Huuuge Games FY2023 Q1 Earnings Release

May, 2023 MAY 2023

1Q 2023

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Today’s

Presenters

Anton Gauffin

Chief Executive Officer

Marek Chwałek

EVP Finance

Solid performance:

+ Franchise longevity

+ EBITDA growth

+ Cash growth

+ Future growth

HC & BC exceeded $1.6bn in lifetime revenue

$71m in Revenue (-15% YoY), reflecting sunsetting Traffic

Puzzle, lower marketing spend & challenging conditions in

the mobile gaming market

Robust cash position of $238.5m

as of 31st March 2023

Record high Adjusted EBITDA profit margin

Delivering on our operational shift & focus on profitability

~$150m Share Buyback Program kicks off

Details announced in the published Invitation To Sell (“ITS”)

Pods – positioning Huuuge for future growth

We have refocused and accelerated our efforts to rapidly

iterate, prototype and develop new games – four Pods already

operational

$
72
m

REVENUE

vs.
$84m
1Q ’22

$
17
m

NET OPERATING CASH

FLOW

vs.
$20m
1Q ‘22

$
27.6
m

Adj. EBITDA

vs.
$14.4m
1Q ’22

38.5
%

Adj. EBITDA MARGIN

vs.
17.1%
1Q ‘22

1Q23

Highlights

BUSINESS

UPDATE

Core Franchises in 1Q 2023

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

●
Our
marketing spend in 1Q 2023 was unusually

low as we have cut the worst performing

channels.
This level is not indicative of our spend

throughout the year – we plan to be more active

outside of performance-based User Acquisition

(e.g. brand marketing)

●
Best in class monetization metrics

(conversion, ARPDAU and ARPPU) vs peers

driven by our clubs and social features

●
Extraordinary
retention of our most

valuable players

●
Focus going forward on
profitability

and longevity
: quality vs quantity

Core Franchises: Live Projects

More upside from everlasting player relationships

Introduction of a more balanced and segmented

game economy

Another major economy upgrade planned for 2H 2023

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

Core Franchises: Webshop success

Progress has accelerated rapidly over the past few months

●
Webshop
performance YTD has

exceeded our internal expectations

●
We have already achieved quite broad

geographical coverage and
we are now

focusing on more aggressive promotion

of our Webshop,
increasing the number of

payers as well as frequency of player

purchases

●
We plan further expansion through

launching a web / PC version of HC and

BC in 2H 2023

●
We are exploring new third party solutions

in order to
improve our offering in terms

of UX, number of payment providers and

login systems

Webshop Revenue as % of Total Revenue

Huuuge Pods

●
Four Pods are already operational

●
Our goal is to drive new growth for Huuuge – new games,

new audiences

●
Community and player centric approach

○
All games are developed with a
multiplayer
focus

○
Focus on
building sustainable organic demand

and visibility on relevant social / discovery channels:

Youtube, TikTok and more…

○
We are working with external partners to help us

drive community engagement

●
First releases potentially in H2 2023
– we acknowledge

the market realities – we will be iterating and
expect to kill

multiple prototypes/games in the process

Multiplayer

Multiplatform
games for Worldwide audiences

Strategic & Operational Directions

Build-up Productivity by leveraging AI across organisation

●
Active efforts to increase the use of AI across the whole organisation

●
Lots of opportunities to improve and optimise how the Huuuge Team leverages the latest advancements of Gen

AI on a day-to-day basis

Grow Huuuge product portfolio by partnering

●
Actively exploring M&A, partnerships, publishing and licensing opportunities where existing Huuuge assets

could be leveraged (brand, audience, knowhow)

●
Target to expand Huuuge product portfolio with new Huuuge branded products

Explore new business models and open new markets

●
Assessing and exploring new market opportunities to expand into new markets such as skill gaming

●
Closely following the evolution of the Web3 space – readiness to be active if there is positive player traction and

change in the market sentiment

Forming new partnerships vs. doing everything in-house

●
Opportunity to level-up by partnering with 3rd party specialists with strong commercial incentives to drive

results in areas such as Webshop or Ad Monetization

FINANCIAL

UPDATE

Our adjusted EBITDA nearly doubled compared to the

previous year, achieving an all-time high in adjusted

EBITDA profitability

04

03

02

01

Financial

Performance

The revenue decline results from sunsetting Traffic

Puzzle and some other game titles. Core Franchises

declined by 8.1% as the improvement in monetization

metrics did not fully offset the payer base decline

resulting from decreased marketing spend

The decrease in UA marketing campaigns reflects our

new user acquisition strategy and our adaptation to the

post-IDFA mobile advertising environment

The savings in R&D expenses are mostly driven by lower

headcount. Q1’23 G&A expenses are affected by the

one-off restructuring costs

USD m

Q1 23

Q1 22

YoY

Core Franchises

68.0

74.0

-8.1%

Traffic Puzzle

3.1

8.6

-63.8%

Other

0.6

1.4

-55.3%

Revenue

71.7

84.0

-14.6%

Gross profit/(loss) on sales

50.6

58.5

-13.5%

Sales and marketing expenses

(9.3)

(29.9)

-68.9%

Research and development expenses

(7.2)

(9.0)

-20.1%

General and administrative expenses

(10.0)

(9.1)

10.2%

Other operating income/(expense), net

0.4

0.1

382.7%

Operating result

24.5

10.7

129.7%

Finance income/expense, net

1.5

0.1

>999.9%

Profit/(loss) before tax

26.0

10.7

142.2%

Income tax

(3.6)

(1.8)

99.5%

Net result for the period

22.4

8.9

150.9%

Adjusted EBITDA

27.6

14.4

91.8%

02

03

01

04

USDm

March 31, 2023

December 31, 2022

Non-current assets

36.5

37.4

Current assets

274.6

248.9

Total assets

311.1

286.3

Total equity

263.8

240.7

Non-current liabilities

9.5

10.0

Current liabilities

37.8

35.6

Total equity and liabilities

311.1

286.3

01

02

03

03

02

01

Balance

Sheet

Includes mainly intangible assets and office

leases

Primarily cash and cash equivalents

($238.5m, or 87% of current assets)

Increase in current liabilities results mainly from

accumulation of the yearly performance bonus

provision and restructuring costs provision

03

02

01

Cash

Flows

Net operating CF declined vs Q1’22 despite much

higher profit before tax. In Q1’23 Net Operating CF

was negatively affected by a temporary increase in

trade and other receivables resulting from the

payment schedule of Apple Store

The positive investment CF in Q1’23 was

mostly driven by interest received from bank

deposits and money market funds as we have

been gradually rolling our cash balance to

higher yields

Financing CF in Q1’23 consisted mostly of

lease repayment

USDm

Q1 23

Q1 22

Pre-tax profit

26.0

10.7

Net Operating CF

16.9

19.9

Investing CF

1.4

(25.7)

Financing CF

(0.9)

0.1

Change in cash

17.4

(5.7)

Cash End of Period

238.5

198.7

01

02

03

Highly Cash

Generative Business

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

If we are unable to find good investment opportunities, and

as long as our valuation multiples are lower relative to our

industry peers, we are supportive of potential future share

buybacks

●
We reiterate our 2023 directional outlook presented

during our FY2022 investor call

●
We continue to focus on optimization and productivity

improvements

●
With headcount now lower by ~20% vs 2022,

materially lower costs will be fully visible in H2 2023

●
We expect to ramp up our marketing spend in Q2-Q4,

but still with a very disciplined approach in mind

●
Management views Q1 2023 numbers as broadly

indicative of the expected 2023 annualised

performance in terms of adj. EBITDA & profitability

Outlook for 2023 – reiterating our view

Key Highlights

2023 Outlook (YoY)

Revenue

Marketing spend

Opex (non-marketing)

Adjusted EBITDA

Adjusted EBITDA margin (%)

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

Thank you

Financial data

Appendix – KPI’s

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

For more information please see
ir.huuugegames.com