Huuuge Games FY2023 Q2 Earnings Release

Sep, 2023 SEPTEMBER 2023

2Q 2023

Presentation

This presentation (“Presentation”) has been prepared by Huuuge, Inc. (the

“Company”). By reading the Presentation, you agree to be bound by the

following limitations.

The Presentation is protected by copyright law, in particular the Act of February

4, 1994 on Copyright and Related Rights. Copying, duplication and use of part

or all of the photos and graphics contained in the Presentation without the

author’s permission is prohibited.

The Presentation does not constitute an offer to sell or subscribe for or a

solicitation of an offer to purchase or subscribe for securities. This

Presentation is provided for informational purposes only. This Presentation

does not constitute or form part of and should not be construed as an offer,

solicitation or invitation to sell or issue, or an offer, solicitation or invitation to,

subscribe for, underwrite, buy or otherwise acquire, securities of the Company

or any of its subsidiaries in any jurisdiction, or an inducement/recommendation

to enter into investment activity in any jurisdiction. Neither this Presentation

nor any part hereof, nor the fact of its distribution or issuance, shall form the

basis of, or be relied on in connection with, any contract, commitment or

investment decision whatsoever.

The information contained herein is only preliminary and indicative and does

not purport to contain the information that would be required to evaluate the

Company, its financial position and/or any investment decision. This

Presentation is not intended to provide, and should not be relied upon for,

accounting, legal or tax advice nor does it constitute an investment

recommendation. This Presentation is given in conjunction with an oral

Presentation and should not be taken out of context.

No information included in this Presentation may be considered as investment

advice or investment recommendation. The information contained in the

Presentation has not been independently verified. No representation, warranty

or undertaking, expressed or implied, is made as to, and no reliance should be

placed on, the fairness, accuracy, completeness or correctness of the

information or the opinions contained herein.

Matters discussed in this Presentation may constitute forward-looking

statements. Forward-looking statements constitute statements that are other

than statements of historical fact. Statements which include the words

“expects,” “intends,” “plans,” “believes,” “projects,” “anticipates,” “will,” “targets,”

“aims,” “may,” “would,” “could,” “continue” and similar statements of a future or

forward-looking nature identify such forward-looking statements.

Disclaimer

Forward-looking statements include in particular statements regarding the

financial performance, business strategy, plans and objectives of the Company

for future operations (including growth potential). All forward-looking

statements included in this Presentation address matters that involve known

and unknown risks, uncertainties and other factors which could cause the

Company’s actual results, performance or achievements to differ materially

from those indicated in such forward-looking statements and from past

results, performance or achievements of the Company. Such forward-looking

statements are based upon various assumptions and estimates regarding

future events, including numerous assumptions regarding the Company’s

present and future business strategies and future operating environment.

Although the Company believes that these estimates and assumptions are

reasonable, they may prove to be incorrect.

The information, opinions and forward-looking statements contained in this

Presentation speak only as at the date of this Presentation and are subject to

change without notice. The Company, its directors, agents, employees and

advisors do not intend to, and expressly disclaim any duty, undertaking or

obligation to, make or disseminate any supplement, amendment, update or

revision to any of the information, opinions or forward-looking statements

contained in this Presentation to reflect any change in events, conditions or

circumstances. To the extent permitted under the applicable provisions of law,

neither the Company nor any of their affiliates, advisers or representatives shall

have any liability whatsoever (in negligence or otherwise) for any loss however

arising from any use of this Presentation or its contents or otherwise arising in

connection with this Presentation.

This Presentation is not for distribution or use by any person or entity in any

jurisdiction where such distribution or use would be contrary to local law or

regulation or which would subject the Company or any of its affiliates to

authorization, notification, licensing or other registration requirements under

applicable laws. Any failure to comply with this restriction may constitute a

violation of United States securities laws. Persons into whose possession this

Presentation comes should observe all such restrictions.

Today’s

Presenters

Anton Gauffin

Chief Executive Officer

Marek Chwałek

EVP Finance

Solid performance:

+ Franchise longevity

+ EBITDA growth

+ Cash growth

+ Future growth

HC & BC reached $1.8bn in lifetime revenue

$69m in Revenue (-13% YoY), reflecting sunsetting Traffic Puzzle,

lower marketing spend & challenging conditions in the mobile gaming

market

Robust cash position of $259.6m

as of 30th June 2023 ($109.1m adjusted for cash reserved

for the purpose of the SBB)

T12M adj. EBITDA reached $109m, Net OCF $82m

We continue to deliver on profitability and cash flows

~$150m Share Buyback Program concluded

Transaction settled on 4th July, purchased shares were retired

following the BoD resolution dated 29th August

HC & BC gearing for a reversal in revenue trends

Recently rolled out game economy upgrade, combined with the new

loyalty program and increasing UA spend might drive topline trend

reversal in Q3 2023

$
69
m

REVENUE

vs.
$79m
2Q ’22

$
20.5
m

NET OPERATING CASH

FLOW

vs.
$6.4m
2Q ‘22

$
27.5
m

Adj. EBITDA

vs.
$13.7m
2Q ’22

39.8
%

Adj. EBITDA MARGIN

vs.
17.2%
2Q ‘22

2Q23

Highlights

BUSINESS

UPDATE

Core Franchises in 2Q 2023

Harvesting long-term profits

●
Harvesting strategy continued. We are careful with

marketing investments, which results in
high sales

margins and freeing up focus and resources

●
Our
marketing spend in Q2 2023 was slightly higher

QoQ as we have been able to increase spend and

maintain paybacks well within our risk tolerance

●
We plan to
further increase UA spend in H2 2023,

more rapidly than we initially planned as paybacks

have been more than satisfactory

●
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

Higher UA spend, economy upgrade and new features likely to drive

revenue trend reversal in 3Q 2023

Recently rolled out game economy upgrade might

drive topline trend reversal in Q3 2023

Economy upgrade rolled out in August – KPI uplift is very

promising, we expect more stable and predictable revenue

and positive impact on engagement metrics. Game economy

management is a part of our process and we have a track record

of regular successful rollouts

New loyalty program – Huuuge Rewards

In response to frequent requests, we are broadening the number

of players covered and investing in player experience to offer

more value for VIPs. We have seen it work well across

the industry and we believe it will help us better retain & monetize

players and further improve the longevity of our core games

Webshop for HC & BC – improving player experience

~$6m revenue (or 4.2% of total in H1 2023 vs 1% in H1 2022),

with further progress in recent months

Core Franchises: DTC channel success

Progress has accelerated rapidly over the past few months

●
Webshop
performance YTD has exceeded our

internal expectations

●
H1 2023 DTC revenue reached ~$6m (4.2%

of total revenue) with the ratio improving further

to around 6% in the most recent months

●
We
continue to invest further in this channel

and we expect more long-term upside

●
Rollout of the .com
web version of HC and BC

should further support our plans.
We are already

in the testing phase

●
We are exploring new third party solutions in order

to
improve our offering in terms of UX, number

of payment providers and login systems

Direct-To-Consumer (Webshop) Revenue as % of Total Revenue

Huuuge Pods

●
Four Pods are operational with a

goal of driving new growth for

Huuuge
– new games, new

audiences. We need to acknowledge

however that it is a
multi year plan

and we are at an early stage

●
We anticipate bringing
multiple

projects to test markets
in the

coming fiscal year

●
If any of these products establish

commercial viability we will
prudently

increase marketing investment to

support these games

Multiplayer

Multiplatform
games for Worldwide audiences

Recent progress of one

of the pods

●
Ideas –
16

●
Concepts –
5

●
Projects –
4

●
Local & Online Tests –
7

●
External Tests –
3

11

Team members

Huuuge Pods

Illustration of the development process

FINANCIAL

UPDATE

Highly Cash

Generative Business

We are proud to report that for T12M ended June 30th 2023

we have generated
adjusted EBITDA of USD 109m and net

operating cash flow of USD 82m

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)

We are actively seeking opportunities to invest in and grow,

but If we are unable to find good ones,
we are supportive of

potential future share buybacks

Our adjusted EBITDA nearly doubled compared to the

previous year, both on a three and six-month basis. We

are well underway to hit our expectations and our earlier

directional guidance

04

03

02

01

Financial

Performance

Overall revenue decline was driven mostly by the falling

Traffic Puzzle revenue. Core Franchises declined by 5.9%

YoY in Q2 2023 (and by 2.8% QoQ). Although growth in

monetization metrics did not fully offset the payer base

decline, we might see a trend reversal in Q3 2023, driven

by the recent economy upgrade and growing marketing

spend

While the UA campaigns expenses were significantly

lower YoY, we started ramping up spend in Q2 2023 (up

22% QoQ) as paybacks exceeded our expectations

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

headcount (result of layoffs carried out in 1Q23)

USD m

H1 23

H1 22

YoY

Q2 23

Q2 22

YoY

Core Franchises

134.1

144.2

-7.0%

66.1

70.3

-5.9%

Traffic Puzzle

5.7

16.5

-65.3%

2.6

7.9

-66.8%

Other

1.1

2.7

-58.9%

0.5

1.3

-62.8%

Revenue

140.9

163.4

-13.8%

69.2

79.4

-12.9%

Gross profit/(loss) on sales

99.5

113.9

-12.7%

48.9

55.4

-11.8%

Sales and marketing expenses

(20.3)

(57.3)

-64.5%

(11.0)

(27.4)

-59.7%

Research and development expenses

(12.6)

(16.8)

-25.0%

(5.4)

(7.9)

-30.6%

General and administrative expenses

(18.0)

(18.2)

-1.4%

(8.0)

(9.2)

-12.8%

Other operating income/(expense), net

0.4

0.3

34.4%

0.0

0.2

-97.5%

Operating result

48.9

21.9

123.7%

24.4

11.2

118.0%

Finance income/expense, net

3.6

(1.1)

n/a

2.1

(1.2)

n/a

Profit/(loss) before tax

52.5

20.7

153.3%

26.5

10.0

165.2

Income tax

(8.4)

(3.2)

165.4%

(4.7)

(1.3)

255.1%

Net result for the period

44.1

17.6

151.1%

21.7

8.6

151.4%

Adjusted EBITDA

55.1

28.1

96.2%

27.5

13.7

100.8%

02

03

01

04

USDm

June 30, 2023

December 31, 2022

Non-current assets

32.9

37.4

Current assets

293.8

248.9

Total assets

326.7

286.3

Total equity

286.0

240.7

Non-current liabilities

8.6

10.0

Current liabilities

32.1

35.6

Total equity and liabilities

326.7

286.3

01

02

03

03

02

01

Balance

Sheet

Includes mainly intangible assets and office

leases

Primarily cash and cash equivalents ($259.6m,

or 88% of current assets).
Balance adjusted for

the SBB amounted to $109.1m

Slight decline driven mostly by lower trade

payables (payout of 2022 performance bonus

and settlement of liabilities related to the

strategic options review)

03

02

01

Cash

Flows

Net operating CF increased significantly YoY both

in H1’23 and Q2’23, but was negatively affected by

changes in net working capital (increase in

receivables mainly due to payout calendars

maintained by distributors, e.g. Apple and a

decrease in payables – mostly related to payout of

2022 performance bonus)

The positive investment CF both in H1’23 and

Q2’23 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 both in H1’23 and Q2’23

consisted mostly of lease repayment

USDm

H1 23

H1 22

Q2 23

Q2 22

Pre-tax profit

52.5

20.7

26.5

10.0

Net Operating CF

37.4

26.3

20.5

6.4

Investing CF

2.6

-26.7

1.2

-1.1

Financing CF

-2.0

-16.2

-1.0

-16.6

Change in cash

38.0

-16.7

20.6

-11.3

Cash End of Period

259.6

188.2

259.6

188.2

01

02

03

Our EPS improves

visibly post SBB

Following the settlement of the SBB and the

announced BoD resolution to retire the treasury

shares purchased in the buyback, the number of

voting shares outstanding declined to 62,810,567,

namely:

84,246,697 total issued shares

–
17,121,919 shares bought in the SBB and retired

67,124,778

–
4,314,211 treasury shares currently held

= 62,810,567 voting shares outstanding post SBB

2Q’2023 adjusted quarterly EPS (Earnings Per

Share) ratio illustrates the improvement in the

metric following the SBB

*2Q’2023 adj. EPS calculated by taking the post-SBB number of shares outstanding (i.e. 62,810,567)

for the whole quarter

Quarterly EPS (Earnings Per Share, USD)

●
We reiterate our 2023 directional outlook presented during our

FY2022 and 1Q 2023 investor calls

●
With headcount now lower by over 20% vs 2022, materially

lower costs will be fully visible in H2 2023

●
H2 2023 topline might be stronger vs H1 2023 as a result of

the recent HC economy upgrade and higher marketing spend

●
We expect to ramp up our marketing spend in the coming

months, ending the year with a run rate around (or above) the

Q4 2022 spend levels

●
Management views 1H 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 (%)

SIGNIFICANT

GROWTH

SIGNIFICANT

GROWTH

SLIGHT

DECLINE

SIGNIFICANT

DECLINE

SLIGHT

DECLINE

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.

EPS

Earnings per share

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