Kuuhubb Reports Fiscal Q3 Financial Results

May 29, 2019


Toronto, Canada – May 24, 2019 - Kuuhubb Inc. (“Kuuhubb” or the “Company”) (TSX- V: KUU), a mobile game development and publishing company targeting the female audience with bespoke mobile experiences, has reported its unaudited financial results for the three and nine-month periods ended March 31, 2019. The Company’s unaudited consolidated financial statements as at, and for, the three and nine months ended March 31, 2019 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 Third Quarter Ended March 31, 2019:

  • Revenue for the three and nine-month periods ended March 31, 2019 was US$2.75 million and US$9.93 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 non-GAAP adjusted EBITDA during the three and nine-month periods ended March 31, 2019 was negative US$539,205 and negative US$848,137, respectively.
  • During the three and nine months ended March 31, 2019, the Company incurred consulting and professional fees of $447,479 and $1,084,368, respectively compared to $237,780 and $693,652, respectively, during the three and nine months ended March 31, 2018. The consulting and professional fees were higher for the three and nine months ended March 31, 2019 when compared to the same periods of the prior fiscal year mainly due to the now settled shareholder proxy dispute (refer to press release dated March 25, 2019), preparation of the annual general meeting (“AGM”) of shareholders and related election of the new Board of Directors.
  • During the three and nine months ended March 31, 2019, the Company incurred $366,470 and $2,201,874, respectively, in sales and marketing expenses related to the promotion of the Recolor App and the My Hospital game, compared to $2,981,991 and $8,606,688, respectively, during the three and nine months ended March 31, 2018. The significant decrease is due to an effort to control expenditures and optimize product features at the same time. Therefore, the user acquisition activities have been reduced and related costs decreased, resulting in decreased revenues as well.
  • During the three- month period ended March 31, 2019, the Company recorded a net loss of $2,665,002, compared to a net loss of $2,073,774 incurred during the three-month period ended March 31, 2018. Net loss is significantly higher than prior quarter due the now settled shareholder proxy dispute (refer to press release dated March 25, 2019), preparation of the annual general meeting (“AGM”) and related election of the new Board of Directors.
  • The Company had a cash position of US $1.29 million for the period ended March 31, 2019.

Limited User Acquisition (UA) Spending Impacting Revenue:

Jouni Keränen, CEO of Kuuhubb stated, ”Revenues declined due to the significantly reduced marketing budget related to user acquisition spending. We spent nearly 90 percent less in the third quarter compared to the corresponding quarter in 2018. In addition, the shareholder requisition in the third quarter consumed substantial resources that would have ideally been deployed in furthering our user acquisition marketing efforts. With some challenging quarters behind us, Kuuhubb is now better positioned to move forward with our growth initiatives and focus on achieving our new product roll-out strategy.”


Board of Directors Changes:

On February 27, 2019, the Company announced that it had reached an amicable settlement with the shareholders and certain former directors that had sent a shareholder requisition to the Company. As part of the amicable settlement, the Company announced the resignation from the Board of Directors of Messrs. Arnold Kondrat, Maurice Colson, Philip Chen and Carl-Gustaf von Troil. The Company refers to the press release issued on February 27, 2019 about the settlement agreement between the Company and certain of its shareholders and directors.

Subsequent to the resignation of the afore-mentioned board members, the Company appointed to its Board of Directors a group of high quality, dedicated individuals with the necessary and relevant industry knowledge to help the Company focus on achieving its long-term strategic objectives. Appointed were Messrs. Garner Bornstein, an entrepreneur with a proven track record of creating successful companies in the world of disruptive technology; Elmer Kim, an accomplished private equity, family office and investment management executive with over 25 years of investment and technology industry experience; and Andre Lüdi, an investment bank and private wealth management executive with over 30 years of experience in the European financial sector.


Financing:

In February 2019, Business Finland, a Finnish governmental agency, granted Kuuhubb Oy a loan in the amount of Euro 963,000 to support the Company’s new game project and platform development. The loan is expected to have a seven-year maturity period with an interest rate of 1 percent.


New Product Launches and Partnership Agreements:

On February 14, 2019, the Company announced the soft launch of its new mobile game, “Dancing Diaries”. The app combines Match 3 gameplay with a unique dancing meta game and has shown itself to be a perfect complement to Kuuhubb’s growing portfolio.

Kuuhubb announced on February 6, 2019, a new cross marketing partnership agreement with a global toy brand. The partnership, signed with a worldwide leader in toys and family products design, manufacture, marketing and content creation, covers a series of interactive campaigns to be prepared for the Partner’s properties and executed in Kuuhubb’s Recolor app.

The Company will continue to focus on its return to growth strategy by utilising the enhanced development capabilities of its new Helsinki studio to roll out a number of commercially available products. In addition to the global commercial launch of “Dancing Diaries”, Kuuhubb is anticipating the commercial release of multiple titles this year, including “Recolor by Numbers”, “Tiles and Tales” and “Incolour”. The Company will also add new features and improvements to its current titles, “Recolor” and “My Hospital”, as it looks to build on the progress shown through the start of the 2019 calendar year.