Good morning. We'd like to thank all analysts and domestic and international investors for attending the 2025 Q1 earnings conference call of DoubleU Games. Before we begin the presentation, we'd like to provide a few notes. The materials presented today are based on preliminary financial statements for the first quarter of 2025 and are prepared solely for the convenience of investors. While every effort has been made to ensure objectivity, some of the information may include forecasts, forward-looking statements, or subjective interpretations. Please note that due to future environmental changes or different data aggregation standards, figures and interpretations presented here may not exactly match the finalized results. Today's earnings presentations will be led by Mr. Jaeyoung Choi, CFO, who will cover the Q1 highlights and Q&A session, while the main presentation will be delivered by Mr. Young-Joo Shin from the IR team.
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Good morning. This is Jaeyoung Choi from DoubleU Games, and I will now walk you through our Q1 2025 earnings. Today's presentation will cover Q1 highlights, consolidated results summary, cost breakdown, and business update. We will hold a Q&A session at the end of the presentation.
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First of all, let me walk you through the Q1 highlights. Consolidated revenue for the first quarter reached KRW 162 billion, which is driven by the continued growth of our iGaming division, marking a return to quarter-over-quarter growth. In particular, the share of DTC revenue increased by 2.2 percentage points YOY to 10.4%, entering the double digit range and signaling a full-fledged structural shift. Apple's recent decision to allow external payments has also created a favorable environment for DTC expansion. SuprNation delivered a strong result, achieving net gaming revenue of KRW 19.2 billion, which is a 73% YOY increase, driven by expanded marketing investments targeting the U.K. market and synergies from product and marketing channel diversification based on our experience in the social casino business.
Moving beyond the reliance on its flagship service, Duelz, additional contributions from NYspins and Voodoo Dreams are accelerating overall revenue growth. Paxie Games demonstrated outstanding performance, recording KRW 10.7 billion in payments, which is a 346% YOY increase centered on its flagship title, Merge Studio: Fashion Makeover, proving its strong momentum in the hybrid casual genre. Monthly revenue continues to hit new record highs, and Paxie Games will be fully consolidated starting in Q2, contributing meaningfully to top-line growth.
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Hello, this is Young-Joo Shin from the IR team at DoubleU Games. Let me now walk you through our consolidated results for the first quarter. Revenue came in at KRW 162 billion, which is up 4.0% QOQ and 0.9% YOY, demonstrating stable growth. Operating income was KRW 54.8 billion, with a margin of 34%, and EBITDA was KRW 57.8 billion, reflecting a margin of 36%. Driven by cost optimization across social casino operations, we have demonstrated operating margins above 30%. Net income was KRW 45.8 billion with a 28% margin. The decline from previous quarter is due to the normalization following FX valuation gains recorded in Q4.
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Let me now explain our Q1 cost structure. Platform costs totaled KRW 41 billion, accounting for about 25% of consolidated revenue. The rate continues to decline due to DTC expansion and overall efficiency improvements. We aim for further optimization of platform cost over the mid to long term. Marketing expenses amounted to KRW 23.8 billion, representing a 13% increase YOY. This increase was primarily due to aggressive marketing expansion in the iGaming segment, which should be viewed not as a short-term cost, but as a strategic upfront investment aimed at acquiring loyal users. Marketing spend as a percentage of revenue was 11% for social casino and 39% for iGaming, reflecting differentiated execution strategies tailored to the characteristics of each business model. Personnel expenses remained stable at KRW 23.7 billion.
We plan to continue managing labor costs efficiently by maintaining our existing workforce, excluding changes related to M&A activities. As of the end of the quarter, our consolidated headcount stood at 589 employees, and there are currently no plans for large-scale hiring. Royalties amounted to KRW 3.6 billion, reflecting increased external IP fees in the iGaming segment due to SuprNation's revenue growth. Depreciation and amortization came in at KRW 3.1 billion, consisting of KRW 2.0 billion in lease-related amortization for office space and KRW 1.1 billion in PPA amortization.
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Let's turn to new business performance. SuprNation is diversifying its brand portfolio and plans to continue expanding its marketing investment with the goal of increasing market share in the U.K. iGaming market, which is estimated to be worth approximately KRW 8 trillion. While last year's revenue structure was centered around Duelz, this year NYspins grew 429% QoQ and Voodoo Dreams by 123%. By applying our user-friendly UI and UX expertise gained from the social casino business to the iGaming segment, we are now seeing meaningful cross-segment synergies. This rapid growth is largely attributed to the highly efficient market structure characteristics of the iGaming business, which allows for a quick return on investment. These advantages have been directly reflected in our performance. Enhanced user convenience has also contributed to lower churn rates and more stable user retention. Paxie Games continues to show strong growth, with Merge Studio achieving 346% YoY payment growth. Further enhancements to Merge Studio and the launch of a new title, Merge 2, are planned for the second half of the year, supporting additional upsides. Like iGaming, hybrid casual games enable quick ROI through in-app purchases and ad revenue.
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Let's now discuss our DTC strategies for the social casino business. The DTC revenue share increased by 2.2% points YoY, reaching 10.4%. As part of our DTC platform activation strategy, we are enhancing the DUC web platform and integrating it with seasonal events to improve user acquisition and conversion rates. In addition, Apple's full-scale policy shift allowing external payments presents a clear opportunity for our DTC strategy. We plan to actively leverage this change to expand beyond VIP users and further strengthen our revenue base by reaching a broader general user segment.
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Now let me discuss our M&A performance and future direction. Since 2017, we have successfully acquired three global game companies and completed their PMI processes. In Q1 2025, revenue from DoubleDown Interactive and SuprNation totaled KRW 121.3 billion, accounting for 75% of consolidated revenue. Starting in Q2, Paxie Games will also be included in our consolidated results. The company's 346% YoY growth in Q1 payment volume is a testament to its high growth potential, and we expect it to contribute meaningfully to our future top-line performance. We continue to explore M&A opportunities in North America and Europe, focusing on companies that offer strong synergies with our existing portfolio.
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Lastly, let me walk you through our new game development strategies. We are focusing on the rapid growing hybrid casual market, which expanded by 44% YOY to reach KRW 4.07 trillion in 2024. This market is particularly attractive as it enables monetization through both advertising and in-app purchases. In this high-growth segment, we are leveraging our Time to Market strategy as a core competitive advantage. By identifying global trends early and optimizing our market entry timing, we aim to maximize the success potential of each title. In particular, we plan to strengthen our development capabilities through synergies with Paxie Games.
The explosive growth of Merge Studio has proven Paxie Games' success formula in the hybrid casual genre. We will actively apply these insights to the development of new titles such as Color Slide Jam, Jewelry Jam, and Hexa Hives Adventure. Marketing investments will be selectively executed based on step-by-step KPI assessments, focusing only on titles with proven gameplay quality. This approach allows us to allocate our limited marketing budget efficiently and maximize return on investment. This year, we plan to develop more than 15 new games, continuing to explore a range of opportunities. While grounded in the puzzle genre, these titles will incorporate unique content and gameplay mechanics to enhance our competitive edge in the global market.
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That concludes our Q1 2025 earnings presentations up to page nine, and we will now move on to the Q&A session, which will be led by our CFO, Mr. Jaeyoung Choi.
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Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone.
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The first question will be provided by Dong-woo Kim from Kyobo Securities. Please go ahead with your question.
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Thank you so much for this opportunity. It seems like you are focused on expanding your business by acquiring Paxie Games and developing new games. My question is about the personnel, like human resources. How's the current situation and what is your plan for the human resources management in 2025?
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Thank you for your question. Let me brief you on the current situation of our staff members and our plan for human resources management in 2025. By the end of March, the consolidated personnel headcount was 590, and as Paxie Games was added to our consolidated result in Q2, about 40 personnel will be added to this team. Consequently, in total, the consolidated personnel headcount will be about 630. The revenue per headcount, based on the consolidated result, is about KRW 1 billion. We can say that we are currently efficiently managing our personnel. If I have to divide it by the business, by the company or the country, we have 480 personnel in Korea, 50 in the U.S., 60 in SuprNation, and 40 in Turkey. We have a very efficient arrangement of personnel and staff members according to our expansion plan for the global market.
In 2025, we will utilize AI technology in a more active manner so that we can improve our overall efficiency in different business areas such as design, development, and CS. As I explained earlier, we will utilize the use cases of AI, and then we will also apply this to game asset development. Overall, we will be able to improve productivity. In particular, we will also reassign personnel within our company, and then we will dispatch our human resources to the departments which show more growth potential, so that in this way, we will be able to improve our efficiency furthermore. By doing so, we will be able to expand our business and continue our growth without adding more headcounts in our company.
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Next question, please.
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Yes. The following question will be presented by Ui-hoon Jeong from Eugene Investment & Securities. Please go ahead with your question.
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Thank you for this opportunity. I have two questions. First question is about the marketing expense. It seems like you improved the profitability by improving efficiency in the marketing cost until last year. But your plan is to increase the marketing cost in order to boost up the Paxie Games and SuprNation. So what is the ratio of the marketing spend that is now being put into the social casino and the other genres in Q1 and compared to the last year? And what's your plan for this year? And second question is about the social casino marketing spend. So, you have efficiently spent the marketing expenses for the social casino until last year, but what is your marketing channel? Or what is your strategies to better save the marketing spend for this year?
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Thank you so much for your question. So, let me explain about the marketing guidance for year 2025. So, i n the social casino sector, we will maintain our marketing spend to be 10% out of the total revenue. At the same time, we will utilize the DTC in a more active way to maximize our profitability. This will be our strategy for 2025. Currently, the revenues coming from the DTC already reached the double digit. This will help us to improve our margin and then secure more user data in this way. When it comes to iGaming, the payback period is about three to six months. We will focus more on expanding our market share in the U.K. market. Especially, just like the social casino market, we will continuously expand the loyal user pool, so that they can be a stronger baseline for our revenues.
In addition, the marketing spend that is used for the first quarter will be the strong baseline for the upcoming revenues in Q2, which will also help us to expand our top line. This will be our core strategy, to set up the long-term baseline for our further profits in the future. In terms of the Paxie Games business, currently, we see that the payback period is about six to seven months. Even though we spend our marketing spend, it easily and very promptly transfers to the revenues, and we can see the result. The merge market is growing at a fast pace, and this is a really important timeline for us. We will use this growth pace to create more top-line growth, and this will be a really important opportunity for us.
We see that this is an important point to further invest in our marketing. It's not like we set up the percentage that can be spent for the marketing out of our total revenue, but we have our internal guideline for the marketing spend, in relation to the ROI as well as the payback period. We will keep our eyes on this to make our decisions on the marketing spend. However, all the marketing investment will be proceeded within the scope in which our operating profit can make absolute growth. We will review our ROI thoroughly in order to maximize efficiency, and we will focus on investment so that we can strike a balance between growth and our profitability at the same time.
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Next question, please.
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The following question will be presented by Seoko Kang from Shinhan Investment & Securities. Please go ahead with your question.
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Thank you for this opportunity. I have two questions, and my first question is about shareholder return policy. The total amount of the dividend by FY 2024 was KRW 24.0 billion, and it's in the middle range of the EBITDA that was shared in advance. When can we expect the share buyback? Would it be by the end of June? And how about the scale of the share buyback? Would it be about 1x or 3x , like we see from the total dividend that was recorded in FY 2024? That's my first question. My second question is about your future collaboration with Paxie Games. As far as I know, you are currently internally developing casual games right now, but after the acquisition, do you have any further plans to collaborate with Paxie Games to develop more new games? If so, what would be the genre?
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First, I will answer the first question about the shareholder return policy. As you may well know, the buyback was done in March, and then we will be able to disclose officially about the total scale of the buyback by the end of June. We will share such detailed information with the market by then after having thorough discussion with our board of directors.
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Second, I will answer a question about our future collaboration with Paxie Games. Recently, the Paxie team has made a visit to Korea, and we started our discussion for future collaboration in many different ways. We have analyzed our failure causes when it comes to game development until today, and we concluded that the development period was too long, and we didn't verify the situation of the market sufficiently to date. Based on this lesson, we will fundamentally change and improve our development path and measures. In particular, the success cases of Paxie Games has become a really important benchmark for our company. Focused on the U.S. market, the hybrid casual games markets are becoming more successful, in which gameplays are being done in a really short period of time.
Success in that market will be our priority in the future. When it comes to genres, software puzzle related genres are our focus. We are now seeing some genres whose D30 retention is at least 15%, which means at least 15 people will continue their play after one of the people install our games. However, such numbers are changing dramatically every month. We are currently closely communicating with Paxie right now so that we can come up with game ideas that can be launched within one or 1.5 months. Also, in relation to the Turkey market, we are currently expanding our networks in that country as well. In Korea, some people consider casual games to be easily successful. However, there are still many challenges in these genres as well.
Even though many users get access to this kind of game, it's not easy to retain those users for at least 30 x of play time. The operation is complicated, and we have to expose more to many different markets in order to make our profits from advertisement. However, currently, we see that Turkey is now growing as the hub of casual game development. It is a strategically important market for us. We are also reviewing the investment opportunities or references of different game companies in Turkey as well. Based on these strategies, our plan is to launch 15 or more various hybrid games every year. We are currently collaborating and talking together with Paxie in a very close manner to enter not only the social casino game market, but also the hybrid game market. We are trying to build track records together with Paxie Games.
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Next question, please.
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The following question will be presented by Dong-h wan Oh from Samsung Securities. Please go ahead with your question.
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I have two questions. First question is about the social casino revenue. In overall, we see a decrease or decline in the sales in the social casino game genre. Is it because of the overall market condition or any certain situations, or is it because of the decrease in the marketing spend? That's the first question. Second question is about SuprNation and Paxie. What would be the revenue point that we can go beyond the BEP?
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Thank you. And then, let me first enter the first question. When it comes to the social casino market overall, we are focused on the U.S. market with DoubleDown Casino and DoubleU Casino. IDFA has changed, and CPA has grown in the U.S. market recently. We also see a decrease in the revenues of our competitors in that market as well. However, when it comes to the European market, the social casino revenue and the market seem more solid. Until today, the proportion of the revenue of the U.S. market was 90%. We believe that we have to do more to expand into more various markets, so we have to make up on this. When it comes to ranking, we are number three or four in the U.S. market, but number seven or 10 in the European market. We will try to find the measures that we can take to catch up on this.
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Regarding your second question about SuprNation and Paxie, when we look into our monthly EBITDA, it's about minus five and it's near the BEP point. But if we reach 20% - 30% more revenues, we expect to have the 5% - 10% margin.
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Next question, please.
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The following question will be presented by Jun-ho Lee from Hana Securities. Please go ahead with your question.
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Thank you so much. I have two questions. The first question is about the high growth of SuprNation in Q1. What are the backgrounds behind this high growth of SuprNation in Q1? And how about the marketing spend as well as the current situation in Q2? The second question is about Paxie. It will be included in the consolidated result from Q2. What kind of impact are you specifically expecting? And how about the marketing? Will you look into the ROI and promote with the marketing? Will it be a little bit delayed, or will you start the marketing in an aggressive way right away?
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Now let me answer the second question about Paxie Games. When it comes to marketing spend, we are currently reviewing the ROI model for this, and then we will decide our marketing policies after reviewing this ROI policy and model for Paxie Games. As of now, we don't have the immediate plans to expand our marketing spend for Paxie Games. However, we see a very good performance from the merge genre. Currently, the merge market is growing at a very fast pace, up to $300 million per quarter, so it's showing a very important and leading position in the growing market. Especially what we have to focus more on is that the users of this genre are the youngest out of the portfolio of DoubleU Games, who are about 25 - 40 years old, and they're mostly female users. These young and new users will be the new driving force for our long-term growth in the future. We also see a relatively lower CPI, and we believe that this will be a strong point for our strategy to expand our profitability in the future. The payback period is maintained at about six months, which is relatively shorter compared to that of social casino.
One more characteristic is that the play pattern is about 30 - 40 minutes, which goes aligned together with the media trend, as people prefer shorts, and this will help us to target the niche time out of their daily life. High immersion experience is also an important characteristic, and that also led to increasing the daily average payment. It also peaked in April this year. We expect that this trend will continue in the second quarter, and then the performance will be consolidated from Q2, which will contribute to the top line growth in full swing from that quarter. Based on the successful know-how of Paxie Games, we will focus our efforts on new game development in the future and expand the casual game portfolio as well. This will help us to develop the core success element in this mobile game market, which can provide a high level of immersion experience to the users within a short period of time.
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Next question.
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The following question will be presented by Dan Kim from Morgan Stanley. Please go ahead with your question.
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Thank you. My question is about the Q2 revenue guidance for SuprNation and Paxie Games, especially when Paxie Games shows very compounding revenue these days. What is the revenue guidance?
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If there is no more question, I'd like to conclude this conference call. But before that, I want to highlight the points that I want to deliver to you from our company side. We will do our best to maximize our revenues and operating profits in the upcoming quarters like quarter two, three, four in 2025. And compared to other game companies, I'm sure that we have a bigger potential for increasing revenues and that we can manage our cost. We have the ability to manage our cost, and we also have the capabilities to further promote additional growth through M&A activities as well. In that sense, I want to explain about our investment principles and M&A strategies before closing this conference call. The big principle of our company is all based on the financial performance. We keep our eyes on the consolidated revenues as well as the continuous growth of the operating profit before making every decision from our company.
Our principle for investment is a synergic investment. We have three standards when it comes to the investment. First, we want to create synergy and improve the efficiency connecting with our existing business models. We have a focus on casino related businesses like social casino and iGaming in the past. But by acquiring Paxie last year and then expanding our business coverage into the casual game genres, we have laid the foundation to create more synergy effects in many different types of game genres. Secondly, we aim at selecting the companies with a high level of competitiveness in growing game genres. We look into the game genres in many different ways, which can continue their growth in the future. And then we also review their product competitiveness and marketing knowhow, and then we prioritize our selection and the investment in these companies in order to improve our market competitiveness and ensure our new driving force for the long-term period.
Third, we are focusing on the investment opportunities to expand into more different geographical markets as well as the user demographics. We are currently trying to expand our revenues with our three existing models. At the same time, expand to more markets as well as expand our coverage in different age groups, as well as striking a balance between the different gender users of our company. We will focus our investment in these goals and priorities to expand more user pool and lay a firm foundation for stable revenue for our company. In the case that we invest in a company who owns their own founder, for example, we are currently contracting on a long-term basis, also based on the earn-out principle, so that we can well utilize our own shares and capital at the same time, in this investment structure.
And in this way, we will be able to have our interest and then the founder's interest together and then grow this into the long-term partnership. Even though our company is based, and its headquarters are based in Korea, we have successfully promoted three rounds of M&As with the foreign companies, as you may well know, and that helped us to expand our global network continuously. And by doing so, we lay the foundation for further global market entry in different game genres, including social casino, iGaming, and casual games. Currently, we are working on due diligence with potential partner companies as of now. And in 2025, we will continuously review such global expansion strategies. And when we specify these deals, we will be able to have some opportunities to share these details with you in the near future.
We will focus on reaching our business goals as well as financial growth through such M&A principle and strategies. Especially, we are currently reviewing the potential partners who can create synergy effects together with us in the market and genres with a high level of potential for the further growth and the new market as well. And in this way, we will make our global presence as a global game company firmer in the near future.
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Thank you so much once again for attending our earnings call despite your busy schedule. I want to assure you once again that we are committed to making every effort we can make, in order to make the business dynamics that can provoke curiosity from many different investors in this year. Thank you very much.