Good morning. We'd like to thank the analysts and domestic and foreign investors who are attending the Q1 2024 earnings presentation conference call of DoubleUGames. Prior to the presentation, I'd like to pass along a few requests. The performance data is prepared for the convenience of investors based on the provisional financial statement for the Q1 2024. This data was written with reference to objective standards. However, please be aware that some predictions, forecasts, or expressions based on the subjective judgment may be included, and the numbers and interpretations that do not match this data may be derived due to changes in the future environment, different data aggregation standards, et cetera. Today's earnings presentation will be conducted by our CFO, Mr. Choi Jae young.
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Good morning. I'm Choi Jae young from DoubleUGames. We'd like to thank all of you for attending the Q1 2024 earnings presentation conference call of DoubleUGames. Today's presentation is organized as shown on page three. Q1 2024 highlights, earnings summary, revenue analysis, cost analysis, business update, and shareholder return roadmap. After the earnings presentation, we will have a Q&A session. I will discuss the keywords in the order of Q1 highlights, growth, profitability, and shareholder return roadmap as shown on page four. First, growth was driven by strong social casino revenue growth in Q1 and iGaming revenue growth at SuprNation with quarterly revenue of KRW 160.5 billion , which was up 10.5% YoY and up 4.6% QoQ. This was our best quarter since 2021 Q1, when we experienced a significant increase in revenue due to the impact of COVID-19, as well as the largest revenue quarter in 12 quarters.
In addition, we are planning the soft launch of up to five new games this year, and we are working on investments and new businesses that will help increase our top line, both in games and non-games, to further drive growth. Second, profitability has been high due to revenue growth and marketing and sales cost efficiencies. Operating income for the quarter was KRW 61.7 billion , and net income was KRW 60.4 billion , which was the highest ever for a quarter. Our profitability indicators are growing, with operating income exceeding KRW 60 billion for two consecutive quarters for the first time since our founding, and net income exceeding KRW 60 billion for the first time, the largest net profit in a quarter.
Finally, with regard to corporate value enhancement, which has attracted a lot of attention in recent years due to the Value-up Program, we are announcing a mid to long-term roadmap for shareholder return to enhance corporate value. In line with our existing dividend policy, we have planned to buy back shares up to 3x the dividend, and we plan to retire up to 2% of the outstanding shares in order to increase shareholder value.
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I'd like to turn to page five about the Q1 consolidated results summary. In Q1 2024, consolidated operating revenue was KRW 160.5 billion , which was up 10.5% YoY. The operating income was KRW 61.7 billion with a margin of 38.4%, up 33.8% YoY. The EBITDA was KRW 65 billion with a margin of 40.5%, up 35.4% YoY. Operating income also exceeded KRW 60 billion for the second consecutive quarter for the first time since our founding. Net income was KRW 60.4 billion with a margin of 37.6%, exceeding KRW 60 billion for the first time. This quarter, we achieved the highest revenue performance in the last 12 quarters due to the growth of social casino revenue through improved app performance and the inclusion of iGaming revenue.
In addition, we achieved operating income of more than KRW 60 billion for two consecutive quarters through efficient marketing and predictable cost management, which led to further growth in profitability.
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Now, please let me turn to page six on revenue analysis. The consolidated sales for the first quarter of 2024 was KRW 160.5 billion . By business unit, Social Casino recorded KRW 149.4 billion with 82.6% of revenue coming from mobile. iGaming was KRW 11.1 billion , reflecting three months of revenue. Franchise games, DoubleDown Casino and DoubleU Casino accounted for 91% of the total revenue, while SuprNation's iGaming revenue grew to 7% of the total revenue, reflecting the diversification of revenue. Revenue by game increased by 1.8% QoQ to KRW 103.8 billion for DoubleDown Casino, and decreased by 0.7% QoQ to KRW 41.4 billion for DoubleU Casino.
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I'd like to turn to the cost analysis on a consolidated basis for Q1 2024, as shown on page seven. The platform costs were KRW 43.6 billion , which is the variable cost of paying 30% of revenue to platform companies, such as Google and Apple. Marketing expenses were KRW 21.1 billion , up 37% QoQ, down 26% YoY, and 13% of revenue. The increase in marketing expenses in Q1 was driven by skill games and iGaming. Unfortunately, skill games underperformed despite global marketing, and we plan to limit further investment. Marketing expenses for social casino continue to operate efficiently at 8.7% of social casino revenue. In the current challenging environment for mobile game marketing, we believe that further marketing investments without confirmed results may negatively impact both overall company growth and profitability in the future.
Therefore, we plan to make additional investments in the future on the new lineups only if the initial marketing ROI and game metrics meet our thresholds, so that we can continue our current growth and profitability. Personnel expenses decreased by 12% QoQ to KRW 19.2 billion . The decrease was mainly due to a one-time decrease in compensation after the revision of executive severance pay regulations. The total number of employees on a consolidated basis was approximately 600, comprising of 360 at DoubleUGames, 180 at DoubleDown Interactive, and 60 at SuprNation. Royalty amounted to KRW 3.2 billion , reflecting a one-off settlement in Q4 2023, a normalization of royalties from IGT, and an increase in fees for the use of iGaming's external slot IP. Intangible amortization expense was KRW 3.3 billion , up 10% QoQ.
Approximately KRW 2.0 billion of the increase was due to amortization of office rent lease accounting, and the acquisition of SuprNation has resulted in a PPA accounting charge of approximately KRW 1 billion .
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Now, I'd like to talk about the social casino on page eight. The social casino market grew at an average rate of +0.6% in Q1, and the top 15 grew at an average rate of +0.8%. We believe our performance in Q4 was stable with 1% QoQ growth in revenue. We are driving increased play time for our existing subscribers through collecting and competitive content. This increase in user metrics is translating into revenue. We are also seeing efficient marketing in the social casino segment with marketing expenses of KRW 13 billion in Q1, or 8.7% of revenue. Now I'd like to further explain about the business characteristics of social casino games.
As DoubleDown Casino has been operating since 2010 and DoubleU Casino since 2012, the revenue contribution from loyal and existing customers is around 90%, and we are building our revenue from new subscribers through efficient marketing investments. Revenue is generated by the influx of new customers and increased play time of existing and new customers through various slots and collecting and competitive content in our app. With the profits generated from these sales, we use efficient marketing to continuously attract new customers through a virtual cycle. Therefore, we are strengthening user behavior data analysis to continue to grow through this virtual cycle. In particular, we are continuously updating game content that can increase play time, and we also plan to continue efficient marketing to attract new customers for sustainable growth.
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Now, I'd like to talk about the iGaming on page nine. iGaming's continued growth in revenue is driven by increased marketing investment, particularly in the U.K. Due to the nature of the iGaming business, the sales conversion rate and payback period for marketing investments are short, and the results of marketing investments are reflected quickly compared to the social casino business. We have set the highest priority on the scale of marketing investment and operational strategies to achieve optimal ROI, and we are also conducting post-acquisition PMI work. iGaming revenue generated KRW 11.1 billion in Q1 2024, and the share of iGaming revenue out of the Q1 2024 on a consolidated revenue basis reached 7%, demonstrating its growth potential. Average monthly revenue in Q1 2024 grew by approximately 30% QoQ.
In addition, the development of SuprNation's fourth brand continues, and we expect it to be a competitive app in the iGaming market based on the SuprNation's existing iGaming operation know-how and DoubleUGames, differentiated social casino content and performance marketing experience.
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Now, I'd like to share business updates about the casual games on page 10. A total of five games are now being developed by our internal studios. Bingo Haven was soft launched in April 2024 in the U.S., U.K., and Canada. Based on the experience of DoubleU Bingo, we differentiated ourselves with proven bingo content and stories with nurturing and building elements. Testing is underway to determine initial retention and ROI metrics, and a global launch in marketing is planned only if further results are achieved. Superb Match is a match-3 puzzle game. We are working on optimizing the difficulty of each in-game stage using generative AI and building additional out-game content with adventure elements. We will share the exact soft launch schedule and more at a later date.
Jackpot Smash will have differentiated game content, including a more intuitive format and a variety of casual elements based on our past experience operating the Fantastic Slots service. We Are All Friends is a casual RPG game with its unique gameplay and is targeted for a soft launch later this year. We are developing it as a new type of game that combines elements of tale -binding games with RPGs. Let's Go! is a triple match game where you collect and clear three puzzles, and is a puzzle game with a block world motif that we are developing. It is also being developed for a soft launch later this year. We are working to optimize our existing social casinos to serve as cash cows, and we are doing our best to create new growth engines through the development and launch of new games.
As explained earlier, marketing investments in new games are subject to initial retention, payment metrics, etc. Further investments will be made once a certain level of profitability is achieved. We do not expect a sharp decline in profitability. We will provide investors with more details on the launch and development of future games at the appropriate time.
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On page 11, I will outline our mid- to long-term shareholder return roadmap. In line with the recent government-led Value-up Program, we have decided to enhance our shareholder value. Earlier this year, we decided on a new dividend policy linked to consolidated EBITDA and declared a final dividend of KRW 16.5 billion , which is the largest since we went public. In addition, we decided on an equity policy centered on the purchase and cancellation of treasury shares, with a special cancellation of 50% of the current treasury shares if there is no disclosure of investment or M&A through treasury shares by the end of 2024, and an annual cancellation of up to 2% of the issued share capital from 2025 to 2026. This is in addition to the purchase of treasury shares up to 3x the settlement dividend.
In addition, a free share capital increase in January 2024 and the cancellation of treasury shares in 2023 resulted in the cancellation of approximately 3% of treasury shares.
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This concludes my presentation on the earnings of the Q1, and we will now open for questions.
[Non-English content] 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. The first question will be provided by Ui-h oon Jeong from Eugene Investment & Securities. Please go ahead with your question.
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I would like to ask you three questions about the iGaming of SuprNation. First of all, after reflecting the result in the Q1, I believe that the revenue recorded higher than our expectation and forecast. Even though you reflected the two months of the result, we expected about KRW 8 billion for the quarter, but actually you recorded KRW 11.0 billion. Was it possible because of the marketing effect or any business synergy effect? The second question is that can we consider that the user traffic and revenue will go together because of the special characteristic of this game? The third question is about the new updates about the development of the iGaming mobiles that are currently developed in your company.
Even though SuprNation has a right for business of these games, I was wondering if they also need to get approval from the authority in order to launch the new games. These are the three questions.
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Thank you for the question. About the first question, we achieved a better result in Q1 compared to Q4. Thanks to the increase of the marketing cost. At the same time, we have a better data analysis on the social casino as well as our experiences and know-how in the operation and performance improvement. Based on this, we are optimizing our campaign and we are fine-tuning our campaigns. I think that these were resulted in the increase of our revenue in the Q1. About the second question, they go together and paying users are really important. As a matter of fact, for the iGaming, 100% of the users are paying users. It will be very important to increase the influx of these users as well as the retention.
You can see that the operation structures are very similar to that of social casino. About the third question about the mobile app that is being developed internally. Of course, we need to launch and sell through SuprNation because SuprNation has the license, and we are also reviewing and calibrating our mobile apps following the approval or the regulations of the respective country. We will optimize our mobile apps according to the regulations of each country that we plan to launch.
[Non-English content] The following question will be presented by Seung-hoon Lee from IBK Investment & Securities. Please go ahead with your questions.
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Thank you for giving me this opportunity to ask questions. I have two questions. First, about the iGaming. We believe that the revenue for the iGaming is likely to increase in the future. But in the short term, how much percent do you expect the iGaming will be counted out of the total revenue? Do you have any strategic objective for this? The second question is about casual game. I was wondering if you have any plan for any internal restructuring or the M&A in the mid to long term.
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Thank you for your question. First of all, about the iGaming, our short objective for this is to have over 10% out of the total revenue. In the mid to long term, we plan to expand this proportion. About the second question, the casual game. As the recent environment is going through very rapid changes, in order to optimize and improve the time to market, we will work in a small team and we will work faster. That's why we are working on the live ops and optimization. Currently, 150 people are working on the development of the new games. Lastly, about the M&A, I'd like to divide it by games and non-games. In terms of the games, in order to cover more various countries and diverse age groups, we are currently reviewing any possible opportunities for the casual games.
However, as the number of the casual game companies with profitability is very limited, we have to be very selective. As we are also a game company, diversification of the games will be very important. In terms of the non-games, the continuity of the revenue is important, and the repeated use and the payment of the loyal users is very important for this. We are currently reviewing the B2C apps in that category. Also, we will review on the ROI based marketing as well as the possibility for the global expansion. We will do our best to come up with more meaningful updates with you soon.
[Non-English content] Currently there are no participants with questions. Please press star and one to give your question. [Non-English content] The next question will be provided by [Dan Kim] from Morgan Stanley. Please go ahead with your question.
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Hello. Thank you so much for giving me this opportunity. My question is about SuprNation. Even though the increase in the marketing expenses, the sales forecast for SuprNation was positive, but can we think as it will reach the BEP point? How about your forecast for the revenue trend in the Q2? Will it be very similar to Q1, or how is your expectation for that? The last question is about the fourth brand of SuprNation. How is the development status? Are you expecting to launch this within this year?
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Thank you for your question. First of all, about the first question. Because of the slight increase in the marketing expenses, we recorded -5% to -10% in the operating income for SuprNation. However, we believe that from the longer term perspective, we will be able to gain more profit through these revenues as well as expenses. We believe that it will be beneficial in the long term. We made investment because we see that it was reasonable from the long-term perspective. About the second question, the revenue trend for the Q2. It is showing very similar pattern as the Q1. Based on the data accumulated, we are currently working on the optimized marketing investment and ROI analysis. For the third question about the fourth brand. We have achieved a certain level of development internally.
However, the regulation compliance is also one step that we need to work on. That regulation compliance may impact our schedule for the launch of this fourth brand. Currently, we are working hard on our major brand, and then we will also work hard on identifying and utilizing our know-how of iGaming and reviewing the market status.
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Thank you very much. This concludes our earnings presentation for Q1 2024. If you have any additional questions, please feel free to contact our IR team or myself, and we will do our best to provide you with the necessary information. Thank you very much once again.