I think you spoke to lower cost of revenue year-over-year. I'm just curious what's kind of driving that?

Yes. So let me start with that one, and maybe I can and I can both talk about what we've done better and what we see as it relates to the core social casino business to drive revenue growth. Relative to the cost of revenue, as we have done over the course of the year, we in Q4 spent less on marketing, specifically acquiring new users as we continue to see a somewhat challenging environment to get the right ROI for the acquisition of new users. And as a result, we have continued to curtail our spend to acquire new users. Again, it's very, I'll say, fact-based. It's very much based on our evaluation of 3,721-day payback for newly acquired cohorts. And that is had us continue to curtail marketing to acquire new players. I mean that was the primary driver of the reduction in cost of revenue for this quarter. Relative to the top line, I mean, again, I think -- and IK, chime in if you have any other things to comment on. I really do think the product features have really helped to create excitement for players, again, IK said, to return to play, to want to be playing more and longer and also, it gives us marketing opportunities. So we can use those features in our content in the content, the ads themselves that we go out through our various partners in order to acquire new players to try to reactivate lapsed players or even lapsed payers who may still be playing, but haven't paid for a while. Those new features are really exciting things for us to use to get players to reengage or to engage more.

Great. Very helpful. And I know you're not officially guiding, but I wanted to get just maybe your high-level thoughts on financial expectations for next year. Like you just spoke to kind of the product features, driving player excitement that return to growth is -- when I think about the core social casino business, should we think about this 3% growth year-over-year as being kind of fair, assuming no other changes? Or just kind of wondering how you're thinking about the top line in 2024?

Yes. No, I appreciate the question. And the reality is, as we all know, and especially if we look at the industry analyst reports, the social casino category is a very mature category, and estimates for the entire market suggest kind of a flattish market going forward from 2023 to 2024 and even beyond for the next couple of years after that. So I think the core market is flat. The question is, can we -- as we did in Q4, frankly, can we take share based on the things that we uniquely in a differentiated way do with DoubleDown Casino and we were successfully able to do that in Q4, and we strive to do that every quarter. That's our -- frankly, that's our objective. That's our goal, that's our challenge. And that is something that we've been very focused on doing. But recognize that it's in the context of essentially a flat very profitable, very cash generative category of gaming, but essentially a flat category.

Got it. That's fair. I think lastly for me, I just wanted to follow-up on SuprNation. Since closing at the end of October, how has it kind of performed relative to your expectations? And I know it's -- just given it's been a couple of months here, you spoke to kind of the initiatives that you implemented I guess the focus early is Sweden and the U.K., when do you foresee kind of looking at new markets for that business?

Thanks, Greg. This is IK. The most important thing for us about SuprNation is to find scalability to get a bigger market share. Although traditional i-Gaming casino business could only provide just playing casino content and its experience so far. Now we want to see additional differentiated opportunities by offering compelling features for these players such as peer-to-peer competition and as I talked earlier. So, so far, November, December, we saw a bit good result so far. So we expect our ongoing development and improvement. If everything goes well, then we will increase our marketing capabilities to scale up [indiscernible].

Got it. Thank you.

Thanks, Greg.

Thank you. [Operator Instructions] And I'm not showing any more questions at this time. I would now like to turn the call back over to Joe Sigrist for any closing remarks.

Great. Thanks, Josh. Appreciate it. Thanks, everyone for your time today, and we look forward to talking to you again soon, and have a great evening and a great Wednesday, tomorrow. Bye-bye.

Thank you for your participation. You may now disconnect.