Ladies and gentlemen, thank you for standing by and I would like to welcome you to the fourth quarter 2024 earnings call of Huuuge. The speakers today are Wojciech Wronowski, the CEO, and Maciej Hebda, EVP of Finance. The call will start with a presentation from the company, followed by a Q&A. For the Q&A session, we'll be joined by Erik Duindam, the COO. The presentation will be available for download on our website after the call. You're also welcome to type in the questions in the chat box while the presenters are speaking. So with that I'll pass the line over to Wojciech to start the presentation. Please go ahead, sir.
Hello everyone and thank you for joining today's call. Wojciech Wronowski speaking, joined by Maciej Hebda, our Treasurer and EVP of Finance. We'll begin by summarizing our operational and financial performance for the fourth quarter and full year 2024, then move on to discuss our outlook for 2025. As always, we'll wrap up with a Q and A session. Let me take a moment to walk you through our key highlights from the fourth quarter of 2024, which underscore the positive momentum we've begun to build heading into 2025. Our product roadmap has driven meaningful quarter over quarter improvements with average revenue per daily active user up 10.9%, helping stabilize revenue at $62 million, an increase of 5.1% compared to Q3. Huuuge Pass and economy improvement stabilized revenue and built a strong foundation for Q1 2025.
Our direct-to-consumer channel continues to perform exceptionally well, up 62% year over year, representing 16% of total sales in the fourth quarter and further growing into Q1 2025. Profitability remains a core priority. Adjusted EBITDA rose significantly to $25 million, marking an 18.9% sequential improvement and a record high EBITDA margin of 40%. These strong Q4 and preliminary Q1 results clearly demonstrate our strategic direction is working, positioning us for profitable growth ahead. Now let me turn to our core business update. In mid-2024 we made significant investments aimed at improving product quality and accelerating time to market. These initiatives required major internal changes leading to delays and postponing several key releases, with most impactful updates shifting towards the end of the year. We believe this was the right decision for the long-term health of our business.
Our Q4 releases, Huuuge Pass and game economy improvements proved to be major successes. These new features drove meaningful improvements in key monetization metrics with daily paying users and average revenue per daily active user showing notable quarter over quarter growth. Specifically, ARPDAU increased by 10.9%, stabilizing revenue and laying a strong foundation for 2025. In fourth quarter 2024 payback periods significantly improved alongside a reduction in UA spend which we carefully align with our product release pipeline. Looking forward, we expect marketing spend in 2025 as a percentage of revenue to remain around Q4 2024 levels. Maintaining stable and sustainable profitability across our core portfolio continues to be our primary focus. Our direct to consumer segment has continued to be a strong performer with 2024 revenues reaching a peak of $29.9 million, nearly double the 2023 figures.
In Q4 D2C revenue accounted for over 16% of total revenue, increasing to 21% in March 2025. We are currently working on several strategic initiatives to improve our webshop offering and expand across multiple other channels. We expect D2C platform to contribute a mid- to high-20s % share of the total revenue by the end of the year.
Hello everyone, I'll cover the financial section of this presentation. Next slide please. In Q4 2024 we saw a 13.4% year on year revenue decline and a 5.1% quarter on quarter revenue growth. The sequential improvement was driven largely by the success of Huuuge Pass and a change in the game economy rolled out in November. I also wanted to point out that our preliminary bookings reported in January were higher than the reported final revenue numbers by approximately $1 million with most of the delta explained by the negative impact of deferred revenue at the gross profit level. We observed year on year and quarter on quarter improvement in the margin driven by the continuous expansion of our direct-to-consumer channel.
Our sales and marketing expenses were lower both year on year and quarter on quarter as we continued to adjust our user acquisition spend to performance trends and our feature releases. R&D expenses increased by 6.9% year on year but were slightly lower quarter on quarter while our G&A expenses declined by 15.7% year on year and 15.5% quarter on quarter as we remain committed to strict cost discipline. Other operating expenses were impacted by the $3.5 million write-off of our investment in Banana Studios. Finance income line was positively impacted by FX gains. We are particularly happy with the Q4 adjusted EBITDA of $25 million and the adjusted EBITDA margin of over 40%.
Both net result and Adjusted EBITDA in Q4 2024 were slightly lower year on year and significantly higher on a sequential quarter on quarter basis, reflecting stabilization of revenue and a declining cost base. Going forward, we expect a further reduction in our operating expenses with the positive impact of the collective layoffs on costs visible in H2 2025. Now let's move on to cash flows. Next slide please. In 2024 our net operating cash flow amounted to $65 million and a solid 75% net operating cash flow to Adjusted EBITDA conversion ratio. In Q4 our net cash from operations reached $17.8 million. Looking at the net investing cash flow, it amounted to -$0.6 million in 2024. As interest income from our investment portfolio almost fully offset our investments in Banana Studios and Empire Games as well as other CapEx.
In Q4 2024, interest received was even higher than our CapEx, bringing the net investing cash flow to $0.9 million. Net financing cash flow of -$74.4 million in 2024 reflects our $70 million share buyback carried out this year. In Q4 2024 alone, our cash balance increased by almost $18 million to $141.8 million at the end of period. Even after returning $70 million to our shareholders in 2024, we maintain a strong cash balance. This allows us to pursue a wide range of potential growth options. I will now go through the 2025 outlook and our high level guidance. Next slide please, please we expect a slight year on year decline in revenue in 2025. We already reported preliminary numbers for Q1 showing quarter on quarter stabilization and we are very happy to see our players engaging in our new features on a full year basis.
We expect our marketing spend to decline significantly as we had quite a high base in 2024, especially in the first half of the year. User acquisition spend as percentage of revenue is expected to remain around the levels seen in Q4 2024. We are seeing solid performance in terms of payback periods and we might slightly increase spend if this continues. We expect the non-marketing operating expenses to decline year-on-year. The impact of the company-wide layoffs on costs will be clearly visible in the second half of 2025 and we expect to generate around $12 million in savings on an annualized basis. We also maintain strict discipline when it comes to non-salary OpEx. We believe that the above measures will lead to Adjusted EBITDA being higher than in 2024 both in absolute and in margin terms.
With that, I am turning to Wojciech for his closing remarks.
Thank you everyone for tuning in and for your continued support. Let's start the Q&A.
Thank you. Thank you very much for the presentation. We are now opening the question and answer section of the call. So if you are dialed in via the telephone and you would like to ask a voice question, please press Star two on your keypad. If you are connected via the web, you may also ask a voice question or send your question as a text. So far we have received a bunch of questions regarding the buyback and M&A. So maybe I will now pass the line to answer those questions to thank you.
Yes, indeed. So a lot of questions we received are regarding buyback and potential M and A. So it's probably better for us to cover those more broadly and skip like detailed questions later on. So in terms of buyback, we view our cash as a strategic asset and we will prioritize growth opportunities over share buyback programs. We are exploring new markets as well as synergistic M and A opportunities where we can leverage our know how and expertise. And we look at the broader time frame to be on one year and we believe that investing in our long term future makes the most sense for us and our shareholders.
In terms of M&A, there are detailed questions regarding the targets, the range, the timelines, and at the very moment we are currently exploring different options and we are still at the very early stages in the conversations and any potential M&A activity would be.
Have to be closely aligned with our.
Core abilities and strengths as a company and would include expansion into new markets and that complement those strengths.
We are taking our time.
We are not under time pressure thanks to stabilization of the core products. We have time to really focus on what is important and will only pursue many opportunities when we have a very high conviction in the strategic fit and the value creation potential. And again, MA is not only our focus, we are actively exploring new markets where investment could be organic, including iGaming, a space where we believe Huuuge has a lot of potential to drive innovation and disrupt the status quo with our social first and product first mindset. That said, we can continue to other questions.
Thank you. Thank you very much for this. So our first question from Max, how do you see the sweepstakes market as a competitor for market share within social casino gaming?
Yeah, I'll take this one. So there is some overlap in the audience with the sweepstakes market, although sweepstakes has generally much younger and more male-oriented player base and now there's more and more states kind of taking a negative stance on sweepstakes and more operators closing down in states like New York and a few others, and so we're monitoring this in terms of user acquisition and it could be potentially helpful.
But there's.
The overlap exists, but it's not. It's not fully. It's definitely not the same audience.
Okay, could you expand on what you mean when you say that you are looking into the iGaming segment? Is it B2B or B2C you are looking at and what is motivating you to go into a completely new segment with its complicated legal environment?
It's definitely quite early to discuss all of those details, and in general how we look at the world is that we think that Huuuge potential, she could be a great operator. Taking account our core strengths and ability to monetize and engage players. We believe that traditional iGaming is a bit stale business and we have understanding that Huuuge could disrupt the status quo with a social first approach. But again, it's very, very early to discuss those details and we definitely will explore more and potentially discuss that on another earnings calls. Okay, perfect.
Thank you. And next question comes from Jimmy Jensen from Fold Equity. You came in $1 million short for the first preliminary number reported in January. What was the reason for the mess?
So maybe I'll take this one. Maciej here. So first of all, what we reported up until the last quarter in 2024 were not revenue numbers but bookings and the difference between bookings and revenues. So bookings, essentially all purchases made by players, but not all of them are immediately recognized as revenue. There is a deferred revenue component and that was actually the primary driver of this $1 million delta. The other minor differences could be some FX adjustments. We also report quite early on. So the numbers from the last month of the period could be based on our internal data reports and the final data. So the reports that we get from partners like Google and Apple, so the final booking numbers could be slightly different. Final point to mention that starting from the last report.
For Q1 2025, we actually are doing it a few days later than usual, but we are reporting preliminary revenue, not bookings.
It should be a bit more accurate going forward.
Okay, thank you very much. Next question from Jimmy is: Sweepstakes are currently receiving significant attention from lawmakers in the U.S. How do you see this impacting your business both from a legal standpoint and in terms of reduced competition?
From a legal standpoint, we don't expect an impact. So all of this legislation that is being discussed has to do with like a dual currency or you know, any form of real money involved with casino games, etc. So that doesn't apply to us and we're not concerned about that. And on the business side, I already kind of answered that there may be some overlap in UA and we're monitoring this and hopefully it's a small opportunity to capitalize on that when more states close down in terms of sweepstakes.
Perfect, thank you. Next question from Jimmy is just to clarify the CEO letter. Are you specifically pursuing M and A opportunities within the iGaming space or are you exploring that market more broadly regardless of potential acquisitions?
Yes, we are exploring the market more.
Broadly regardless of potential acquisitions.
Perfect. Have all the resources that contributed to new game development now left the company?
What we've done is some of our team members have been reallocated to our Huuuge Casino studio, in particular some of the team members in Poland, but we've also closed down two other locations being the Netherlands and Finland, and so those people have left the company.
Thank you. Next question from Jim is how is the sharply weakening American dollar expected to impact the business going forward?
Okay, so maybe I'll take this one. So there are two components here. One is our hedging policy or FX risk management. So essentially we hedge up to about 70% of our net expense exposure on a rolling forward basis up to six months forward. So if we take, let's say, the FX market as of today, most of the hedging transactions would have taken place one to two quarters ago. So that's one thing.
But also looking at our exposure.
A weak U.S. dollar is actually positive for our euro-denominated revenue because we receive a good chunk of revenue in euros specifically for Android, so for the Google platform. It would also be negative for our costs denominated in the Polish zloty or Israeli shekel. I would say long-term close to neutral depending on the correlations between euro-dollar and dollar-PLN and dollar-ILS.
But.
Essentially for now I would say positive because of the euro-denominated revenue.
Okay, thank you very much for that. So we are now moving to the questions from Michał Wojciechowski from Ipopema. Could you comment on current U.S. consumer sentiment towards spending in mobile games, especially following the tariff disruption? Do you expect mobile spending to be substantially affected due to weaker consumer and uncertainty?
I'll take this question. So far we haven't seen any impact whatsoever in our data or also what we've seen in terms of, for example, Sensor Tower numbers. It's something we'll obviously monitor closely, but in uncertain times, it doesn't always mean that mobile games are affected, so it's hard to answer, but it's something we're monitoring and we haven't seen any impact so far.
Okay, thank you. A follow-up question from Michał is initial market reports show that Chinese e-commerce platforms are drastically cutting marketing spending in the U.S. Is that an opportunity for mobile market and Huuuge for lower CPI potential for marketing expansion? What are your thoughts?
We do think this is a potential opportunity. We haven't seen it in the numbers yet but we know previously when some of the Chinese e-commerce brands were scaling up user acquisition spend significantly, we definitely saw that in terms of CPMs and CPI. So it is something that could definitely positively impact us if this, if their spend will be systematically lower.
Okay, thank you and another question is how substantial part of your marketing spending is currently retargeting? Is this your key channel right now?
Retargeting is an important channel for us and something we try to generally maximize because we see good ROI. It's not our key channel. It's not the majority of our spend. Much larger part is still user acquisition not retargeting.
Okay, thank you, and another question from Michał. Is Huuuge Casino once again available in Poland? What was the issue with Google Play takedown?
Huuuge Casino is not available in Poland, but we have mitigated all the risks and migrated players to other platforms and right now the impact on revenue is not material.
Okay, thank you. We have another question from Jimmy Jensen from Fold Equity. During the presentation, did you say high 20s in D2C during 2025?
Yes.
Our expectation is in the mid to high 20s for direct to consumer in 2025. For the end of 2025.
Yeah.
Perfect.
Thank you. And a question from Grzegorz Balcerski: What is the cost of the DTC channel as a percentage of payments compared to the effective cost of traditional channels?
The traditional channels are 30%. Our D2C channel is in the single digits or lower single digits.
Okay, thank you. Thank you very much. Just a reminder for any remaining questions and you can still send our questions. We have a voice question from Piotr Poniatowski from mBank. Please go ahead. Your line is open now. Okay.
Hi, I have a question regarding Banana Studios and Empire Games. Could you tell us what's going on with those two entities right now? What's your plan for the future for them? And another one would be regarding Beyond the company created by Anton. Are you an investor in it? Or are you any way related to the company?
Thank you.
In terms of Beyond, we are not related to the company in terms of Banana Studios. We ceased the cooperation, performance was not as we expected and we couldn't scale as expected with Empire Games. We are still working with a small studio and we are happy where the things are going, but we are evaluating things on the fly. There is no specific product the studio is working on. We are more or less in the ideation prototyping at this point.
Okay, thank you. So, moving to the next question, we have a text question from Ole Jacobson from WDV Invest. Is the higher bookings compared to revenue related to Huuuge Pass release?
So, definitely, Huuuge Pass was one of the component and we released Huuuge Pass along with bigger improvements in economy. And Huuuge Pass is a bigger feature that ties into all in-game systems we have in the game. So it allowed us to create this environment where monetization team and CRM teams can create multiple engagement events on top of this path. Definitely Huuuge Pass is one of those core components of the revenue stabilization. But at the same time what we see is a result of smart calendar management and live operations on the game that Huuuge Pass enabled.
Okay, thank you very much. We have a follow up question from Jimmy Jensen from Fold Equity. Are there any major new features planned for release in the core games during the first half of the year?
Yes.
How we are approaching the roadmap right now, we would like to have one bigger release every quarter. We have a lot of lessons learned after Huuuge Pass release. We understand better how to build new features to make sure to tie in those features to all in-game systems so we can utilize them as a platform for our live ops and monetization operations. At the very moment we do have a plan of releasing a bigger feature every quarter this and the next year.
Okay, thank you. Thank you very much. Just a quick reminder for any further questions. If you're connected via the telephone, you can press Star two to ask a voice question. If you are connected via the web and you also want to ask a question, you can either raise your hand to ask a voice question or send your questions as a text. I see a voice question from Maria Mickiewicz from WOOD & Company. Please go ahead. Your line is now open.
Hi.
Hello.
Thank you very much. I know you've already said a lot about the buyback and growth investments or growth opportunities you want to take. I just wanted to make sure that we have a fully proper understanding. So should we read your message the way that like definitely there are no plans for share buyback this year or maybe you just leave this option for investment. But in case you do not spend the money until some point in time, there is still a buyback possible.
Sharing some cash with shareholders basically.
Like, yeah, what's your review so that we have a proper understanding? Thank you.
Yeah, we are not going to give definite answers. Like we definitely are prioritizing opportunities over buybacks, but we are not ruling the buybacks out. There is a lot of initiatives that we are exploring at the very moment, and the one that we've been discussing, like iGaming potential, the required deeper pockets, and we believe that keeping money and investing those in the long term growth of the company makes more sense than short term decisions, and we are not going to provide definite answers but we are not ruling it out, but we are prioritizing definitely growth investments.
Okay, thank you very much. There's one question from Michał Wojciechowski, Ipopema Securities, for Q2 2024 DAU for core franchises declined by 70% year on year and the negative trends have continued since pandemic. Do you expect double digit decline in 2025 DAU year on year as well?
So we don't give guidance on the daily active users. But what I generally want to say is it could be a bit misleading looking only at this metric because we are looking heavily at the quality of the players and so the DPUs, actual paying players, is a better metric that we are looking at more closely. And the DAU could also include for example traffic from countries that are not so significant for us or all kinds of other traffic. So we are very focused on getting the right players and keeping them and not so much on the overall DAU.
Okay, thank you very much. At this point in time we are seeing no further questions. So I'll be passing the line back to the team for their closing remarks.
Thank you very much for all the support and great Q and A and see you soon on another earnings call. Thank you very much.
Thank you. This concludes today's call. We are now closing all the lines. Thank you and goodbye.