Kuuhubb Reports Fiscal Q2 Financial Results; Adjusted EBITDA Nearing Break-even

March 4, 2019

Toronto, Canada – March 1, 2019 - Kuuhubb Inc. (“Kuuhubb” or the “Company”) (TSX- V: KUU), a mobile game development and publishing company targeting a female audience with bespoke mobile experiences, has reported its unaudited financial results for the three and six month periods ended December 31, 2018. The Company’s unaudited consolidated financial statements as at, and for, the three and six months ended December 31, 2018 and related management’s discussion and analysis can be found on the Company's SEDAR profile at www.sedar.com. The Company’s financial year end is June 30.

Highlights for the Fiscal Second Quarter Ended December 31, 2018:

  • The non-GAAP adjusted EBITDA during the three and six-month periods ended December 31, 2018 was negative US$93,415 and negative US$308,932, respectively, making this period’s adjusted EBITDA a near break-even quarter.
  • The non-GAAP adjusted EBITDA for the three-month period ended December 31, 2018 was calculated by adjusting the net operating loss of US$2,073,772 with share-based compensation expense of US$319,778, depreciation and amortization of US$1,497,277 and interest expenses and foreign exchange loss of US$163,302.
  • The non-GAAP adjusted EBITDA for the six-month period ended December 31, 2018 was calculated by adjusting the net operating loss of US$4,364,919 with share-based compensation expense of US$789,408, depreciation and amortization of US$3,033,911 and interest expenses and foreign exchange loss of US$232,668.
  • Revenue for the three and six-month periods ended December 31, 2018 was US$3.1 million and US$7.2 million, respectively (unaudited). This revenue was generated from sales of the Recolor app, the in-app sale of virtual goods from the My Hospital game and in-app ad revenue.
  • The Company had a cash position of US$2.2 million for the period ended December 31, 2018.

Recent Board Member Changes:

In addition to the changes to the composition of the Board of Directors announced on February 27, 2019, Kuuhubb announces that Mr. Carl-Gustaf von Troil has resigned from the Board.

The Company refers to the press release issued on February 27, 2019 about the settlement agreement between the Company and certain shareholders and directors.

Lower Revenue Due to Limited User Acquisition (UA) Spending:

The company faced several challenges in the second quarter. Revenue continued to decline due to a significantly reduced user acquisition (UA) spending budget. Kuuhubb spent US $0.2 million on user acquisition during the quarter, compared to US $3.6 million in the corresponding quarter last year. The ongoing conflict of management with certain former Directors on the Board, coupled with the recent Shareholder Requisition announced in the third quarter consumed substantial resources, which management believes will have a negative impact on third quarter profit.

Technical Improvements and New Product Launches:

Kuuhubb has implemented a series of product improvements in Recolor that are indicating improved metrics and remains focused on improving the user experience, overall quality and monetization of Recolor. Although the last three quarters have experienced declines in user acquisitions and revenue, management believes these declines have been stabilized and are now positioned for improvement in the second half of our 2019 fiscal year.

Kuuhubb has strengthened its technology and development capabilities and increased its product pipeline for 2019. The Company has implemented a return to growth strategy by increasing its rollout of new commercially live products from two to six in calendar year 2019. Management intends to launch a new product in every quarter, with the first commercially launched product being Dancing Diaries, developed in partnership with a UK-based studio. Subsequent quarters will follow with commercial launches of Recolor by Numbers, Matching Stories and Neybers 2.0.

Non-Dilutive Financings:

The company closed a non-dilutive financing of Euro 2 million in December 2018 and has been approved for an additional non-dilutive financing of approximately Euro 1 million in February 2019, providing necessary funds for the development and marketing of the previously mentioned new products. With the investments in future growth, the next few quarters will focus on sustainable ROI positive revenue growth, maximizing the combined total potential of the expanding product portfolio.