Good morning, ladies and gentlemen. We'd like to thank the analysts and domestic and foreign investors who are attending the 2023 Q2 earnings presentation conference call of DoubleU Games. 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 second quarter of 2023. This data was written with reference to objective standards. However, please be aware that some predictions, forecasts, or expressions based on subjective judgments may be included, and numbers and interpretations that do not match this data may be derived due to changes in the future environment, different data aggregation standards, and et cetera. Today's performance announcement will be conducted by our CFO, Mr. Choi Jaeyoung.
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Hello. I'm Choi Jaeyoung from DoubleU Games. We'd like to thank all of you for attending the 2023 Q2 earnings announcement conference call of DoubleU Games. Today, we will proceed to the meeting in the order of earnings summary, revenue analysis, cost analysis, business update, and appendix, as shown on page three. After all the presentations, we will have a Q&A session.
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First of all, please let me share the Q2 earnings summary as shown on page four. The revenue on a consolidated basis in 2023 Q2 was KRW 143.9 billion, down 3.8% year- on- year. Operating income was KRW 50.3 billion, with a margin of 35.0%, up 20.3% year- on- year. EBITDA was KRW 52.2 billion with a margin of 36.3%, which was up 14.7% year- on- year. Net income was KRW 44.4 billion with a margin of 30.9%, recording a stable net income. In the second quarter of this year, we recorded the highest operating income ratio and EBITDA margin since 2020, driven by improving efficiencies in marketing and operating expenses.
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Next up, please let me share the Q2 revenue analysis as shown on page five. The revenue on a consolidated basis in 2023 Q2 was KRW 143.9 billion. By platform, web recorded KRW 24.9 billion, and mobile recorded KRW 119.0 billion, and mobile accounted for 82.7% out of total sales. Mobile revenue was strong, growing 1.1% compared to Q1, and up 4.5% year- on -year. Franchise games, which are DoubleDown Casino and DoubleU Casino, accounted for 97% of total sales. By game, DoubleDown Casino recorded KRW 96.6 billion, which was down 1.5% year- on- year. DoubleU Casino recorded KRW 43 billion in a year-on-year decrease of 5.5%. The slowdown due to inflation and the warmer month have reduced the metrics for web platforms, so the overall sales decreased slightly. However, we were able to rebound on mobile by continuing to streamline marketing and manage the profitability and improve app performance.
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Now please let me share the Q2 cost analysis on page six. Platform costs amounted to KRW 41.4 billion, which is a variable cost that paid platform companies like Google and Apple 30% of sales. The marketing expenses amounted to KRW 24.7 billion, which was down 12.4% quarter- on- quarter, and it was 17.2% of sales. Most of the marketing expenses were invested in attracting new users to franchise games, which are DoubleDown Casino and DoubleU Casino. Cost efficiency was achieved by optimizing marketing channels and improving marketing efficiency. The salary and benefits were KRW 17.8 billion, down 2.2% quarter- on- quarter.
We believe that such labor costs are continuing to stabilize and are not expected to change significantly in the future. The total number of employees on a consolidated basis is approximately 570, which comprises of 320 at DoubleU Games and 250 at DoubleDown Interactive. The royalty amounted to KRW 2.4 billion, or 1.7% of sales, and it is a fee for the use of IGT's Slot IP. D&A was KRW 1.9 billion, unchanged from the previous quarter. Most of the expenses is due to amortization of office leases. Both operating profit and EBITDA increased year- on- year due to marketing cost efficiencies and operational cost management.
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Now, we will update you on our businesses and plans as shown on page seven. Beginning in the second half of 2023, we plan to grow focusing on sales through three strategies. First of all, the existing social casino business will serve as a cash cow by streamlining marketing costs and improving app performance. In particular, in the second half of this year, we plan to increase our market share by expanding our user base from users in their 40s and 50s to users in their 30s and 40s, and also in North America and Europe through the launch of a new game called Fantastic Slot with casual content that focuses on user growth experience. Second, we plan to continue to invest in businesses that have a high direct synergy effect with social casinos.
The areas with a high direct synergy with social casinos are iGaming and Skill Games. In the case of iGaming B2C, the review of corporate governance changes is currently underway with the relevant authorities in the U.K. an d Malta. As soon as it is completed, it will be included in the consolidated results through closing. The reason for the delay in the corporate governance review is that all of our Korean and U.S. consolidated subsidiaries, including DoubleU Games, have been submitted and reviewed their data, and SuprNation's license includes the U.K. and Malta, Isle of Man and Estonia, and each country's gambling commission board has different procedures.
We will do our best to complete the review process with the authorities as soon as possible so that we can inform our investors. Skill Games has checked app stability, BM, and etcetera through the tech beta launch in June 2023. The global launch is being delayed due to a slight delay in the screening of the company to introduce credit card payments.
As soon as the relevant screening is completed, we are planning full-scale marketing in the U.S. market. Skill Games are growing mainly in the U.S., India and the U.K. markets, with global downloads reaching 30 million in the first half of 2023, which is up 5% from the second half of 2022. We are aiming for successful market entry and performance in these global skill game markets by utilizing our existing mobile performance marketing know-how.
Third, even if there is no direct synergy with existing social casinos, we plan to consider investments and M&As also in non-game areas as well as games if they have high ROI and can contribute to future revenue growth. We currently have about KRW 400 billion in cash, and we plan to utilize the cash to finance M&A. We also plan to create additional growth engines based on the stable operating cash flow we generate every year.
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On the iGaming side, as previously explained, we plan to share as soon as the corporate governance change review is complete, and at the same time, we are working on a two-track approach to ensure that we have additional growth drivers at the time of closing, as I'm going to explain as follows. First of all, regarding the B2C market, we are jointly developing a differentiated iGaming app with SuprNation based on our experience in certified slots and social casinos. We will be able to share the exact timing of the app launch after the closing of the acquisition.
In addition, in B2B, we aim to launch one slot developed by W Games on the SuprNation app in the short term. By checking the performance of the slot, we plan to prepare a content provider business to supply differentiated Slot IP developed by W Games in the B2B market in the mid to long term. Lastly, I want to talk about Fantastic Slot. If the previous DoubleU Casino and DoubleDown Casino were targeted at middle-aged people in their 40s and 50s, I would like to say that Fantastic Slot is a game with more casual game elements.
The new economic model of zone system and the content focused on user growth are distinctly different from existing social casinos. We are expanding our user age pool to the 30s and 40s through casual game elements that are suitable for gaming trends. We aim to achieve significant results in the European market in addition to North America. Recently, within the social casino market, titles that provide various events and content in addition to the fun of slot games are performing well. Fantastic Slot was designed and developed with this in mind, so we expect it to contribute to the growth of the social casino sector after the game's global launch. We are looking forward to contributing to the growth of the social casino sector after this launch.
With the first round of development now complete, Fantastic Slot is currently undergoing internal QA, and we plan to move to the tech beta and the global launch in the second half of this year. We look forward to sharing more details with our investors as we progress.
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This is the end of our presentation up to page eight, and now we will proceed with the Q&A session.
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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-w oo Kim from Kyobo Securities. Please go ahead with your question.
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Thank you so much for giving me this opportunity to ask this question. First of all, I was wondering if you can elaborate a little bit more about your plan for utilizing the cash that you have inside your company. My second question is about M&A. You say you are also considering M&A, so could you please share more details about the progress that you are going through now as well as the sector that you are focusing on?
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Thank you so much for your question. Regarding your question, our priority is on the M&A investment in order to improve the corporate value and promote more sales growth in the future. Regarding the sector that we are focusing on these days, we are considering, of course, various investment opportunities in the game sector. These days, we see the changes in the marketing environment in many different markets, as well as the preference towards content among users. We are currently considering the B2C mobile services that can work in countries like the U.S., Korea, and Southeast Asia.
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Next question, please.
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The following question will be presented by Seung-h oon Lee from IBK Investment & Securities. Please go ahead with your question.
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Thank you so much for giving me this opportunity. I have two questions. First of all, I see that the payments or the sales themselves have slightly decreased. I was wondering if this is a trend that we can see throughout the social casino market, or is it because of the endemic effect? Could you share your forecast regarding the social casino market? That's the first question. My second question is about marketing. I see that the marketing expenses were down significantly, and the efficiency is pretty good. Is it because the online marketing unit price itself was down a little bit recently, or what's the reason behind this change?
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Thank you so much for your question. Regarding your first question, the overall social casino market actually grew significantly during the COVID-19 era. Last year, it stood at $7.4 billion, and this year is very similar to last year's figure, which is about $7.4 billion. The market is not experiencing a significant decrease these days. Rather, it shows a very stable and steady trend. Regarding the second question, in our case, we can say that the CPI or the market environment are not that favorable towards companies in this sector. They are actually increasing one by one. We are efficiently using our retention pool and marketing channels, and we are trying to optimize by improving efficiency in the channels that are doing well and reducing the marketing costs in the other channels that are not doing well. We are currently optimizing our overall progress.
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Next question, please.
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The following question will be presented by Donghwan Oh from Samsung Securities. Please go ahead with your question.
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Thank you for this opportunity. I have two questions. First, we see that the efficiency improvement in the marketing cost is very positive. When we look back at the data, we saw that such marketing expense efficiency progress influenced the sales as time goes by. I was wondering if you believe that such changes in the first quarter would impact the sales in the second quarter in a negative way. Do you think this will happen? Are you going to keep this marketing expense plan for the second half of this year?
The second question is, even though it's a little bit early to ask this question, I was wondering if you can share the forecast for next year. Can you forecast the sales growth for next year? If you expect the growth will be positive next year, where do you expect such growth will come from? Mostly among the update of the existing games, or iGaming, or skill games, so where do you see this growth coming from?
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Thank you so much. I want to answer the first question. The first question was whether the marketing efficiency progress that we made in the first quarter would impact the sales of the second quarter. The marketing expense-related decision is, we believe, a preemptive investment. We of course make investment considering all these possible impacts.
However, we believe that such impact will be very limited in the second half of this year, because we see the new sales coming from these new stats. Even though we improved the efficiency in the marketing cost and the absolute amount actually decreased, the new sales stack itself is stabilized. We don't think that the direct impact will be made in the second half of this year. We also have the marketing expense-related plan for the second half of this year, considering all these elements that we mentioned.
However, if the marketing environment turns more favorable to the companies, there is a possibility that we might increase the marketing expense in the second half of this year. Regarding your second question, the forecast for next year: our target for the social casino game is to reach at least a single-digit growth for the quarterly-based sales, by improving our app performance and improving the efficiency in the marketing channel. We also expect some more positive results coming from the SuprNation chain of control and acquisition being completed. Regarding the skill games, we will need to see the result and indexes after the global launching in the second half of this year, and then we'll be able to judge on the marketability of these skill games.
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Next question, please.
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The following question will be presented by Ui- Hoon Chung from Eugene Investment & Securities. Please go ahead with your question.
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I have two questions. First of all, I want to ask you about the going mobile strategy for the iGaming. How are you preparing this? And I was wondering, why do you think that it is very competitive to go B2B slot for this iGaming mobile? My second question is about your plan that you announced earlier this year, regarding the shareholder return that was shared earlier this year. Any change for this shareholder return plan?
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Thank you for your question. Regarding going mobile for the iGaming, we are providing service based on the app web right now. If you see the U.K. or other European markets, we see increasing preference or requests among users who love to use mobile. Just like the social casino games that we have done before, we are currently jointly developing the apps that can show the optimized mobile performance right now. Regarding the B2B slot that you mentioned, we can see very positive references from other games. Just like what we saw from the social casino, I believe that we will be able to receive good responses for the iGaming as well. Regarding the expanding shareholder return plan that we shared in early this year, there is no change.
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Next question, please.
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The following question will be presented by Hak-j un Kim from KIWOOM Securities. Please go ahead with your question.
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I have a question about the sales of skill games. Could you please share some more information by game? My second question is, as this is a matching game, I believe that you will need a certain number of users. How do you forecast the users that will get access to the game at the same time, as well as the marketing expense for this game? When do you think the payment method will be applied? Can you also share plans to apply for the games that will follow, like Bingo, Bubble, and Solitaire?
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Thank you for your questions. Regarding the skill games, there are not many official reports available right now. We also searched for the data, and according to Fortune Business Insights, we see that the market size is about KRW 8 trillion-KRW 9 trillion , and it grew by 15% compared to the previous year. As you said, the skill games require some elements like matching or casual, and the proportion of the paid users is higher. I believe that these elements combine together to drive the growth of this market as well as the scale of this market.
Regarding the DAU, we can share more information later. In order to become feasible, we need about 100,000 DAUs for this. Regarding the marketing expense, I cannot actually share this as of now because of the fluctuation in the market, like the variable elements in the market. I can say that we will spend the marketing expenses within the scope that we can make profits in our company.
Regarding the timing of the application of the payments, we have talked to some companies like Braintree and PayPal, and we are almost completing the process. In addition, the users will need to cash out, so it will be better if we can diversify the payments method. We also have additional plans to talk to more possible partners. Regarding the Solitaire and Bubble Shooter, we have almost completed the development. After going through the efficiency improvement for the marketing process, we also have plans to launch second and third applications consecutively.
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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 for this opportunity. I want to ask you questions about Fantastic Slot. Could you share the development progress as well as your expectation for the game to contribute to the sales? In the last quarter, you shared that our goal is to launch in the third quarter. Is it still like that, or would it be more realistic to expect it to be launched in the fourth quarter?
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Regarding the Fantastic Slot, we have almost completed our internal development. We are checking two ways, including technical errors that might happen in the game. Our plan is to promote tech beta launching and global launching throughout the Q3 and Q4, so officially we expect that this game will be launched in the Q4 this year. Regarding our forecast for the sales, it's kind of difficult to accurately forecast the number as of now. We will see the efficiency in the marketing expenses and the user retention, and then we will share those information with you in the early stage after the launching.
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Thank you so much for participating in our conference call today. If you have any additional questions, please feel free to contact our IR team. We will do our best to share such information. Thank you once again for taking your time out of your busy schedule.