Huuuge Games FY2024 Q1 Earnings Release
Download PDFMay, 2024 Q1 2024
PRESENTATION
MAY 2024
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Wojciech Wronowski
Chief Executive Officer
Marek Chwałek
Treasurer, EVP Finance
To learn more please visit:
https://ir.huuugegames.com/governance
TODAY’S PRESENTERS
$70m Share Buyback executed in April 2024
Strong cash position: $163m as of 31 March, 2024
Core franchises: main KPIs stabilize
DAU consecutive growth since Q2 2023
$
67
m
REVENUE
vs.
$71m
Q4 ’23
$
22
m
Adj. EBITDA
vs.
$26m
Q4’23
$
46.34
ARPPU
vs.
$47.73
Q4’23
Maintaining cost discipline
User Acquisition costs almost doubled YoY, but overall operating
expenses were flat YoY (savings in R&D, G&A and platform fees)
EBITDA margins high despite marketing spend increase
Direct-To-Consumer channel growth
DTC responsible for 12% of sales in April
HIGHLIGHTS
BUSINESS
UPDATE
●
Core franchises revenue in Q1 2024 decreased
QoQ as in Q4 2023 we took advantage of seasonal
effects and stronger monetization.
●
UA spend for core franchises in
Q1 2024
increased by 86% YoY
, and 13% QoQ.
We are not
planning to significantly increase UA spending in
the coming quarters
. We aim to further refine our
marketing mix and maintain expected paybacks
within our targets.
●
Sales profit
for Core franchises in Q1 2024
decreased by
18% QoQ mainly due to higher
marketing spend.
CORE FRANCHISES
Q1 2024 revenue slightly decreased QoQ, UA spending increased significantly YoY
Player base trend reversal
Stabilization of our player base is a result
of increased marketing spend. Average
monthly installs have doubled compared to
Q1 2023
Managing the growth
Broadly stable performance expected in Q2
2024, we are trying to balance churn and
longevity vs monetization
Core franchises’ main KPIs stabilize
Q1 24 DAU +2% QoQ; Q1 24 DPU -1% QoQ
CORE FRANCHISES: MAIN KPIs STABILIZE
Our core games have stabilized since Q2 2023: operating KPIs flattened
●
DTC revenue reached over 8% of the total revenue
in Q1 2024 with the ratio improving further
to almost 12% in April.
●
We continue to invest further in this channel
and we expect more long-term upside, with DTC
as % of revenue
expected to reach low to mid- teens
in 2024.
●
We are exploring new third party solutions in order
to
improve our offering in terms of UX, geographical
coverage, number of payment providers and login
systems.
We are in the testing phase and will report
more on progress in due course.
Direct-To-Consumer (Webshop) Revenue as % of Total Revenue
CORE FRANCHISES: DTC CHANNEL GROWTH
Direct-To-Consumer channel share in revenue reached low teens (12%) in April 2024
●
Several
Pods
are working on new games, with
the total headcount of these teams below 40
FTEs
●
There are three new games, each at a different
stage of the product life cycle
●
We are continuously testing and validating
new concepts and planning to tech launch 2
games in coming quarter.
●
When any of these products reach commercial
viability, we will prudently increase marketing
investments to support these games.
HUUUGE PODS
Multiplayer multiplatform
games for worldwide audiences
FINANCIAL
UPDATE
Effective tax rate in Q1 24 at 18% (vs 17% in FY 23).
04
03
02
01
In line with our prior guidance for the first half of the
year, overall Q1 24 revenue decline YoY and QoQ
driven mostly by core franchises revenue decrease.
Q1 24 UA expenses were significantly higher YoY, we
were ramping up spend throughout the last year as
we continue to optimize paybacks.
The Q1 24 savings in R&D and G&A expenses
are
primarily due to a lower headcount, a result of
restructuring carried out in Q1 2023.
02
03
01
05
Q1 24 EBITDA decrease YoY driven mainly by
higher UA spend.
05
04
$ m
Q1 24
Q1 23
YoY
Q4 23
QoQ
Core Franchises
65.1
68.0
-4.2%
69.3
-6.0%
Other
1.9
3.8
-50.2%
2.0
-9.5%
Revenue
67.0
71.7
-6.6%
71.3
-6.1%
Gross profit/(loss) on sales
47.9
50.6
-5.3%
50.8
-5.7%
Sales and marketing expenses
-15.1
-9.4
60.7%
-14.5
4.3%
Research and development expenses
-5.7
-7.5
-23.7%
-4.5
25.9%
General and administrative expenses
-8.0
-9.6
-16.3%
-8.9
-9.5%
Other operating income/(expense), net
-1.0
0.3
–
-0.3
218.4%
Operating result
18.1
24.5
-26.0%
22.6
-19.9%
Finance income/expense, net
2.0
1.5
31.9%
0.7
176.1%
Profit/(loss) before tax
20.1
26.0
-22.7%
23.4
-13.8%
Income tax
-3.6
-3.6
-1.2%
-3.9
-9.0%
Net result for the period
16.5
22.4
-26.1%
19.4
-14.8%
Adjusted EBITDA
21.9
27.6
-20.5%
26.1
-15.9%
FINANCIAL PERFORMANCE
$ m
March 31, 2024
December 31, 2023
Non-current assets
32.6
29.8
Current assets
196.8
187.6
Total assets
229.4
217.4
Total equity
193.8
177.1
Non-current liabilities
6.5
7.2
Current liabilities
29.1
33.2
Total equity and liabilities
229.4
217.4
01
02
02
01
Includes mainly intangible assets and office
leases and $3.5m long term investment.
Primarily cash and cash equivalents ($163.2m,
or 71% of current assets as of Mar 31, 2024;
$70m buyback executed on April 23, 2024).
BALANCE SHEET
03
02
Pre-tax profit decreased significantly YoY in Q1 24
mainly as a result of increased UA spend
The negative investing CF in Q1 24 was mostly
driven our $3.5m investment in Bananaz Studios and
was partially offset by interest received on
short-term bank deposits and money-market mutual
funds
$ m
Q1 24
Q1 23
Q4 23
Pre-tax profit
20.1
26.0
23.4
Net Operating CF
14.4
16.9
24.8
Net Investing CF
-2.6
1.4
0.9
Net Financing CF
-1.0
-0.9
-1.1
Change in cash
10.8
17.4
24.7
Cash End of Period
163.2
238.5
152.1
01
02
03
01
Net operating CF decreased YoY and QoQ in Q1 24
largely following the trends of adjusted EBITDA.
Income tax paid was higher in Q1 24, mainly due to
higher tax liability for FY’23 than for FY’22
CASH FLOWS
In Q1 2024 we delivered
adjusted EBITDA of $22m
and net operating cash flow of $14.4m
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 positioned us well to execute share buyback of
$70 million in April 2024
Despite returning up to
$220 million
to our
shareholders
within 9 months
, we will maintain a
strong cash balance, allowing us to pursue inorganic
growth opportunities
HIGHLY CASH GENERATIVE BUSINESS
●
Adjusted EBITDA and Adjusted EBITDA margin (%) to decrease
mostly due to investments in future growth, but we still aim to
maintain high profitability
●
In the first half of the year, we expect our revenue to decrease
slightly, with a projected recovery in the second half, driven by the
new feature release calendar. Overall, we anticipate our revenue for
2023 to remain flat YoY
●
Marketing spend increase follows the paybacks observed in the
second half of 2023 (and expected in 2024) – we keep optimizing
our UA strategy in the post-IDFA reality. We are not planning to
further significantly increase UA spending in the coming quarters
●
We are mindful of our costs and based on Q1 2024 performance
and current run rate, our operating expenses might actually be
slightly lower YoY (not flat as previously guided)
KEY HIGHLIGHTS
2024 OUTLOOK (YoY)
Revenue
Marketing spend
Opex (non-marketing)
Adjusted EBITDA
Adjusted EBITDA margin (%)
DECLINE
DECLINE
SLIGHT DECLINE
SIGNIFICANT
GROWTH
FLAT
2024 OUTLOOK – INVESTING IN FUTURE GROWTH
Keeping our profitability on high levels
Q1 2024 EBITDA margins remain high
User Acquisition costs almost doubled YoY, but overall operating
expenses were flat YoY (savings in R&D, G&A and platform fees)
Core franchises’ KPIs stabilize
DAU QoQ improvement for 4 consecutive quarters
For more information please see
ir.huuugegames.com
THANK
YOU
Direct-To-Consumer channel growth
DTC responsible for 12% of sales in April
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
Effective tax rate in Q1 24 at 18% (vs 17% in FY 23).
04
03
02
01
In line with our prior guidance for the first half of the
year, overall Q1 24 revenue decline YoY and QoQ
driven mostly by core franchises revenue decrease.
Q1 24 UA expenses were significantly higher YoY, we
were ramping up spend throughout the last year as
we continue to optimize paybacks.
The Q1 24 savings in R&D and G&A expenses
are
primarily due to a lower headcount, a result of
restructuring carried out in Q1 2023.
02
03
01
05
Q1 24 EBITDA decrease YoY driven mainly by
higher UA spend.
05
04
$ m
Q1 24
Q1 23
YoY
Q4 23
QoQ
Core Franchises
65.1
68.0
-4.2%
69.3
-6.0%
Other
1.9
3.8
-50.2%
2.0
-9.5%
Revenue
67.0
71.7
-6.6%
71.3
-6.1%
Gross profit/(loss) on sales
47.9
50.6
-5.3%
50.8
-5.7%
Sales and marketing expenses
-15.1
-9.4
60.7%
-14.5
4.3%
Research and development expenses
-5.7
-7.5
-23.7%
-4.5
25.9%
General and administrative expenses
-8.0
-9.6
-16.3%
-8.9
-9.5%
Other operating income/(expense), net
-1.0
0.3
–
-0.3
218.4%
Operating result
18.1
24.5
-26.0%
22.6
-19.9%
Finance income/expense, net
2.0
1.5
31.9%
0.7
176.1%
Profit/(loss) before tax
20.1
26.0
-22.7%
23.4
-13.8%
Income tax
-3.6
-3.6
-1.2%
-3.9
-9.0%
Net result for the period
16.5
22.4
-26.1%
19.4
-14.8%
Adjusted EBITDA
21.9
27.6
-20.5%
26.1
-15.9%
FINANCIAL PERFORMANCE
$ m
March 31, 2024
December 31, 2023
Non-current assets
32.6
29.8
Current assets
196.8
187.6
Total assets
229.4
217.4
Total equity
193.8
177.1
Non-current liabilities
6.5
7.2
Current liabilities
29.1
33.2
Total equity and liabilities
229.4
217.4
01
02
02
01
Includes mainly intangible assets and office
leases and $3.5m long term investment.
Primarily cash and cash equivalents ($163.2m,
or 71% of current assets as of Mar 31, 2024;
$70m buyback executed on April 23, 2024).
BALANCE SHEET
03
02
Pre-tax profit decreased significantly YoY in Q1 24
mainly as a result of increased UA spend
The negative investing CF in Q1 24 was mostly
driven our $3.5m investment in Bananaz Studios and
was partially offset by interest received on
short-term bank deposits and money-market mutual
funds
$ m
Q1 24
Q1 23
Q4 23
Pre-tax profit
20.1
26.0
23.4
Net Operating CF
14.4
16.9
24.8
Net Investing CF
-2.6
1.4
0.9
Net Financing CF
-1.0
-0.9
-1.1
Change in cash
10.8
17.4
24.7
Cash End of Period
163.2
238.5
152.1
01
02
03
01
Net operating CF decreased YoY and QoQ in Q1 24
largely following the trends of adjusted EBITDA.
Income tax paid was higher in Q1 24, mainly due to
higher tax liability for FY’23 than for FY’22
CASH FLOWS
In Q1 2024 we delivered
adjusted EBITDA of $22m
and net operating cash flow of $14.4m
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 positioned us well to execute share buyback of
$70 million in April 2024
Despite returning up to
$220 million
to our
shareholders
within 9 months
, we will maintain a
strong cash balance, allowing us to pursue inorganic
growth opportunities
HIGHLY CASH GENERATIVE BUSINESS
●
Adjusted EBITDA and Adjusted EBITDA margin (%) to decrease
mostly due to investments in future growth, but we still aim to
maintain high profitability
●
In the first half of the year, we expect our revenue to decrease
slightly, with a projected recovery in the second half, driven by the
new feature release calendar. Overall, we anticipate our revenue for
2023 to remain flat YoY
●
Marketing spend increase follows the paybacks observed in the
second half of 2023 (and expected in 2024) – we keep optimizing
our UA strategy in the post-IDFA reality. We are not planning to
further significantly increase UA spending in the coming quarters
●
We are mindful of our costs and based on Q1 2024 performance
and current run rate, our operating expenses might actually be
slightly lower YoY (not flat as previously guided)
KEY HIGHLIGHTS
2024 OUTLOOK (YoY)
Revenue
Marketing spend
Opex (non-marketing)
Adjusted EBITDA
Adjusted EBITDA margin (%)
DECLINE
DECLINE
SLIGHT DECLINE
SIGNIFICANT
GROWTH
FLAT
2024 OUTLOOK – INVESTING IN FUTURE GROWTH
Keeping our profitability on high levels
Q1 2024 EBITDA margins remain high
User Acquisition costs almost doubled YoY, but overall operating
expenses were flat YoY (savings in R&D, G&A and platform fees)
Core franchises’ KPIs stabilize
DAU QoQ improvement for 4 consecutive quarters
For more information please see
ir.huuugegames.com
THANK
YOU
Direct-To-Consumer channel growth
DTC responsible for 12% of sales in April
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
