Good afternoon, and welcome to DoubleDown Interactive earnings conference call for the fourth quarter and full year 2021 financial results ended December 31, 2021. My name is Olivia, and I will be your operator this afternoon. Before this call, DoubleDown issues financial results for the fourth quarter and full year 2021 in a press release, a copy of which has been furnished in a report Form 6-K filed with the SEC and is available in investor relations section of the company's website at www.doubledowninteractive.com. You can find a link to the investor relations section at the top of the homepage. Joining us on today's call are DoubleDown CEO, Mr. In Keuk Kim, and CFO, Mr. Joe Sigrest. Following their remarks, we will open the call for questions. Before we begin, Mr. Grampp, the company's outside investor relations advisor, will make a brief introductory statement. Mr. Grampp?
Thank you. 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 our 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 we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to DoubleDown's annual report on Form 20-F and other SEC filings for 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 obligation 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 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 available in the investor relations section of DoubleDown's website. Now I would like to turn the call over to DoubleDown's CEO, Mr. In Keuk Kim.
Thank you, Jeff. Good afternoon, everyone. Thank you for joining us on the earnings call for our Q4 and full year 2021 results. In the fourth quarter of 2021, we continued to execute on our strategy to both leverage our leadership in the social casino genre through our flagship DoubleDown Casino and expand through the launch of gaming apps adjacent to social casino. Q4 revenue was down slightly from the Q3 2021 result, consistent with our understanding of the performance of the overall social casino gaming industry. To maximize the ongoing opportunity in social casino games, we plan to continue to release exciting new slot games within DoubleDown Casino every one to two weeks, as well as to integrate new meta features focused on further improving our industry-leading monetization metrics.
We finished a successful 2021 by growing revenue to a record of over $363 million, which represents 33% growth compared to 2019 results. Adjusted EBITDA at approximately $120 million remain relatively stable compared to 2020 and represent growth of 18% compared to our 2019 results. I highlight 2019 since 2020 represents a difficult comparable period for this year, given the worldwide stay-at-home measures that significantly benefited our business, especially at the onset of the COVID-19 pandemic. The fact that our 2021 results were materially better than our 2019 results demonstrate the value of our platform and importance of the ongoing player engagement with our games.
Throughout 2021 and inclusive of the first quarter, we continued our long string of cash flow positive quarters with $20.4 million in net operating cash flow for Q4 and $96.1 million for the full year. As a result, we ended the first quarter with a cash balance of $242.1 million, giving us a strong financial position. Importantly, we believe our business model will continue to generate positive free cash flow each quarter. Now I will turn it over to our CFO, Joe Sigrist, to walk you through our financials before providing my closing remarks.
Thank you, IK, and good afternoon, everyone. Our revenues for the fourth quarter of 2021 decreased 5% to $86.3 million from the prior year period. Q4 2020 benefited from the widespread stay-at-home COVID prevention initiatives in place at that time, which have significantly abated since then. For the full year of 2021, revenue increased 1.4% to a record $363.2 million. We continue to be encouraged with key monetization metrics that improved from the comparable quarter last year and for the full year 2021 versus the full year 2020. Specifically, average revenue per daily active user or ARPDAU increased from $0.88 in Q4 2020 to $0.96 in Q4 2021. ARPDAU for the full year 2021 increased to $0.97 compared to $0.83 for the full year 2020.
Secondly, average monthly revenue per payer increased from $205 in Q4 2020 to $216 in Q4 2021. Average monthly revenue per payer for the full year 2021 increased to $218 compared to $191 for the full year 2020. Lastly, payer conversion, which is the percentage of players who pay DoubleDown, was unchanged at 5.5% in Q4 2021 compared to the prior year period. For the full year 2021, payer conversion increased to 5.7% from 5.3% in 2020.
In addition, the initial engagement of players from Undead World: Hero Survival, our first non-social casino gaming app, launched at the end of September 2021, positively impact our sequential quarterly player engagement metrics as Q4 total company monthly active users, or MAU, increased compared to Q3 2021. Total operating expenses for the fourth quarter of 2021 decreased 8.8% to $62.7 million from the prior year period. The decrease was primarily due to a combination of lower cost of revenues, lower G&A, and lower depreciation and amortization expenses. For the full year 2021, total operating expenses decreased 1.9% to $264.5 million from the prior year period. The decrease was primarily due to lower depreciation and amortization expenses from the prior year.
Of note, sales and marketing expenses in Q4 2021 were $21.9 million, representing a 25% increase compared to the fourth quarter of 2020. This increase was primarily due to the activity to acquire initial new players for Undead World: Hero Survival. Going forward, we expect to continue to incur advertising expenses both to acquire and retain players for DoubleDown Casino and for the ramp up of our new app initiatives. It is also worth noting that depreciation and amortization expenses in Q4 2021 were $2.2 million compared to $7.6 million in Q4 2020, and were $17.9 million for the full year 2021, compared to $31.6 million for the full year 2020.
The decreases were due to the completed amortization of certain identifiable and tangible assets for which we used purchase price allocation at the time of the 2017 DoubleDown Interactive acquisition. Net income for the fourth quarter of 2021 increased to $17.5 million or $7.08 per diluted share, compared to $15.5 million or $6.99 per diluted share in the fourth quarter of 2020. For the full year of 2021, net income increased to $78.2 million or $33.96 per diluted share, compared to net income of $53.6 million or $26.20 per diluted share in the full year of 2020.
Adjusted EBITDA for the fourth quarter of 2021 was $25.8 million, compared to $29.9 million in the prior year quarter. Adjusted EBITDA margin of 29.9% represents a reduction of approximately 296 basis points compared to Q4 2020. The quarterly year-over-year decline in adjusted EBITDA and adjusted EBITDA margin is primarily attributable to lower revenue and higher sales and marketing costs, as I previously discussed. For the full year of 2021, adjusted EBITDA remained relatively stable compared to 2020 at approximately $120 million. 2021 full year adjusted EBITDA margin was 33.1%, slightly below last year's result of 33.6%. Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures, which we believe are useful in evaluating our operating performance.
A full reconciliation of these measures to the most directly comparable GAAP measure is available in the earnings release. Cash flow from operations for the fourth quarter of 2021 was $20.4 million compared to $36.1 million in the prior year period. We did not incur any material capital expenditures during the quarter. For the full year, cash flow from operations was $96.1 million compared to cash flow from operations of $99.9 million during the 12 months of 2020. Finally, turning to our balance sheet. At the end of the fourth quarter, we had $242.1 million of cash and cash equivalents compared to $223.1 million at the end of Q3 2021.
The improvement in our net cash position was due to the aforementioned net cash flow from operations as we continue to remain in a state of positive cash flow generation. That completes my financial summary. Now I will turn the call back over to IK for closing remarks.
Thank you, Joe. As some of you know, DoubleDown has defined a three-pronged growth strategy. Let me briefly comment on each element. Firstly, we will continue to maximize our leadership position in the social casino gaming industry. This is primarily through our flagship gaming app, DoubleDown Casino, leveraging our passionate current base of players while acquiring new players through the frequent and consistent launch of new slot games and the introduction of exciting new meta features. Secondly, we plan to continue to expand into adjacent mobile gaming segments, starting with last quarter's launch of Undead World: Hero Survival. We were encouraged by the player engagement metrics seen immediately after Undead World worldwide launch in late September.
We expect to continue to optimize our monetization strategy and the future state of the game as we chart a path towards more material monetization while building a critical mass of players for long-term value creation. In parallel, we are preparing for the release of our next non-social casino app, Spinning in Space, which we currently expect will be available to players in the summer of 2022. We believe that we are in an excellent position to capitalize on the last element of our growth strategy, M&A, due to our strong balance sheet bolstered by late September's IPO and our track record of post-merger execution success. We continue to evaluate opportunities to accelerate our organic growth potential and have been encouraged by the recent broader M&A activity within the gaming industry. We are now happy to take your questions. Operator?
Thank you, sir. Ladies and gentlemen, if you'd like to ask a question at this time, you will need to press the star then the one key on your touchtone telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Now first question will come from David Bain with B. Riley. Your line is open.
Great. Thanks. IK and Joe, once again, nice cash flow conversion. I guess my first question would be if you could bifurcate the core DoubleDown Casino MAUs and DAUs from Undead World for the quarter. Do you have any metrics we can chew on?
Yeah, Dave. Thanks. As I said in my comments, total company MAUs did increase. Obviously, if you've been following us in the industry, that's, you know, for the first time in a while.
I think while I can't break it out separately, certainly MAUs and DAUs are still falling somewhat in the social casino business, and you know, are being augmented or offset, if you will, by what we've seen with Undead World, which you know, if you think back to what we described earlier and during the IPO process is exactly the part of the strategy or at least the hopeful outcome of our strategy to expand to adjacent areas, which is to you know, grow our overall player base by moving into social casino adjacent.
You know, we've been hearing a lot about, you know, the metaverse or blockchain and mobile games. Are these opportunities that DDI is working on? What could that look like from just a timing or just overall perspective?
Yeah. Thanks, Dave. Yeah, there's no doubt that the metaverse and blockchain and NFT, you know, all those terms have been used a lot in gaming more recently. Certainly, we think it's a very exciting potential for, you know, the future of gaming. We're very interested in leveraging, especially in Korea, where the gaming industry is definitely really the forefront of some of the metaverse NFT activity in gaming, frankly, there that we can leverage the expertise available in Korea. With that, maybe I'll ask IK to talk a little bit about what our strategy is at this point.
Yeah. Thank you, Joe, and thanks, David. We believe it will be one of our future opportunities. Technically, I believe our internal team, we are already ready to adapt our skill in the cryptocurrency and DeFi area. Now we are seeking how to leverage it with our own content, utilizing outside opportunities like M&A and collaboration. Hope this helps.
Yeah. One, I guess the additional comment I'll make, and, David, as you know, one of the things that we are very frankly cautious about is creating a thing of value in the social, you know, context, you know, relative to, you know, gambling statutes, et cetera. You know, we also are looking at the need to investigate and look at the whole area, you know, through that lens as well.
Understood. Okay. If I can go one over, you know, we noticed that DoubleU, the parent, offered its first ever dividend since being public, and understanding growth is still the priority for DDI. Is the company open to dividends down the road if you don't find, you know, a suitable or a large enough target for diversification at the right price? Just on that end, just any sort of commentary on the M&A market, kind of what you're looking at, what your discussions are sort of bringing in terms of topics or ideas or anything around that would be helpful.
Sure. Well, let me start with on the dividend side. You're right. DoubleU has actually paid a dividend annually ever since it went public several years ago, which is it's my understanding, fairly normal for companies that are listed in Korea. Relative to DoubleDown, certainly that's ultimately one option for us, you know, given our cash balance. As we've said, especially as we continue to look at M&A opportunities, you know, we know that having a war chest, if you will, at least for a while as we, you know, chase some of these, you know, more interesting M&A opportunities to the ground is important for us.
At least for now, that's really you know been the focus of our, if you will, balance sheet activity. We you know we'll look at other options you know down the road. You know, relative to M&A progress, obviously, I can't speak to anything very specific, but I will say that we are you know fully engaged in looking at opportunities. You know, there's been you know in the broader mobile gaming market you know quite a bit of M&A activity on the one hand.
On the other hand, I think, to be honest, and this is, you know, good for a potential acquirer, valuation expectations have started to become a little more realistic. You know, we're interested in, you know, seeing how these will play out.
Okay, great. Thanks, IK. Thanks, Joe.
Thanks, Dave.
Our next question coming from the line of Greg Gibas with Northland Securities. Please proceed.
Hi. Good afternoon, IK and Joe. Thanks for taking the questions. Appreciate it. You know, was wondering, you know, you've had a couple quarters now with tough year-over-year headwinds related to the stay-at-home orders. You know, any thoughts on, you know, when you expect to getting back to year-over-year revenue growth? You know, if we think about the resurgence of COVID cases in January here, you know, will that positively impact playtime in Q1?
Yeah. There's no question that, you know, the comparables, as we mentioned earlier, on the call, to 2020, you know, have been somewhat difficult. You know, that being said, the comparison to 2019 still shows a significant bump in revenue, and we, you know, are continuing to look to grow from what is a much higher base, kind of steady state base of the business than we were, you know, two years or less than two years ago.
If I compare us to what I'm hearing and what we're reading about the social casino industry and how it performed at the end of 2021, as a whole, I think you know, we're all as an industry continuing to do things to create that growth given you know, the bump that we all had over the last 18-24 months. I mean, certainly the things that IK mentioned around you know, game improvements within DoubleDown—slot game improvements within DoubleDown Casino, and meta features, our marketing activities and continued focus on you know, improving our ROAS and you know, using our advertising partners positively to acquire good-paying new users.
All that, you know, is toward, you know, growth within social casino. Then as we've discussed, on top of that, the expansion into social casino adjacencies is extremely important for us. Very early days, obviously, with just, you know, the first few months of the Undead World launch, and we have other games in flight in our development teams. You know, that is gonna augment, you know, whatever growth that we, you know, we will ultimately see with social casino.
Great. Very helpful, Joe. You know, I know you already spoke on kind of your M&A and dividend thoughts, so you know, no need to repeat yourself. Wanted to follow up, you know, in terms of the balance sheet being strengthened, cash generation and conversion strong this quarter, you know, just wondering if you could maybe from a high level discuss upcoming capital deployment or uses in terms of your priorities.
Yeah. Well, again, I think, you know, M&A for us is the top priority. Actually, let me step back and say the top priority is maximizing shareholder value. You know, that is first and foremost what we're about. We see, you know, our strong balance sheet as a tool to be used to maximize shareholder value. For us, the main focus or the main priority to use with that tool is towards growth. You know, that growth obviously is continuing to do the things that we've been talking about from an organic standpoint, but also the potential through M&A for inorganic growth, as we optimize the use of our cash balance.
That's, I think the best way to answer your question there, Greg.
Yes, I appreciate that. That's helpful. You know, last one from me, just relating to Undead World. You know, now that we have a handful of months since its launch, you know, just wondering if you could talk, I guess, a little bit more about its performance, whether it's kind of lived up to your early expectations? You know, do you have a sense of maybe what that game could contribute in 2022 or any sense of run rate, or really any metrics you'd be willing to share?
Yeah. Undead World, you know, we've had three or four months now in a worldwide launch. I'd say, you know, we're very encouraged by player engagement. You know, that means the reaction to how players are engaging with the game. Certainly from a metric standpoint, how players are retaining, especially new players. You know, D7 numbers are especially strong. Where we continue to be focused is monetization. Taking that excitement, interest, if you will, in the game and, you know, converting that into not only the first time payment activity, but ongoing payment. Where we really need to focus based on what we've seen so far is payer retention.
One of the important things that we're doing now is continued development in the game from an economy standpoint, from a feature standpoint, so that we can improve the monetization metrics and especially the payer retention metrics. Over the next you know few months, you're gonna see more features released of that sort and improvements there that we you know expect to you know aid us in the monetization of the game.
Got it. Yeah, thanks for the color, and thanks for taking the questions.
Thanks, Greg.
As a reminder, ladies and gentlemen, to ask a question, please press star one. Our next question coming from the line of Aaron Lee with Macquarie. Your line is now open. Please proceed.
Hey, good afternoon. Thanks for taking my question. I appreciate all your comments on marketing and M&A. Just a quick one for me. Just more broadly speaking, when you think about your growth in 2022 and the building blocks for growth, where do you see the biggest opportunities? Do you expect most of your growth to come from, you know, converting more users or growing ARPDAU, or how do you think about that?
Yeah. Well, if you look at, I'll answer in two pieces, right? Obviously on the social casino side, we are continuing to see improvements in revenue per payer. The payers that we have continue to be very passionately engaged with DoubleDown Casino specifically. You know, based on the activities that we are giving them, like new games, new slot games, et cetera, you know, we're seeing their propensity to pay continue to increase, and we certainly see that being a big contributor to 2022 growth. We also are adding new players every day, right? New user acquisition is extremely important. It's the biggest single area of discretionary spend in the company.
We continue to think we do a very good job managing our advertising partners, optimizing the ROAS associated with that investment to get new payers into the game and, you know, to continue to retain them as payers. You know, for us, that's really the focus for the social casino side of the business. Obviously, on the new app side, it's the ability for us to grow our player base first and foremost as we add new players to, like, Undead World and ultimately Spinning in Space.
To get those players to monetize, you know, clearly it's all incremental revenue to us in a sense, since we don't have a base of any, you know, non-social casino revenue, you know, prior to the fourth quarter of 2021. That, you know, that's obviously another, you know, important element of our growth strategy in 2022.
Great. That's helpful. Just a quick follow-up from me. Any updates on how your user acquisition costs have trended post the IDFA change? I think last quarter you talked about CPIs trending higher in the summer before pulling back in the fall around September, October. I'm curious how have they trended since then and into early 2022? Thanks.
Yeah. You know, as you said last time, you know, when IDFA initially was deployed, you know, we certainly saw, well, a couple of phenomena. First of all, there was a big shift towards Android and in the demand, if you will. And so as a result, Android CPIs increased significantly. That really occurred through the summer, let's say, into the early fall. Starting in Q4, we saw Android CPIs actually begin to fall. You know, fast-forward to today or to the start of Q1, we see Android CPIs essentially back to where they were, you know, a year ago.
Relative to iOS, you know, it's really been a volatile environment post-IDFA, but you know, if you again fast-forward to today, we generally just see the normal volatility that we've experienced in the past around seasonality. You know, December you know spikes, January falloff, just essentially back to the kinda normal fluctuation.
Okay. Got it. Awesome. That's really helpful. Thank you very much.
At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Sigrist.
Okay, operator, thank you so much for monitoring this call today. A big thank you to everyone who has joined us today for this call and your interest in DoubleDown, and we will continue to keep you updated with further status as we continue to innovate and grow the business. We hope you have a great rest of your day. Thank you.
Ladies and gentlemen, thank you for joining us today for DoubleDown's earnings call. You may now disconnect.