Ladies and gentlemen, thank you for standing by, and I would like to welcome you to the second quarter 2025 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, the CEO of Huuuge, joined by Maciej Hebda, our treasurer and EVP of Finance. We'll begin by summarizing our operational and financial performance for the first half of the year, then we'll follow up on our outlook for 2025. As always, we'll wrap up with a Q&A session. Let's turn to the second quarter highlights. Adjusted EBITDA was $24 million with margin expanding to 41%, an improvement of more than 10 percentage points year- over- year. This marks the third consecutive quarter we have sustained profitability above 40%. Net operating cash flow reached $25 million in the quarter, underscoring the consistent cash-generative nature of our business. We also took significant steps in capital allocation. We announced a $120 million share buyback to be executed this autumn.
It will bring total shareholder returns to $360 million over the past four years. At the same time, we introduced a regular cash distribution policy, committing to return 50%- 100% of annual free cash flow to shareholders. These actions highlight our disciplined approach to capital deployment, our confidence in the long-term strength of the business, and our commitment to listening to shareholders and responding actively and decisively to their needs. This quarter also marks a very special milestone. Huuuge Casino is celebrating its 10th anniversary. Last year, we celebrated Huuuge's 10th company anniversary, and now it's time to celebrate the game that started it all and continues to be one of the most recognized social casino experiences worldwide. Together, Huuuge Casino and Billionaire Casino have surpassed $2.2 billion in lifetime revenue, an achievement that only a handful of games in our industry have ever reached.
Revenue for the quarter came in at $59 million, down 7.2% year- over- year and 5.8% sequentially, reflecting ongoing softness across the social casino market. While the top line remains under pressure, our profitability continues to demonstrate the strength and resilience of our model. Looking ahead, our release pipeline is concentrated in Q4, with strong launches planned each month starting in September, supported by celebrity campaigns. We are confident in the performance over the coming months. On the product side, our direct-to-consumer channel hit another record high, representing 22% of total sales in Q2 and climbing further to 24.6% in August. D2C continues to be a key driver of margin improvement while also deepening our direct relationship with our players. Let's move to another slide and discuss updates on the company's strategic priorities.
Our top priority remains stabilizing our core business, and we are making great progress on both the operational and product aspects. The second priority is entering new markets. No changes here. A quarter ago, we communicated that iGaming was still in exploratory phase. Since then, we have begun building internal capabilities to develop our own product. At the same time, we believe all options remain on the table, whether building our own solution or accelerating market entry through M&A. We remain realistic about timelines, aiming for market launch in early 2027. With our deep expertise in operating live games and creating innovative social meta features, we believe Huuuge is uniquely positioned to succeed in its market. Our third priority, M&A, has evolved.
Huuuge is shifting its focus away from free-to-play mobile gaming space to concentrate on iGaming opportunities to accelerate our entry into new markets, though we are still in the early stages of this process. On capital distribution, we previously noted that Huuuge did not rule out potential share buybacks but prioritized growth opportunities. With a clear understanding of our investment needs related to iGaming market entry, supported by Huuuge's record profitability and strong fundamentals, and following continuous feedback and dialogue with our investors, we have decided to revise our approach to better meet shareholder expectations. Huuuge will return all surplus cash to shareholders while maintaining a disciplined long-term capital deployment strategy. Let's discuss capital deployment in detail. First, share buybacks. Huuuge will execute a $120 million share buyback this autumn.
This will be the fourth buyback program in a company's history, bringing total shareholder returns to over $360 million in just four years. With this move, Huuuge is making a strong statement as one of the most cash-generative businesses on the Warsaw Stock Exchange and beyond. The announced buyback, if fully executed, would result in Huuuge buying back 24.5% of its share capital, a buyback yield placing us well within the top of the industry. Invitation to sell has been published yesterday, on September 18th. Acceptance of sales offers starts today, September 19th, and will last until October 18th, 6:00 A.M. Warsaw time, 12:00 A.M. midnight, New York time. As in previous years, all shares acquired during share buybacks will be retired, except those needed to satisfy ESOP plans. Second, regular cash distributions.
Alongside the buyback, we introduced a long-term capital distribution policy under which 50%-100% of annual free cash flow will be returned to shareholders. This framework reflects both our confidence in the company's strong fundamentals and our commitment to disciplined capital allocation. We believe that this balanced approach, returning surplus cash while continuing to invest in our core business and iGaming entry, strikes the right balance between meeting shareholder expectations and supporting future growth opportunities. Now, let me turn to our core business update. Our core franchises, Huuuge Casino and Billionaire Casino, generated $119.3 million in revenue in the first half of the year, a 6% decline from the previous year, consistent with a softening social casino market. In the second quarter, daily active users fell by 6.5% quarter over quarter, while still maintaining strong monetization performance.
Key monetization metrics showed promising results: average revenue per daily active user increased by 1.1%, and average revenue per paying user increased by 2.5% quarter over quarter. The results are tied to a smaller release pipeline in the second quarter. Our roadmap has the most impactful feature releases clustered in Q4, with several features scheduled for release monthly starting mid-September. Each release will be supported by a strong marketing campaign featuring celebrities, and we expect a strong finish to the year. Marketing metrics remain healthy, and paybacks are stable. Maintaining stable and long-term profitability across our core portfolio remains our top priority. We are proud of the performance of our direct-to-consumer segment, with revenue doubling year- over- year to $25.2 million in the first half of the year.
Direct-to-consumer has been breaking records every month, growing from 22% of total revenue in the second quarter to 24.6% in August and exceeding 30% in the first week of September. Huuuge has been able to swiftly adapt to new market conditions and deploy numerous solutions to increase the revenue share coming from our direct-to-consumer solutions. Recent release of Huuuge Pay in the United States on iOS was a success and helped us able to reach a record high of 37% revenue share in a single day. All solutions we have developed are very flexible and await further changes in regulations. Huuuge will act swiftly the same day when policies have been loosened. We remain optimistic with several meaningful updates ahead of our D2C roadmap.
We will continue optimizing the offering, and we are very optimistic with regards to our guidance of reaching and possibly over-delivering a mid- to high-20% share of the total revenue by year-end. Now, I will hand it over to Maciej Hebda, our EVP of Finance, who will walk you through the financial update.
Thanks, Wojciech. Hello everyone, Maciej Hebda speaking. I'll cover the financial section of this presentation. Next slide, please. In Q2 2025, our revenue reached $58.8 million, which was a decline of 7% year on year and 6% quarter on quarter. Our top line dynamics is consistent with a softening social casino market, with the additional impact of a smaller release pipeline in the second quarter. Looking at the gross profit line, we are clearly seeing the positive impact of our D2C efforts on cost of sales, as gross profit declined by only 3.5% year on year. Our sales and marketing expenses were lower by 26% year on year and slightly up quarter on quarter, in line with our prior guidance. When it comes to our R&D and G&A expenses, we can already see the impact of the company-wide restructuring carried out earlier this year.
$2.7 million cost savings when we compare Q2 2025 to Q2 2024. R&D costs are down 31% year on year, and G&A costs are down 12% year on year. Q2 operating result amounted to almost $21 million, or a 26% increase year on year. Net finance income line was negatively impacted by roughly $2 million in realized and unrealized FX losses, driven mainly by the USD/PLN exchange rate. Our net result amounted to $17.3 million, representing a 15% year-on-year improvement. We reported $24 million of adjusted EBITDA, up 23% year on year, marking another quarter of margins above 40%. It's a third quarter in a row with profitability above 40%. Now, let's move on to cash flows. Next slide, please.
Our net operating cash flow in Q2 amounted to solid $25.3 million, with pre-tax profit adjusted upwards by non-cash items such as revaluation losses on our investment in Empire Games, as well as finance expenses mainly related to FX translation. We have generated $26 million in cash throughout Q2 2025, maintaining a solid EBITDA to operating cash flow conversion ratio, almost 80% over the past 12 months. Our cash balance at the end of June amounted to almost $189 million. We believe that Huuuge will continue to be a cash-generative business, and even after factoring in the announced $120 million buyback, our balance sheet will remain strong. We retain flexibility, allowing 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.
We remain confident in our top line guidance for the year, especially as we have several feature releases in our roadmap for the coming months. Marketing spend might increase slightly in H2 relative to H1, as we plan our campaigns to celebrate the 10th anniversary of our flagship game, Huuuge Casino. We still reiterate our guidance for a significant year-on-year decline in UA spend, and we expect it will remain in the low teens as percent of revenue. Operating expenses, excluding marketing, are expected to decline year-on-year, and we already saw the positive impact of our recent restructuring on Q2 costs, both R&D and G&A expenses. Q2 was another quarter of strong Adjusted EBITDA and the third quarter in a row with Adjusted EBITDA margin above 40%. This makes us confident that we will deliver a year-on-year increase in both metrics on a full-year basis.
With that, I am turning to Wojciech for his closing remarks.
Thanks, Maciej, and thank you to everyone for tuning in and for your continued support. Here are four key takeaways from today's presentation. Huuuge will execute a $120 million share buyback this autumn. This will be the fourth buyback program in the company's history, bringing total shareholder returns to over $360 million in just four years. Alongside the buyback, we introduced a long-term capital distribution policy under which 50%-100% of annual free cash flow will be returned to shareholders. Q2 marked the third consecutive quarter of sustaining profitability above 40%. Net operating cash flow reached $25 million in the quarter, reaffirming Huuuge as a consistently cash-generative business. We continue to break records in our direct-to-consumer segment, reaching 24.6% of revenue in August and over 30% in the first weeks of September. We see significant potential to further improve our margins. Now, let's start the Q&A.
Thank you. So we'll now move to the question and answer section. If you'd like to ask a question, please press star two on your phone and wait to be prompted. If you're dialed in by the web, you can type your question in the box provided or request to ask a voice question, and we'll just give a moment or two for the questions to come in. Okay, we already have some questions lined up, so I'm going to move to the first one from Jimmy Johnson from Fold Equity. First of all, great decision to implement the long-term capital policy and the share buyback. Do you see any changes in the broader social casino market? For example, one of your competitors, Slotomania, has seen a rapid decline over the past year.
I'll take it. Hey, it's Wojciech. Thanks, Jimmy. No, we don't see major changes. However, we still see a significant upside potential, particularly in the context of direct-to-consumer growth and lowering the UA spend among the biggest players on the market. We also know that sweepstakes, which were previously considered as one of the drivers behind the decline of social casino, are now under heavy scrutiny, and Eilers & Krejcik forecast the sweepstakes market to contract by 10% due to stricter regulations, and we view that as a potential positive for the social casino segment.
Okay, thank you. Thank you very much. Our next text question comes from , Max Stenberg, private investor. You mentioned plans to enter the iGaming market by developing your own iGaming product. Could you expand on that? Is this initiative focused on B2C or B2B products?
Yeah, I will take this question. Hi, I'm Erik. This initiative is focused on B2C products, so launching our own iGaming brands, and the rationale is we see that the iGaming market is largely stale, with a lot of similar product offerings and marketing channels that are less data-driven than how we typically do it, and we also see in the market some newer players that are very product-focused, unlike the bigger incumbents. And these companies are actually growing very quickly in key markets, and we think we can expand on this approach, and we can leverage our unique abilities to create very deeply engaging products, and our focus on retention and keeping our players in the ecosystem for a long time is a core strength, as well as the expertise we have in user acquisition, in particular performance marketing in a very sophisticated way at scale.
So by leveraging the things we do very well already and bringing that to this different market, we think we have a real competitive edge, and that's why we see it as a big opportunity.
Okay, thank you very much. We have another question from Jimmy from Fold Equity. The DTC segment has been growing very fast in the recent quarters. Have you changed anything in the offering in the past month? Do you see any near-term limitations in reach?
No. So first of all, we are continuously improving our D2C solutions, and our recent positive impact has been driven by the release of Huuuge Pay in the United States. We still see upside potential, and we expect continuous growth of this channel. We are quite optimistic with regards to our guidance of reaching and possibly over-delivering a mid- to high-20% share of total revenue by the year-end.
Okay, thank you. Another question from Jimmy. Could you elaborate on what Huuuge Pay is? Will this further reduce transaction costs?
Yeah, simply saying that Huuuge Pay is a feature which we roll out for iOS players in the United States, and it allows to switch all in-game purchases from Apple ones to external payments, and this will definitely have a positive impact on the margins. This solution is very flexible, and when we are going to see that other platforms losing their policy, we'll be able to switch on this feature instantly, so we are expecting further upside here.
Okay, thank you. Next question from Jimmy. Is the new organic development in iGaming able to fit within the current staff cost base?
We will be hiring new talent as we go. Our approach is definitely a more lean approach, where we reuse some of our resources and then potentially look at partnerships. So it's too early to say a lot about the staff cost base, and we will update the market as soon as we know more. But there will definitely be some hiring here because we want to bring in top talent from this market as well.
Okay, thank you. Another question from Jimmy. In the CEO letter, you mentioned changing your perspective in terms of M&A. Could you please explain further what new markets mean in that context?
Yes, we are referring specifically to this real money iGaming market as a new market. So for us, it's a new market. It's an adjacent market, and we feel uniquely equipped, as I explained before, to differentiate here. And we think that diversifying into this vertical would have clear long-term strategic potential for us.
Okay, thank you. Another question from Jimmy. I know it's still early, but given the new capital policy, should one interpret it as profitability being the top priority also in 2026 and beyond?
Okay, so perhaps I'll take this one, Maciej here. So indeed, it is quite early, and we are still in the process of budgeting for 2026, but we will continue to follow our disciplined approach when it comes to costs. Potential entry into iGaming could generate some additional costs, but again, as Erik said earlier, we are planning to take quite a lean approach to that.
Thank you. Thank you very much. Next question from Max Stenberg, private investor. As part of the recent settlement in California, the company has agreed to make changes to its social casino operations, including adjustment to gameplay, specifically allowing players to engage in certain forms of continuous play and to advertising practices. Could you clarify whether these changes are limited to California? Also, do you expect these changes to materially affect players' spending behavior?
Yeah, I will answer this one. Just one quick comment for my fellow speakers. There's some typing in the background, so please mute so we can hear it well. So we've made some minor changes to our products across the U.S., and we don't expect any. We don't see any material impact. They're very small changes to comply with the rules of the settlement, and we don't expect anything material here.
Okay, perfect. Thank you very much. Our next question comes from Grzegorz Balcerski, Trigon. Do you plan to hold a separate meeting for investors explaining your approach to getting into iGaming?
Yes, and we will announce that in the upcoming months.
Okay, thank you. Thank you very much. Our next text question comes from Piotr Poniatowski, mBank. Could you tell us a bit more about the iGaming sector? Where do you see yourself in it as a technology provider for other companies or as an owner of online real money slots casinos?
Yes, I think I already addressed most of this question, so we see it as being an operator ourselves, so an owner of those actual brands with slots casinos. And in terms of the iGaming sector, it's a growing sector. And as I explained before, there are some newer players that take a bit different approach that are very successful. And so we think we can do that better. And we also see that there's definitely room for new players like that out there. And so that's why we think it's a very interesting sector for us to enter.
Okay, thank you. Another question from Piotr. Was your major update to the casino games scheduled for mid-September already introduced? If so, when was it?
Yes, we released already one of the features called Huuuge Adventure. It is already live right now. It was released on the 16th of September, supported by the marketing campaign featuring David Hasselhoff. It's very early to discuss any results, but we see positive reactions and great feedback from our players.
Okay, thank you. Another question from Piotr. How many shares do you need to satisfy employee stock option plans, like the nominal number?
So perhaps I'll take this one, Maciej here. So in our financial statements, we do have a note on share-based payments with quite a bit of detail on new shares being or new options being granted in the period, then exercised options, and overall total and average weighted average exercise price. So at the moment, we have roughly 3.5 million options granted. And at the same time, we hold almost 3.9 million in treasury shares. So more than enough to satisfy the ESOP plans as of today. But again, we also grant new options to our employees on a regular basis. And this note explains all the movements in ESOP programs in detail, and we'll just update this on a quarterly basis.
Okay, thank you. Thank you very much. Our next text question comes from Maria Mickiewicz from Wood & Company. You mentioned plans for a product launch in iGaming in early 2027. Could you please share what milestones should we expect by then? What size of the team should be allocated to the project?
Yes, early 2027 is currently our best estimate, but there's still a lot of moving pieces. So the entry into iGaming is a very disciplined step-by-step process that involves a lot of legal regulatory reviews of the priority markets and building compliance and operational frameworks, and also advancing the product development and partnerships. So there's a lot of moving pieces there. Our key focus is currently to select the right markets that we want to operate in from a commercial perspective and from a compliance perspective. In particular, we want to match what we want to do in terms of the product and marketing with the commercial opportunity in the markets that we are looking at. So we still need to make those decisions on the actual markets and exactly how to operate.
And then so setting exact milestones at this point is kind of difficult and premature because the timeline of events will depend on those decisions. And with that, also, we will decide how to best launch in those markets and what partners to choose. And we will also be dependent on regulators in the licensing process because our products and the company, things have to be licensed and certified. And so then we will know more around the exact hiring needs and requirements. And as we said a few times, we want to take a lean approach. And what that means is we want to make sure we move in a quick way with a strong, smaller team and not just throw a lot of resources at it, but do it in a way that we are managing this carefully and in a way that we can move quickly.
So, 2027 is our best. Early 2027 is our best estimate right now, and we will update the market much more as we know more.
Okay, thank you. Thank you very much. Our next text question comes from Michal Stopka, private investor. What are your planned research and development expenses in the coming quarters?
So I'll take this one, Maciej here. We don't give specific guidance for certain P&L cost lines, but overall, we reiterate our guidance for a year-on-year decline in operating costs. That's all I can say.
Okay, thank you very much. Another question from Michal. Could you please share your observations on where the ceiling is for your DTC?
It's definitely very early for us to comment on ceiling. We are very focused on player experience and retention. These are our top priorities, but we see still a lot of potential on those channels.
Okay, thank you. Another question from Michal. What are your main goals for the coming quarters?
Like we discussed in the presentation, so the number one priority is to keep stabilizing our core products and close the gap between us versus the market in terms of HC and BC, and the second priority is definitely accelerating and making progress on the iGaming side, so these are two top priorities we are very focused on, and yeah, this is where our focus is.
Thank you. Another question from Michal. What upgrades will you be introducing to your games in the coming months? How much might they impact revenue?
We released just Huuuge Adventure mode, and there will be two bigger releases, very focused on early funnel and players' retention. We won't comment on the revenue impact, but we expect Q4 to be one of the strongest ones this year.
Okay, thank you. Our next question from Piotr Poniatowski, mBank. How is Q3 going for you? We know that DTC is performing very well, but how about overall sales?
I'll take this one, Maciej here. Again, we don't really give out specific quarterly guidance, and we will report our preliminary revenue estimates in early October. So keep an eye on this report. Otherwise, we see no reason to change our full-year guidance.
Okay, thank you. Our next question comes from Max Stenberg, private investor. Which markets are you targeting for your iGaming initiative, and do you intend to focus primarily on the regulated markets?
We are looking at the bigger markets where we can have a substantial impact, and we will only operate in markets where we can do so legally and also with confidence in compliance standards. So that is many regulated markets for sure, but ultimately, we'll make our decision based on the compliance and the legal framework. We want to make sure we do everything fully legally.
Okay, thank you. So our next question comes from, again, Michal Stopka. What are the current CPI rates? How much have they increased year-on-year?
I can take this one, but yeah, we won't comment on the CPI's dynamics.
Okay, thank you. Thank you very much. And then another question from Michal. You mentioned an increase in marketing spending related to the new game features. Are these significant increases?
I'll take this one, Maciej here. So we don't really guide for a significant increase in marketing spending, more like a smaller evolution or some shift in costs, and overall, we still expect user acquisition spent in the low teens as a % of revenue.
Okay, thank you. Thank you very much. Our next question comes from Jimmy Johnson of Fold Equity. Erik mentioned licenses for iGaming. Our regulated markets, what you are focusing on right now for the future?
I think I probably covered it in my previous answer that we are definitely looking only at markets where it's very clearly legal to operate in and with licenses, and that is largely the regulated markets.
Okay, thank you. Our next question comes from Piotr Poniatowski, mBank. Could you give us a ballpark number for M&As you are eyeing in the iGaming market? Is it rather a couple of million dollars, a dozen, or a hundred?
We are still very early in the process and scanning the market. For us, it's key that the key focus here is to accelerate our entry or to de-risk it and to leverage our synergies that I talked about before, so it's a bit early to give a ballpark number. It doesn't necessarily have to be a large acquisition if we can find a strong team or product, for example, and so we are really focused on the synergies and acceleration.
Okay, thank you. So maybe just a quick reminder. If you would like to ask a voice question or connected via the phone, please press star two on your phone keypad and wait to be prompted. If you're connected via the web, you can type in your question in the box provided or request to ask a voice question. We'll just give a moment or so for any additional questions to come in. Okay, at this point in time, we are seeing no further questions, so I'd like to pass the line back to the management team for their concluding remarks.
Thank you, everyone, for tuning in, for your time and engagement. I want to just reiterate that we are very confident in the direction we are heading, and we look forward to updating you on the progress next quarter. Thank you very much.
Thank you. We are now closing all the lines.