Huuuge Games FY2022 Earnings Release

Mar, 2023 MARCH 2023

FY 2022

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2

Today’s

Presenters

Anton Gauffin

Chief Executive Officer

Jonathan Bellamy

Chief Commercial Officer

Marek Chwałek

EVP Finance

3

2022 at

a Glance

HC & BC exceeded $1.5bn in lifetime revenue

$319m in Revenue (-15% YoY), despite challenging

conditions in the mobile gaming market

Robust cash position of $222 m

as of 31st December 2022

Record high Adjusted EBITDA and a 26% profit margin

Delivering on our operational shift & focus on cash flows

~$150m Share Buyback Program

Planned for 1H 2023

Webshop – new channel improving player experience

Enthusiastic response from our players & better engagement,

in addition to a positive contribution to our margins

$
319
m

REVENUE

vs.
$374m
12M’21

$
71
m

NET OPERATING CASH

FLOW

vs.
$30m
12M‘21

$
82.3
m

Adj. EBITDA

vs.
$64.4m
12M’21

25.8
%

Adj. EBITDA MARGIN

vs.
17.2%
12M ‘21

4

BUSINESS

UPDATE

5

Core Franchises in FY

Harvesting long-term profits

●
Harvesting strategy continued. We are careful

with marketing investments, which results in

growing sales margin and freeing up focus and

resources

●
Successful game economy upgrade
drove

stabilization and a
reversal uplift
in Q4

●
Best in class monetization metrics

(conversion, ARPDAU and ARPPU) vs peers

driven by our clubs and social features

●
Highly profitable
with predictable long-term

revenue

●
Extraordinary
retention of our most

valuable players

●
Focus going forward on
profitability

and longevity
: quality vs quantity

6

Core Franchises: Live Projects

More upside from everlasting player relationships

Introduction of a more balanced and segmented

game economy

Providing more reasons for all players to stay, play & pay

Extension of Huuuge’s VIP Program

Generating an uplift in engagement, retention and

monetization of our most valuable players

Webshop for HC & BC – improving player experience

With an enthusiastic response from our players, we have

expanded beyond the US to new geographies (EU, Canada,

Australia). Further expansion through a
playable PC

version
of HC and BC in 2H 2023

7

Creation of Pods

REFOCUSING OUR EFFORTS ON BUILDING GAMES

New games with attributes that play to our

strengths and reflect market conditions

●
Multiplayer games with natural

word-of-mouth distribution

●
Games with highly shareable moments

●
Socially-oriented long term retention drivers

●
Games with high accessibility and universal

appeal

●
Language and platform agnostic. We need

to acknowledge the market reality and go

beyond just mobile

●
The market landscape is constantly

changing and we need to adapt

●
Post-IDFA environment makes paid User

Acquisition very difficult. We need to focus

more on organic discovery and community

building

●
Hit ratios in gaming more broadly, and in

mobile in particular are extremely low – rapid

iteration and multiple shots on goal are a

must

●
Small agile units with a startup mentality

and full creative freedom, operating as

independent “innovation studios”

●
We will not be afraid to iterate and to kill

games

●
We aim to establish at least 5 pods in 2023,

3 are already operational

Why?

What are Pods?

How?

8

Lower Marketing Expenses

Adjusting headcount to reflect our strategic

positioning, but without jeopardizing our future

Ongoing analysis and streamlining

of non-salary OPEX

Company-Wide Paradigm Shift

CONTINUED FOCUS ON OPTIMIZATION AND PRODUCTIVITY IMPROVEMENTS

We are actively looking at reducing

complexity across the whole organization

We are limiting our marketing investments –

lower spend on UA / performance marketing.

We are exploring other channels such as

influencer marketing and brand marketing

Our headcount should be lower by ~20% (vs EoY 2022) as a result of

the already implemented and ongoing initiatives:

●
Traffic Puzzle studio sunset and Marketing team reduction

●
Collective redundancies as announced in our Current Report No

12/2023

We expect our productivity as measured by Revenue per FTE to

improve throughout 2023

9

Returning cash to our shareholders

$150M SHARE BUY BACK PLANNED IN 1H 2023

Our cash position is stronger than ever – $237m balance (as of 10 March 2023)

●
We continue to execute on our harvesting strategy, which translates into strong cash flows

●
Our cash and deposits are diversified across several banks (classified as Global Systemically Important Banks by the

Financial Stability Board)

All relevant details of the SBB will be published in due course in a manner that shall provide adequate

advance notice to stockholders

●
If and when the Board of Directors of Huuuge adopts all the details of the SBB, we will share with the market the details

on price, timing and all other relevant considerations

We plan to execute the SBB in 1H 2023

●
The SBB will comply with applicable US and PL regulations, including with respect to the length of the subscription

period (SEC regulations impose a minimal subscription period applicable to the invitation to sell)

●
The contemplated buyback will be a taxable transaction. Non-U.S. shareholders may be subject to U.S. withholding tax

at a 30% rate unless a lower rate applies under an applicable treaty (e.g. lowered to 15% for Polish shareholders
provided

they fill in the relevant tax forms)

●
We are working with external service providers to allow participating shareholders to fill in all relevant tax information

online

●
Taking into account the project complexity, our reporting calendar and closed periods, the SBB could start not earlier

than our 1Q 2023 earnings announcement

●
After the buyback, Management will recommend to the
Board of Directors
of Huuuge to cancel the shares bought back

from the market

10

FINANCIAL

UPDATE

11

Record high adjusted EBITDA in FY’22 and Q4’22

04

05

03

02

01

Financial

Performance

FY revenue decline driven mainly by core franchises,

while in Q4 additionally by the gradually declining Traffic

Puzzle revenue. The key driver for all games was the

lower marketing spend amplified by the broader

post-Covid market headwinds

The decrease in UA marketing campaigns reflects our

new user acquisition strategy and our adaptation to the

post-IDFA mobile advertising environment

In Q3 & Q4 22 we spent $3.4m on the strategic options

review. With the exception of this one-off expense we

would see FY and Q4 decline in both R&D and G&A

resulting from streamlining and optimizing our cost base

Traffic Puzzle asset impairment

USD m

2022

2021

YoY

Q4 22

Q4 21

YoY

Core Franchises

288.1

328.1

-12.2%

72.9

77.2

-5.6%

Traffic Puzzle

26.2

34.0

-23.0%

4.1

9.4

-56.8%

Other

4.4

11.7

-62.5%

0.7

1.9

-62.0%

Revenue

318.6

373.7

-14.7%

77.6

88.5

-12.2%

Gross profit/(loss) on sales

221.7

261.5

-15.2%

54.0

61.8

-12.5%

Sales and marketing expenses

-88.8

-146.2

-39.3%

-13.8

-29.6

-53.3%

Research and development expenses

-29.6

-33.1

-10.7%

-6.5

-7.7

-15.8%

General and administrative expenses

-39.6

-38.0

4.3%

-9.7

-8.6

13.5%

Impairment of intangible assets

-26.1

-26.1

Other operating income/(expense),

net

1.0

0.4

147.0%

0.3

-0.3

n/a

Operating result

38.6

44.6

-13.4%

-1.8

15.6

n/a

Finance income/expense, net

0.4

-45.6

1.5

-1.0

Profit/(loss) before tax

39.1

-1.0

n/a

-0.2

14.5

n/a

Income tax

-7.0

-8.7

-18.8

-0.6

-3.2

Net result for the period

32.0

-9.7

n/a

-0.9

11.4

n/a

Adjusted EBITDA

82.3

64.4

27.9%

29.7

20.7

43.4%

02

03

01

04

05

12

USDm

December 31, 2022

December 31, 2021

Non-current assets

37.4

67.5

Current assets

248.9

232.4

Total assets

286.3

299.9

Total equity

240.7

226.1

Non-current liabilities

10.0

13.0

Current liabilities

35.6

60.9

Total equity and liabilities

286.3

299.9

01

02

03

03

02

01

Balance

Sheet

Includes mainly intangible assets and office

leases. The decrease driven by the Traffic Puzzle

impairment

Primarily cash and cash equivalents

($222.2m, or 89% of current assets)

Decrease in current liabilities results mainly from

the last two payments for Traffic Puzzle

($29.4m) in Q1 and Q3 2022

13

03

02

01

Cash

Flows

Strong OCF generation continued in Q4 which

was our strongest ever quarter in terms of

OCF generation – $28.9m

Investing CF included $29.4m of two final

payment tranches for Traffic Puzzle

Financing CF in Q3 2022 YTD is mainly cash

spent on share buyback – $20.1m (suspended

in August 2022)

USDm

2022

2021

Q4 22

Q4 21

Pre-tax profit

39.1

-1.0

-0.2

14.5

Net Operating CF

71.0

29.8

28.9

10.8

Investing CF

-32.6

-16.0

-0.6

-2.3

Financing CF

-21.8

96.6

-0.8

-0.9

Change in cash

17.8

102.8

29.1

16.4

Cash End of Period

222.2

195.6

222.2

195.6

01

02

03

Despite cash outflows associated with the Traffic Puzzle purchase and

the SBB program,
the company’s cash position materially improved

throughout 2022

As of of 10 March 2023 our cash balance increased further to $237m

which further proves that our harvesting strategy is yielding tangible

results

14

Highly Cash

Generative Business

Focus on profitability of our products, continuous

optimization of cost base, positive RoI projects
lead to

positive FCF

Cash is king in an uncertain environment and
we are a

fundamentally strong business
in an extremely

fortunate position

We recognize that we are one of the most cash

generative businesses in the games industry
(as

measured by Net OCF to adjusted EBITDA conversion)

This gives us a lot of
flexibility when it comes to our

future
– be it potential M&A, investments in internal

projects or returning cash to our shareholders

15

●
Fundamentally strong, cash generative business
,

which is able to deliver tangible value to our

shareholders

●
Continued progress as the
globally #1 monetizing

social casino operator

●
Pods – refocused approach to building new games

●
We continue to
focus on optimization and

productivity improvements

Outlook for 2023

Key Highlights

2023 Outlook (YoY)

Revenue

Marketing spend

Opex (non-marketing)

Adjusted EBITDA

Adjusted EBITDA margin (%)

16

For more information please see
https://ir.huuugegames.com

Thank you

Financial data

18

Appendix – KPI’s

19

ARPDAU

Average revenue per daily active user.

ARPPU

Average revenue per paying user.

DAU

The number of individual users who played a game on a particular day.

DPU

The number of players (active users) who made a purchase on a given day.

Live Ops

Activities aimed at increasing the player engagement, among others, by adding new features to games, recurring and one-off virtual events in which players

can participate, and active management of promotions within the game.

MAU

The number of individual users who played a game during a particular month.

Monthly Conversion

The percentage of MAU that made at least one purchase in a month during the same period In-app purchases. Payments made by users after downloading

a game, in connection with the purchase of additional game features. In-app purchases can be made through various non-cash payment instruments (e.g.

payment card, transfer), various electronic channels (e.g. e-banking, mobile phone) or using payment service providers (e.g. PayPal).

MPU

MPU is defined as the number of players (active users) who made a purchase at least once in a given month.

Retention

The number of users who continued to use the game after a certain period of time after downloading the application.

UAMC

User acquisition

marketing campaigns

Process of the acquisition of users through paid campaigns or promotional offers

Appendix – glossary

20

For more information please see
ir.huuugegames.com