The social casino game developer said that while no agreement is imminent, nor can it place a timeline on any potential deal, it is in a position to pursue opportunities if they arise.
DoubleDown is primarily focused on the social casino games sector, but after revenue fell by 13.5% year-on-year in Q2, and the business slipped to a net loss, it said moving outside this market could support the business in the long term.
“We are continuing to evaluate strategic M&A opportunities that can leverage our core capabilities and diversify our revenue stream outside of social casino,” DoubleDown chief executive Keuk Kim said.
“Although there can be no certainty as to timing or completion of any suitable M&A opportunity, we believe the overall acquisition environment is beginning to offer better alignment in buyer and seller valuation expectations.
“This is encouraging given our strong balance sheet that includes $171 million of cash and cash equivalents and short-term investments, net of debt and non-cash accruals, at the end of the second quarter.”
Revenue for the three months to 30 June was $80.6m, down from $93.2m in the previous year. DoubleDown said this was primarily due to the easing of novel coronavirus (Covid-19) restrictions on land-based venues, with players now returning to retail facilities to gamble.
Operating expenses were 79.9% higher year-on-year at $128.6m, though this was mostly due to a $71.5m expense associated with a class-action lawsuit against the business in the US state of Washington.
As a result of these costs, the business made a $48.6m operating loss. Meanwhile, a $5.6m gain on foreign currency remeasurement more than offset financial costs, leading to an additional $1.9m in profit.
As a result, the developer posted a pre-tax loss of $46.1m, compared to a $21.3m net profit in 2021. In addition, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell 16.1% year-on-year to $26.1m.
The business did receive $12.0m worth of tax benefits during the quarter, but after taking into account a $3.5m loss on foreign currency translation, it resulted in a net loss of $37.3m, in contrast to an $18.3m net profit last year.
Looking at the first half, revenue for the six months to 30 June was 12.5% down to $166.1m, which DoubleDown again said was due to the easing of Covid-19 measures.
Operating costs were 32.9% higher at $189.4m and while finance costs were again cancelled out by gains on foreign currency remeasurement, pre-tax loss reached $21.6m, compared to a $47.4m profit last year.
DoubleDown received $6.0m in tax benefits, but when also accounting for a loss on foreign currency translation, this left a net loss of $20.8m for the half, whereas in 2021, the business posted a $39.0m net profit. Adjusted EBITDA also declined by 16.8% from $64.2m to $53.4m.
“We recorded these results despite industry-wide headwinds relating to difficult year-over-year comparisons during a period of Covid-related lockdowns in 2021 and recent global inflation concerns that are impacting player behaviour,” Kim said.
“Going forward, we expect our resilient business model to continue driving positive financial performance, while operationally we will strive to expand our business through a combination of improvements to our flagship game, DoubleDown Casino, and the addition of new gaming apps outside of social casino.”
Original article: https://igamingbusiness.com/finance/half-year-results/doubledown-eyes-ma-and-diversification-as-revenue-drops-in-q2/
