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March 27, 2020
In Keuk Kim
Chief Executive Officer
DoubleDown Interactive Co., Ltd.
13F, Gangnam Finance Center
152, Teheran-ro Gangnam-gu
Seoul 06236, Republic of Korea
Re: DoubleDown Interactive Co., Ltd.
Amendment No. 1 to Draft Registration Statement on Form F-1
Submitted March 12, 2020
CIK No. 0001799567
Dear Mr. Kim:
We have reviewed your amended draft registration statement and have the
following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we may
have additional
comments. Unless otherwise noted, where prior comments are referred to they
refer to our letter
dated February 18, 2020.
Amendment No. 1 to Draft Registration Statement on Form F-1
Risk Factors
Risks related to our relationship with DoubleU Games, page 28
1. We note that you have removed the risk factor related to your status as
a controlled
company. Please include this risk factor in your filing as your status
as a controlled
company presents risks that are separate and apart from your status as a
foreign private
issuer.
In Keuk Kim
FirstName LastNameIn Keuk Kim
DoubleDown Interactive Co., Ltd.
Comapany2020
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
Our business, page 44
2. We note in your filing you have a declining number of players year
over year.
Additionally, you derive a significant portion of your revenues from a
small number of
high-paying players. Please discuss your vulnerability to a near-term
severe impact
arising from the disruption of the economy by the COVID-19 pandemic
which could
affect the discretionary spending behavior of such players and thus,
your revenues. In
addition, disclose other material known or reasonably likely effects
of and the types of
risks presented by COVID-19 on your financial position, results of
operations, accounting
judgments and estimates and timeliness of your financial reporting.
Refer to ASC 275-10-
50-16 and CF Disclosure Guidance Topic No. 9: Coronavirus (COVID-19)
at https://www.sec.gov/corpfin/coronavirus-covid-19.
Our marketing efficiency, page 46
3. Please revise to clarify your new computation for average payback
period that replaces
CPI. We note it measures time by days for 3rd party costs to be paid
back, but it uses
"cumulative revenue generated by all of the players in a given install
period." If your
use of "all players" includes organic and paid channel revenues to
measure payback
periods, tell us why it is appropriate to include organic revenues
unrelated to the
marketing partners fees.
Other key performance indicators and non-GAAP metrics and trends, page 47
4. We note your responses to comments 11 and 12. Please balance your
disclosure to
indicate how growth in your subscription revenue, if at all,
contributed towards your total
revenue growth, ARPDAU, and average monthly revenue per user.
Furthermore, you disclose your mobile penetration represents the
percentage of revenue
sourced from the Google, Apple and Amazon platforms but do not include
Facebook. Tell
us why and disclose other platform revenue sources, amounts and
percentages. Tell us and
disclose what comprises the balance of your revenue penetration for
the periods, both
online or mobile. Also disclose whether the high paying players are
predominantly mobile
or online players. To the degree there are any material trends among
the individual
platform sources, mobile versus online or high-paying players please
revise your MD&A
accordingly. We refer you to Item 5.D of Form 20-F.
5. We note your response to prior comment 5. You disclose that
monetization of active
players is a key factor affecting your financial performance. You
indicate that this
monetization comes from players' purchases of in-game virtual chips,
which is how you
generate substantially all of your revenue. You further disclose that
the proportion of
revenue from high-paying players (those who spend more than $500 per
month) has been
gradually rising in recent years. Please tell us whether you use any
metrics to monitor
In Keuk Kim
DoubleDown Interactive Co., Ltd.
March 27, 2020
Page 3
your revenue concentration and the impact of high-paying customers on
your financial
performance, such as the percentage of revenue derived from
high-paying players, number
of high-paying players as a percentage of paying players or average
revenue per high-
paying player. If so, please provide a discussion of these metrics or
other related metrics
and any material trends. We refer you to Item 5.D of Form 20-F.
Critical accounting policies and estimates
Recent accounting guidance adopted, page 61
6. Please disclose to state, if true, whether the conversion feature of
the 2.5% convertible
bonds and the May 2017 warrants contain a down round provision. If so,
please further
disclose as follows:
how you concluded whether the conversion feature or the warrants met
the scope
exception in ASC 815-40 for classification in stockholders'
equity;
whether either instrument contains terms or features other than the
down round
feature that would cause liability classification on the basis of
the guidance in Topic
480 or Subtopic 815-40;
how you evaluated the 2.5% convertible bonds under accounting
guidance for debt
with conversion and other options under ASC 470-20;
how a down round feature in the warrants will impact the calculation
of basic EPS
when triggered.
Note 2: Significant accounting policies
Revenue Recognition, page F-10
7. We note your response to prior comment 21. You recognize virtual chip
or currency
revenues when control transfers upon consumption of this currency.
Please explain and
disclose further the basis for your determination that player purchase
of virtual currency
determines consumption of the currency and thereby affects revenue
recognition. In this
regard, address the assumptions used in estimating virtual currency
consumption based on
your analysis of customers' historical play behavior, purchase
behavior, and the amount of
virtual currency outstanding.
You disclose on page 60 you estimate the outstanding purchased virtual
currency at period
end because you are unable to distinguish between the consumption of
purchased versus
free currency. Tell us and disclose the assumptions used to estimate
this amount, how you
considered free currency/chips obtained during game play and through
player actions on
FirstName LastNameIn Keuk Kim
social media outside of gameplay, as well as forfeitures, and explain
the impact of any
Comapany NameDoubleDown Interactive Co., your financial statement revenue
recognition
uncertainties. Revise to disclose this in Ltd.
March note.
27, 2020 Page 3
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In Keuk Kim
FirstName LastNameIn Keuk Kim
DoubleDown Interactive Co., Ltd.
Comapany2020
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Contract assets, Contract liabilities and other disclosures, page F-11
8. We note your response to comments 21 and 23. Elsewhere in your filing,
you referred to
your loyalty program subject to a third party registration. Describe
the terms of the loyalty
program and the nature of incentives and rewards that players may
receive. Disclose
whether participation in the loyalty program provides a material right
that the player
would not receive otherwise, thereby giving rise to a separate
performance obligation to
which a portion of the transaction price must be allocated. Refer to
ASC 606-10-55-41
& 42.
Principal-agent considerations, page F-11
9. We note in your response to comment 22 that the platform providers
have no rights to
control how the company defines its pricing. You disclose on page 77
that your platform
providers have the "ability to make unilateral changes to their
platforms, their terms of
service, the amounts of or method by which players obtain content and
make payments,
how they are paid, and any other aspect of their platforms and
services." Please clarify the
disclosure regarding your platform providers' inability to change your
pricing. To the
extent your arrangements with Apple, Facebook and Google allow them to
offer
incentives, discounts or otherwise change the price defined by you for
virtual chips, tell us
whether you know the actual amount paid by your players and how that
impacts the
amount you record as revenue.
Regarding your arrangement with Facebook, please provide us your
analysis as to
whether you have control or visibility over the issuance of extra
chips (up to 9 million
chips each year) in the Daily Wheel spin of each player logged onto
Facebook when such
player's Facebook friends also play DoubleDown Casino. Clarify whether
the invitations
to friends through the Facebook platform results in greater fees
retained by Facebook.
Refer to the benefits of connecting through Facebook in DoubleDown
Casino
at
https://doubledowncasino1.zendesk.com/hc/en-us/articles/201395160-Benefits-of-
connecting-through-Facebook-in-DoubleDown-Casino.
Note 4: Debt, page F-16
10. We note your response to comments 24 and 26 and your revised
disclosures. With respect
to the 2.5% convertible bonds and the May 2017 warrants, please
clarify and state if true
whether "certain adjustments for anti-dilution protection" constitute
a down round
provision or whether they may be deemed standard anti-dilution
protection..
Further clarify how your assessment of such provisions could be
affected by the
probability (or remote likelihood) of price adjustment(s) or by such
adjustments being
under your control. Refer to your basis in the accounting literature.
In Keuk Kim
FirstName LastNameIn Keuk Kim
DoubleDown Interactive Co., Ltd.
Comapany2020
March 27, NameDoubleDown Interactive Co., Ltd.
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FirstName LastName
You may contact Kathryn Jacobson, Senior Staff Accountant, at (202)
551-3365 or Craig
Wilson, Senior Advisor, at (202) 551-3226 if you have questions regarding
comments on the
financial statements and related matters. Please contact Jeff Kauten, Staff
Attorney, at (202)
551-3447 or Kathleen Krebs, Special Counsel, at (202) 551-3350 with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Barbara A. Jones, Esq.