Okay. Hi, good morning, everyone, and thank you for joining us in the third quarter earnings call. Our presenters today are Anton Gauffin, Chief Executive Officer, Grzegorz Kania, Chief Financial Officer, and Jonathan Bellamy, EVP Strategy and Investment. We have prepared the presentation, and after the slides, we will have Q and A session. I will now hand over to Anton.
Thanks, Gabi. Good morning, good day, depending where you are calling in. We are very pleased to be here today. I would say Huuuge had a strong Q3, and we delivered double-digit 17% in its year-over-year growth despite somewhat challenging market climate. We saw contributions coming from both our core titles and especially when it comes to Traffic Puzzle. Traffic Puzzle was a very significant contributor. We saw the game revenue growing in the third quarter almost sixfold when we compare year-over-year results. In total we are getting close to kind of + $10 million quarterly with Traffic Puzzle. I'll let my colleagues dive deeper with the numbers shortly.
We see that with Traffic Puzzle players love the game, and there's increases with both DAUs and daily payers as well. That's fantastic. The company is delivering more and more profit, which allows us to expand and invest our business. We remain very excited where we are heading as a business. The evolution around gaming and the latest trends coming from blockchain gaming and play to earn is highly exciting for us, which we would love to talk a bit more maybe during the Q and A. We continue to very much be the leading edge on the monetization side when we look at the increases on the ARPDAU side and looking at our conversion rates.
We are clearly the best in class. It's difficult to find anyone in the industry who would be as advanced and we are highly proud of our capabilities. In that context, the Huuuge being the technology plus gaming company is the important point to continue emphasizing here. With that, I would be happy to hand over to JB, Jonathan to give a bit more color on the KPIs and give you a business update.
Thanks, Anton. Hi, everyone. Good morning. I'm gonna spend the first couple of slides on the business update section talking through the core franchise updates, and then we'll move on to the new franchises. To begin with, Huuuge Casino and Billionaire Casino are two flagship titles. Q3 has been a positive one for our core franchises. We've seen 9.5% year-on-year increase in revenue from $74 million in Q3 2020 to $81 million in Q3 2021. That has been enabled by a significant increase in ARPDAU, or Average Revenue per Daily Active User. That is a 40% year-on-year increase versus the equivalent period in 2020 from $1.38 to $1.93. All of that has delivered growth, despite lowering marketing spend.
Our investment in user acquisition has fallen by 27% year-on-year from $22 million in Q3 2020 to $16 million in 2021. All of this summarizes to say we have been growing beyond the market rate in our core franchises as we focus on portfolio management and kind of quality versus quantity, particularly when it comes to user acquisition investment. Our monetization metrics, as they have done since we first listed and started speaking to the market, have been outstripping any stagnation or declines in the category network-wide daily active user numbers. As we know, this trend exhibited by Huuuge is the same one that the wider social casino market is following.
It's worth noting that this average revenue per daily active user number, this increase of 40% was driven 29% by an increase in ARPPU or the revenue per paying user. When somebody does spend, how much do they spend? Then kind of conversion as well as the other half of that improvement at 9%, which is up 1.3% year-on-year. As Anton says, this is a best-in-class result. On the next slide, you'll see. I think the takeaway from this slide really is that the category in which we operate and our two core franchises are all evergreen. This is an evergreen category that continues to deliver revenue and player base for years upon years upon years.
As those of you familiar with Huuuge will already know, our revenue stack for our core franchises is comprised of many sedimentary layers of historical cohorts acquired since, you know, 2015, 2016 even in some cases. These players from many years ago continue to play and pay within our franchises, and this provides highly retentive, highly sticky, and highly resilient profitability and revenue backbone for the company. This gives us great flexibility in our ability to explore new growth initiatives. It also means that as these continually layering cohorts mature, we start to see that these user acquisition as a percentage of revenue KPIs fall in line with our peers. As of Q3 2021, UA as a percentage of revenue for our core franchises was roughly 20%. Perhaps with that, I can skip forward to new franchises.
Again, it's a positive story. We've seen that new franchises have grown significantly year-on-year. A 130% year-on-year increase in revenue, and a 78% increase in DPU or daily paying users. In absolute numbers, this means that revenue from new franchises has grown from $5 million in Q3 2020 to $11 million in Q3 2021, placing it as roughly 12% of our total company revenue for the quarter. Traffic Puzzle is the standout story once again. It is responsible for nearly all of the revenue growth that you're seeing on the slide here. We have a bunch of other titles at various different stages of development, and publishing continues to broaden our horizons and diversify the portfolio.
We've published, I think, three new titles since we last spoke, one in Q4, 2 in Q3, which brings the active portfolio of publishing titles up to five. We'll talk a little bit more about that in a moment. Just one more slide forwards, and we'll talk a bit about Traffic Puzzle specifically. Traffic Puzzle has within Q3 had its best ever months for revenue, daily active users, and daily paying users. It is now significantly larger and more significant as part of the overall portfolio than it ever has been. We've seen record high revenues, as I just mentioned, equivalent to sixfold the numbers of the equivalent period in 2020. Six X the revenue that we saw in Q3 2020.
The UA focus or the user acquisition investment has been the key driver of our additional scale in the past few months. However, monetization and product improvements are really the next step in driving further growth. We will continue to invest in user acquisition. However, now that we have 100% ownership of the product, the code base, and the live build were both handed over to Huuuge in November 2021, that means that we have additional levers to pull, and we can actually improve the product itself with Huuuge's expertise and in-house knowledge. That gives us another kind of aspect of growth to exploit. This leaves Traffic Puzzle in a great position.
It is a top 30, sorry, puzzle game globally, that is across all geos, across all app stores, representing roughly 1.8% global market share according to App Annie. I think the call-out feature here is that the game has some of the best monetization metrics within the category globally. According to GameIntel, it is a top 2% ARPDAU product within the match three puzzle category. That is not to say it's top 1%. The granularity actually finishes at top 2%, so we believe we're well above this threshold. Perhaps with that, I can pass you over to Grzegorz for a financial update.
Thank you, JB, and good morning, everyone. My pleasure to be here for yet another quarter of fantastic growth of business of Huuuge. As said before, 17% year-on-year growth on revenue and the fantastic more than doubled adjusted EBITDA of $17.7 million for Q3 2021 with 19.2% of adjusted EBITDA margin for the quarter. As you can see, we enjoyed the economies of scale and the evergreen nature of our games. In line with our product roadmap, Q3 2021 was the quarter where we decreased our user acquisition expenses. This year, 2021, you know, allocated proportionally more budgets for the first half of the year as opposed to 2020, where the user acquisition budgets were allocated proportionally more to Q3 and Q4 of 2020.
That's why you see that, in terms of percentage of revenue, we have a decrease of 7 percentage points from 39% of revenue in Q3 2020 to 32% of the revenue invested in user acquisition in Q1 2021. That's the primary driver of our increased EBITDA. We also, as said in the press release, look positive at Q4 2021, inasmuch that we expect our adjusted EBITDA to grow year-on-year on an annual basis on a double-digit percentage versus 2020. Maybe a deeper dive into our P&L, revenue growth 17%.
We said the primary driver of it was actually Traffic Puzzle, where we saw the revenue and the new franchises where we saw the revenue increase of 130%. We are particularly excited and encouraged by the scaling of the Traffic Puzzle game. This scale, as JB presented very nicely, 6x year-on-year revenue growth. We look forward with the current parameters and with the current KPIs how the game scales. We look forward to seeing it break even on a gross margin, on a sales margin level next year.
Also, we are very excited to see that Publishing 2.0 strategy has got a very nice proof of concept with the Traffic Puzzle becoming really our cash-generating game next year. Other items on the P&L, just as a reminder, the cost of sales, it's mainly platform fees we would pay to the distributors and the gaming server expenses. This is actually quite in line with the revenue dynamics. I've already discussed the user acquisition marketing campaigns that's different allocation of budgets across the year, this year versus last year.
The increase in general and administrative expenses year-over-year that you can see here of 51.9% is driven by primarily by the employee related costs and including ESOP and the public company related expenses. The said primary driver is actually ESOP. When we look at the next slide where we have the reconciliation of reported to adjusted EBITDA and net results, you will see that the ESOP expenses in Q3 2021 amounted to $4 million as opposed to as compared to Q3 2020, where it was $1.1 million.
An increase of 2.9%, and that's primarily driven by the two option grants that we made in the first one in Q4 2020, the second one in Q3 2021, both in line with our long-term incentive program and remuneration model, broadly discussed earlier in the year and also during the IPO roadshow. Basically the adjusted EBITDA $17.7 million has a 19.2% adjusted EBITDA margin. The adjusted net result this quarter has only one reconciling item, the non-cash ESOP expenses. Last year, just as a reminder, we had the Series C shares revaluation, but as you certainly remember, immediately prior to IPO, those shares were converted.
The preferred Series C shares were converted into common, and we no longer recognize the liability. They are part of equity, and we no longer remeasure them at the balance sheet dates. Brief overview at the balance sheet. Nothing really new to talk about. The non-current assets increase versus end of last year is a Traffic Puzzle acquisition. The increase in current assets is the proceeds from IPO.
The structure of liabilities is impacted by the conversion of Series C into common as discussed, and the equity turned from negative almost 100 to more than 200 positive as a result of both the revaluation of Series C as well as the proceeds or the equity raised in the IPO. I'm very happy to also present to you the cash flow as the EBITDA conversion this quarter is actually particularly very good. We've adjusted EBITDA of $17.7 million.
We've generated $18.8 million of operating cash flows, and the increase in our cash is $16.4 million, leaving us cash in hand at the end of Q3 2020 on the level of $196 million. That would be my brief overview. I'm sure there's plenty of questions, and I'll be happy to answer, but before that, I'll hand back to Anton for concluding slides and comments.
Thanks, Grzegorz. The company is in a great financial position, and we I would say we have an even greater conviction that this real-time multiplayer, more social gameplay that Huuuge is committed in innovating and taking further, that this is leading into a more engaging and rewarding player experience, which is eventually what the players want. We've we know that we are well-aligned where the industry is heading. We have our build and buy strategy, how we are executing it. We continue fine-tuning all the time. When it comes to build specifically, which is all about building the next generation games coming from us and expanding our network, we have continuously several prototypes and concepts that we continue testing.
As we've spoken earlier, we've taken the approach that, before the games are hitting, let's say, meaningful scale, we continue to manage everyone's, especially the analysts' expectations and rather start talking of these new games when they are hitting more meaningful scale. There is very active build efforts going on. When I look back, what has brought us so far, we've been focused on creating exceptional small screen experiences. I personally have been doing this for 20 years. A lot of our success has been on that having the DNA to build new games.
The company continues to be very excited of that. On the buy side, JB, maybe you wanna give a quick update what we've been working on there, and how we've been fine-tuning how we execute buy.
Yeah, of course. Buy really is split into publishing and M&A. Given the significant discrepancy between private market M&A valuations in gaming and public market, we've tended to focus more actively on publishing as a means of inorganic growth. As I mentioned earlier in the presentation, this leaves us with five active publishing titles within our portfolio. However, we've now signed more than 10 publishing deals since the inception of this initiative. We are very close to signing another actually, and we're ahead of schedule for hitting our one new game per quarter target as communicated, way back at the beginning of the year. We do have quite a strong pipeline of publishing products, and we're in detailed talks with four more developers.
I wouldn't comment on the expected conversion rate of those, but it's important to acknowledge that these conversations are consistent and at significant pace. Additionally, as has been the case since we first started speaking with the market, we are almost always in discussion with between one and five M&A targets. At the moment, we're in talks with three to four, we have a couple of open VDRs. Until those processes or if those processes pan out and become more mature, we won't comment on specifics. At least for now, it's worth reiterating that Publishing 2.0 has been proven as a concept, as Trigos said, by Traffic Puzzle, and is consistently and constantly broadening our horizons and diversifying the portfolio.
As these games hit greater scale and show further promise, we'll of course start talking about them specifically just as we did with TP. Anton, maybe you wanna touch on new initiatives?
Yes. First, when it comes to macro outlook for the whole gaming, it's looking extremely exciting, more people coming to the market and the ways how to play and also monetize these games are continuously evolving and growing. When it comes to new initiatives, the couple ones to highlight here is that we haven't only followed what's been going on in the so-called Web3 blockchain gaming or P2E space. We've been taking our first steps. It has been a lot, setting up new partnerships and making sure that we are taking this evolution going on very seriously. The second thing I'd like to highlight is the possibilities to operate outside App Store and Google Play, which continue and kind of remain the key platforms for us.
We are very excited how the industry is now evolving and allowing to do our business beyond that. This creates significant growth opportunities that we are actively exploring. With that, I think enough slides and we'd appreciate and welcome all questions or feedback. Thank you.
Okay, thank you. In order to ask a question, you can click on raise hand button so we can unmute you, or you can type your question in Q and A chat. Maybe I will first unmute Larrad from Jefferies.
Hi, thank you. Hi. Good morning, guys. Can you hear me?
Yes.
Yes.
Okay. Yeah. Firstly, congrats on the strong results. I guess my question is just try to understand a little bit about the declining user base for the Core Casino franchise. I understand that other players are seeing this trend as well, but do you think this is actually kind of a temporary effect due to IDFA or due to COVID? Or do you see like this is kind of a structural trend that eventually for those games, the user base will decline anyway? Related to that, for the Core franchise, what do you see as the future revenue drivers?
Yeah, I think that's a very good question. We can see that the Social Casino is, first of all, a real evergreen category. We see Social Casino delivering more value years to come. In that sense, there's a very high conviction that this is a segment where we wanna be, and we wanna see further success coming thanks to our core franchises. At the same time, the industry is changing and evolving. IDFA changes how the UA landscape works. It has meant for us that we need to adjust our playbook and how we are executing our UA. In the near term, this means that we've been optimizing a lot our user acquisition efforts with these titles.
That is now bringing us more capital and allowing us to grow and expand more elsewhere. This has been a kind of carefully pondered decision that management sees as very beneficial for the company. I don't know if JB or Craig, or you-
Sure
you guys would like to add.
Yeah
Some more color to that.
Yeah. No, no, I will. Just for a moment. I think part of the question there was about the long-term outlook for the declining user base or just the nature of the user base Social Casino.
Eilers & Krejcik, who are the leading market analysts, are projecting daily active user decline across the category a negative 5.8% per annum over the next five years. This was a trend that we'd started to see pre-IDFA and pre-pandemic period. It was of course exacerbated by IDFA's deprecation. I think we do expect to see nearly all of the growth in the category coming from improved conversion and average revenue per paying user, so in essence, monetization rates. This is exactly what we've been delivering on as a strategy and delivering good results with, id est, the 40% year-on-year increase in ARPPU for our core franchises. That's what we've been doing for quite a while now.
We expect to pursue exactly the same strategy, and that's why we doubled down on our strengths in live ops and monetization in recognition that that is how we compete in Social Casino today.
Yep, that's really helpful. That makes sense. I guess my second question relates to the new initiatives you talk about. Obviously blockchain gaming and also play-to-earn are quite exciting. Could you maybe just elaborate a little bit more on your thoughts over there? Would we see Huuuge implement some of the game mechanisms to one of the new games or existing games? How do you think Huuuge Corporation itself like benefit from that front?
Sure. First of all, we see that there's been quite significant progress what has happened specifically in the Web3 blockchain gaming space in the last, let's say, 12 months or so. That space seems now really much more viable than in the past. We think that we are in great position because of our knowhow to build I would say complex economies. In blockchain how you are monetizing is different and it is to some extent also complementary to how we've been doing things as there the monetization can be built around tokens and NFTs and that's highly exciting for us.
What we've been doing, as I said, we've been setting up new partnerships, and we've been taking these design aspects into account when we think of our especially new titles, but also exploring opportunities with our existing titles. Very concretely what we will be doing in near term and long term in this space. In January, we will do a dedicated day where we talk about innovation, new products and the exciting stuff, but what we are working. At the moment, we are not going to give you much more details than this.
Yep. Great. That's really helpful, and I quite look forward to the innovation day in January. Thank you so much.
Thank you. I can see we have several questions on the chat.
Yep. Let me open the line of Matthew Walker.
Okay
from Credit Suisse because he wants to ask question live. Matthew?
Yeah. Can you hear me?
Yes.
Perfect. Thanks. I've got two questions, please. The first is, obviously there's, you know, if you look at Playtika, et cetera, you know, it's a difficult time for the industry. Revenue growth hasn't been great. When you look out to the fourth quarter and also for next year, are you basically looking at, you know, mid-single digit kind of growth or high single digit kind of growth, not double digit growth for the reasons that you've explained? With margin, you were targeting over 20% margin for 2022. Obviously that's a big jump from 17%. Can you just explain, does that still look realistic or, you know, because of the slowdown in the industry, it's no longer realistic? The final one is obviously, as you commented, public market valuations are much lower than private market.
How long should shareholders expect you to retain the $200 million of cash? Obviously it doesn't make sense to have forever. If the situation with multiples doesn't flip over and doesn't change, how long can we expect you to hold onto that cash rather than return it to shareholders?
Thank you, Matthew. Yeah, I think we got three questions. Maybe you wanna Gregorz's first comment.
Yes. Thank you. Pleasure. Yes, indeed. I mean, the revenue growth, the first question about the revenue growth, indeed, we saw-
The slowdown in the revenue growth this year versus our expectations, there's been a lot of reasons for that and factors that happened throughout the year that caused that. The eCPI increases that affected the efficiency of the user acquisition spend and the post-COVID hangover, if you will, in the middle of the year. This is all affecting the pace of revenue growth. Definitely we will see a slower pace in Q4 than we expected.
As far as next year is concerned, we are still you know in a planning phase, and we are not prepared to give any guidance or ranges of the revenue growth pace next year. What I can definitely say is probably reiterate what already JB said about our core franchises. Also I'll say that we are quite excited about the growth that Traffic Puzzle can generate next year. This will be somewhere an effect of those two core revenue drivers for the next year for us.
When it comes to the EBITDA margin, again, we saw this year a bit more positive at the beginning of the year due to the factors that I described. Nevertheless, profitability is our focus, and despite quite negative trends that we saw throughout the year, we are shooting at delivering the double-digit adjusted EBITDA growth in percentage terms versus the full year 2020. We'll definitely not be able to reach the expected adjusted EBITDA margin at the level that we projected or anticipated at the beginning of the year.
When it comes to cash, the almost $200 million cash that we have, there are two driving forces there, of course. The one is that, yes, indeed, the M&A market is difficult, and JB already described the discrepancy or the gap between the private deals valuation and the public company valuations. We do look at it closely and also consider it in terms of the ability to deploy capital during the 12-24 months period as we were projecting during the IPO. You know, we are not even past 12 months post-IPO when it comes to capital deployment.
But still, you know, on the other hand, we are considering whether it's worth keeping that war chest for potential M&As in the future, and we'll definitely be observing those factors. We do see others in the industry sort of having their view already at this moment, like PLAYSTUDIOS announcing the share buyback. We are not there yet, and we'll definitely be observing how the market evolves very closely. We know of those potential other options to our shareholders, but definitely too early to say anything specific.
Yeah. I'd say that we remain highly positive when it comes to our future. It's extremely important for us that we have capital and basically readiness to move forward if and when we see something that would be a great opportunity to further grow the company. Now, in the very near term, it is about releasing and everything what Jonathan and JB already mentioned that we expect to have lots of action. If you look at what we did with Traffic Puzzle, so we are definitely looking to repeat that and many times.
Okay. Thank you very much.
Okay. The next question, from the line of Michał Wojciechowski from PKO BP .
Hello, guys. Do you hear me?
Yes.
Yes.
Okay, great. I have two questions about user acquisition. The first one, could you tell us more about your schedule of spending for the next quarters, especially after Q4? The second one, about user acquisition for core games in the next year. Should we expect it to be higher or lower versus this year? Thank you.
Thank you. Who wants to take that?
Maybe I'll start, and then you can supplement it. When it comes to Q4 this year and the user acquisition in Q4 this year, then we said many times that our allocation of budgets in the user acquisition was different versus last year. Most of the budget was, or the proportionally higher portion of the budget was allocated to the first half of the year. On top of that, we see the increased eCPIs and, you know, the efficiency of the user acquisition spend is also driving our cautiousness when it comes to spending the user acquisition expenses. Too early to say because, you know, December is still ahead of us.
We expect that the eCPIs in December will not go any easier and we will not spend the budgets that we have allocated compromising on the user acquisition efficiency. That's definitely not what we do. We remain very disciplined about the return on advertising spend, so we might be adjusting our user acquisitions in December for that reason. When it comes to the next year, I think Anton already said during this call and he in his letter in the report, that we are focusing on making sure that our user acquisition is optimized. This might mean that for the core franchises we are actually optimizing the user acquisition and this might decrease.
This is also in line with our explanations earlier this year, at the beginning of the year, that over time, increasingly, the higher proportion of our user acquisition expenses would be directed to the new franchises. What I can tell definitely is that next year we'll see the increase in the user acquisition allocations to scaling the Traffic Puzzle.
Okay, thanks. I have one more question about your answer to IDFA. Recently, Ten Square Games said that they are widening their user base because of the IDFA, and they are more focused on untargeted marketing campaigns. The question is, are you also able to try those untargeted campaigns? Are they efficient for you, or how you see that?
Anton,
Shall I touch on this?
Please go ahead.
Sure. It very much depends on the product. The reality is that for Social Casino, targeting user acquisition is kind of the name of the game. In fact, the ability to target is one of the key competitive differentiators for Social Casino combatants in the arena. The other, of course, is the ability to monetize. The two are very closely linked, so our ability to kind of target, understand our users, and serve them products that serve them best is really kind of the name of the game. For much broader products, particularly within our soft launch pipeline at the moment, we have the ability to spend in a much more untargeted fashion.
Generally speaking, the more casual and broadly appealing the game, the more ability you have to spend on untargeted campaigns. Generally speaking, hyper-casual games, you can absolutely do that with, almost exclusively. The more core the game becomes or the more mid-core the game becomes, such as social casino or role-playing games or strategy games, the much more targeted you need to be. Of course, the flip side of this equation is that you also have significant resilience from the more core games, right? Because you have these layered cohorts of users generating very stable revenues over time. Whereas, on the other side of the equation, where you may be able to spend on untargeted campaigns, retention in general tends to be much lower in the long term, so you don't have those layered cohorts.
While it may be possible to spend on broader UA campaigns for those casual games, you don't have the same level of longevity or resilience that we do in Social Casino. This is exactly why we pursue both casual and core games in the portfolio.
Okay, thank you. That's all from me.
Yeah. I would, JB, just add that obviously we are very active when it comes to testing new types of UA and what's going on on that front. If players like Google and Facebook are bringing new features or new services, how to do UA with them or perhaps there's some new channels. This has been a very important part of our business. Also what Grzegorz said earlier, kind of remaining very disciplined operating managing our marketing paybacks and returns we are getting to our advertising spend. This has been the core discipline in how we've been growing Huuuge and continue to do so in the future.
Okay, thanks. Now the questions from the chat. We have two questions from Ken Rumph from Jefferies. First one is what's the UA versus monetization for TP? And second one is, how could social features work for TP? Doesn't seem to have the competitive club dynamic of Social Casino.
Anton, let me know.
The first one, we don't disclose that.
No. That's right. We don't disclose specific UA to monetization, sorry, the UA versus revenue numbers for Traffic Puzzle. We haven't done so. That's not our policy. That said, we can say that the UA as a percentage of revenue is significantly higher for Traffic Puzzle than it is for Huuuge Casino and Billionaire Casino. There's a very simple reason for this. The game is just younger. It hasn't had time to layer up significant cohorts that are paying back. The user acquisition dollars that we're spending, most of those are still not yet at the 100% payback limit.
As you know, we spend with a certain number of months in mind by which we wish to see, we want to see breakeven on the return on ad spend or paybacks. There just hasn't been enough time of the product being live for those cohorts to build up to dilute the user acquisition investment as a proportion of revenue. That said, looking at the payback profiles or the return on ad spend profiles of our cohorts in Traffic Puzzle, at the moment they're the most positive in the short to medium term within the entire portfolio. The dollars that we're spending there are extremely redeeming, are paying back more quickly than our other products. It also means that we need to operate at least in the short term with very high user acquisition as a proportion of revenue.
Maybe adding to that, I'd reiterate what I said with optimism that we look forward to seeing the Traffic Puzzle break even on the sales margin levels. Actually next year we expect that this game will be self-financing in a way for our per user acquisition and scaling. The next title to join our cash generating titles.
Ken also asked about the social features for Traffic Puzzle and wondering if it has the same similar competitive club dynamic as we have with the core franchises. We have seen several successful examples when it comes to casual games how clubs have been implemented. As an example, when it comes to even games like Solitaire, Tri Peaks Solitaire, introducing clubs and team mechanics have often led into having more reasons to replay levels. With what we have in Traffic Puzzle at the moment is still more of a single player experience. We just acquired the asset. You can rest assured that we continue making Traffic Puzzle more social and there's lots of possibilities to do that.
We believe that adding social elements will lead into better engagement, better retention, and people have many more reasons to replay levels because of advanced and smart use of the social mechanics.
Okay, thanks. The next question from Andrzej Karpiński from KO. Your target in IPO roadshow was 25%-30% revenue growth, which won't be delivered. What should we assume as an updated midterm target?
Yeah, I think that's part of that question was already answered or if not, the whole question was already answered with the question on the revenue growth. Again, you know, we've seen some negative trends which we believe are the, you know, the short-term trends impacting the industry. On a longer term, we remain highly positive about the gaming sector and about mobile free-to-play gaming sector. This year definitely the revenue growth will not be reaching the 20%.
As it comes to the midterm, as I also said, we are during the planning phase, we are analyzing various scenarios and optimizing against those scenarios. It's definitely too early to do any updates of the margins or the revenue growth base for the next years. We do expect that, you know, in 2022 definitely we'll be growing slower than we would have thought at the beginning of this year.
Okay, one more from Andrzej Karpiński. During IPO roadshow, you presented a quite rich new games pipeline, but it seems that none of them have gone into hard launch. Is there any data you can provide us to convince us that you can grow organically? And how many projects have been canceled?
Again, generally said, we don't comment on the number of projects or prototypes or concepts that we are working on for the reasons discussed earlier. To manage your expectations and we don't want to fall into that trap that we would be discussing too early on our new games. What happened this year when we acquired Traffic Puzzle and we again didn't acquire the whole studio, we acquired the asset. Some of the titles what we were discussing and showcasing during the IPO, we made the decision to double down with Traffic Puzzle and all of these games require teams and talents.
We valued the opportunity we saw with Traffic Puzzle over what we had ongoing with some of these projects that were presented again during the IPO roadshow. We have a healthy pipeline. We are continuously investing into doing more build activities and again, in January, we hope to present much more what's to come from Huuuge next year.
Okay, thank you. One more question on the chat from Kacper Koproń from Trigon. What range of transactional multiples do you have in mind for future M&As, and how do you perceive your, the competitive environment in M&A?
Yeah, I think it's maybe I say first that it's important to obviously look beyond just multiples. It's a lot about this. Is the company and their culture and what they do a match, or are we doing an asset acquisition? Yeah, we are very much paying attention to synergies and if there would be that sort of alignment where we are heading. It's not just about a specific multiple threshold that we would be looking when we think and how we are approaching M&A. JB, go ahead.
Yeah. No, I think that's the essence of it. Provided we can build a compelling business case that we believe in that shows that at least in the kind of near to midterm, a transaction makes sense from the perspective of where Huuuge is trading, the actual multiples at the time of acquisition are a little bit less held on a pedestal, right? At one point in time, we were very keen on having one-year EBITDA accretion, and returns above WACC. Actually, the competitive environment in private market M&A has effectively exploded since then. I don't think there has been a time in history where the level of consolidation and M&A activity in games has been like this. Private market multiples are significantly higher, you know, tens of percentages higher than those trading multiples of public equivalents.
If we are choosing to deploy capital on deals that we believe make sense and the combined business is of net positive value in the medium term, we will do that without kind of being too precious about multiples at the time of acquisition. That said, we have to remain disciplined. We promised, actually, at the beginning of the IPO and all the way through, we've promised that if there is no good deal to be done, we won't do a deal rather than just do a bad one for the sake of buying revenue. That continues to be our approach, and it's the reason why we're in talks with between one and five targets at all times, and yet we're quite selective with the deal that we do.
We'd much rather deploy capital in a way that makes more sense, whether that be internal growth or Publishing 2.0 or any other capital transaction. We are kind of non-precious about it being just M&A.
Okay, thank you. I do not see any further questions in the chat.
I think there's one more.
Oh, there's one more.
Do you consider yourself a M&A target given your low valuation? Listen, are we happy with how the market is currently valuing and treating our stock? Certainly not. We are very excited about where we are heading as a company. It is not our place to kind of comment these sort of questions, I guess. Beyond that, there's a lot of consolidation going on in the industry and we plan to play a bigger role in this industry years to come. Hopefully that gives you a bit more context on how we are thinking about that question.
Now there are no more questions on the chat. You can always contact our IR team, Jyrki, if you have more questions. Now I will ask Anton for closing remarks.
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Thank you.
Thanks, everyone.