Remedy Entmt Oyj

Ladies and gentlemen, dear Remedy investors, welcome to the webcast for Remedy's second quarter and the first half of 2025. My name is Aapo Kilpinen from Remedy's investor relations. Joining me today are Remedy's CEO Tero Virtala and Remedy's CFO Santtu Kallionpää. Tero will be going over the business review for the quarter and then Santtu will dive deeper into the financials. We'll end with the outlook for the year, and then we'll move towards the Q&A session.

But without further ado, Tero, please, the stage is yours. Thank you, Aapo. So, welcome everyone, also on my behalf. Let's first have a look at our second quarter highlights. Our revenue was 16.9 million euro, which increased by 63.5% from a year ago. Also, related to the comparison period, both EBITDA and EBIT improved. EBITDA was €4.2 million positive, but overall, the second quarter was loss-making, EBIT being €0.5 million negative. Gas flow from our operations was €3.1 million positive. As a key event in this quarter, in June, we self-published and launched FBC Firebreak. FPC Firebreak naturally being the key event, let's go through that in a bit more detail. As a reminder to everyone, FPC Firebreak is a three-player cooperative first-person shooter set in the world of Control. It's our first self-published game and also our first multiplayer game. The game is available on PC, PlayStation 5 and Xbox Series X and S, also on the consoles available on the subscription services. The game launched approximately two months ago on June 17th and has now been out since that. The launch overhaul succeeded technically, reaching over one million players in its first 10 days. However, consumer sales-wise, the launch was disappointing. We'll soon go through some of the key findings we had right after launch, but in short, after the launch, we listened to the community feedback, we looked at how players were playing the game, and identified issues that needed to be corrected in the game. And we, of course, started to take action. We included the identified needs to our post-launch development plans. Since launch, we have now already made a number of game-improving fixes and patches, and towards the community, we have been openly communicating what we are planning to do and have then also communicated what we have done. So far, the changes have been appreciated by the players, and this work continues. We keep on improving and expanding the game. Looking ahead, a larger major update late September will be the next key step for FVC Firebreak. But let's first get into early phase and have a look at what was marketing-wise done for the launch. To maximize the impact and reach the target audiences before launch, our marketing campaign was soared with clear targets and focused actions. We gained good visibility and interest among players, which also showed in Steam wishlist developments. Then during launch day, together with the platform holders, we also succeeded in driving a significant number of players to the game's store pages. So overall, the marketing campaign was carried out as planned, created interest and drove good traffic. But sales-wise, as I said, the launch was disappointing. As the game was day one on PlayStation Plus and Xbox Game Pass, we expected PC and especially Steam to be the channel where most of the consumer sales would happen. On Steam, the launch clearly underperformed. Why then the early interest and good amount of players visiting game's Steam sales pages did not convert into good sales? That can be seen by looking at the Steam user reviews, especially the share of positive daily reviews during launch and the first week following it. In Steam Overhaul, when players get interested in a game and visit the game pages, they very clearly see user reviews and the average amount of positive reviews. If a game has over 70% positive reviews versus negative reviews, it has a visible label, mostly positive. Below 70%, the label is mixed reviews, and if we would go below that, it turns into negative reviews. This here, what you see in the slide, is a graph that shows the amount of positive reviews that Firebreak got each day during its first week. As you see, the launch day reviews are exceptionally bad, but then in the other days, the daily reviews are on a fairly good level. What happened was that immediately after the launch, during the very first hours, the proportion of negative reviews was exceptionally high. There are some reasons for this. The first underlying one is that the early experience of the game just didn't feel good and led players quitting early and also rating the game badly. The game's initial onboarding experience was very slow and partly confusing and mission structure that we had planned was too restrictive for the players. Too slow and confusing early experience is not good for any players, and we started to correct this already in the first week. However, right after launch, the effect of this issue was exceptionally strong for us. In the first hours after the launch, high proportion of the early players came from selected non-Western markets. While players anywhere in the world typically spend some time in the game before deciding whether they like the game or not, we now saw players from selected countries clearly making their minds very, very fast. In the very early hours, we saw a lot of negative previews that had been posted after playing the game for 15 minutes, 30 minutes, under one hour. And it was true that the early experience was slow and not good. And therefore, these reviews that were posted very early were very bad. Nothing takes away the fact that the game had early phase issues and players did not like that. But then when the launch day went on, we started to get more players all around the world and the reviews became a bit more balanced as well. We can see that with how the share of positive reviews rose just during the first day from as low as 17% to 55%. Nevertheless, players who visited the sales pages during that first day just saw a game that other players had reviewed very badly. And with that, the sales momentum that we had been building for the first day was lost. Games can build back the sales momentum, but it needs to be done after a while. And while there are underlying real issues also, they need to be put in order before the new momentum should be built. Quite soon also, it's good to note after the launch, once we saw that the sales momentum was not there, we also stopped most of our marketing activities and saved that money to be used later when the time would be right. What gives us promise that this can be done for Firebreak, so building the new momentum, reigniting the game, is that the core game experience is good. We can see that by looking also at the daily reviews that players are giving the game after the launch day. Those reviews are quite positive, clearly above the 70% landmark, so above the label mostly positive. During those days after day two, there are of course less new players, which is not good, but this then emphasizes the reviews from players that have spent a bit more time with the game. Also among the new players after few days, they experienced also the improved early phase experience that we already during the first week started to correct with the first batch. But overall, once players get past the slow onboarding, they like the game. As an example, reviews from players that have played the game over one hour is already 78% positive. But in any case, during the launch day, the game lost its early sales momentum. Then beyond PC, looking at consoles, Firebreak is part of PlayStation Plus for extra and premium members and part of Xbox Game Pass Ultimate. Already in 10 days, the game creates over 1 million players and majority of these players were from PlayStation and Xbox services. Since that, we have continued to have good inflow of players, and this keeps the community active. As we have the cross-play feature also in the game, it enables players to find people to play with across platforms, PC included. So, as I have said earlier, we actively keep on developing FPC Firebreak Forward. We have analyzed the game and how it has been played so far, and we have very closely listened to the player feedback. The key positive themes that came across are here. So the core experience is solid once you get further along the game. As I said, players who have gotten over the first one hour experience rate the game 78% positive on Steam, which is good. We have a basis we can build on. Firebreak is also a fun experience, especially when played with friends. As a cooperative experience, this of course has also been our intent, and with Firebreak, this has especially come true with players. As our first multiplayer game, technical functionality definitely had its risks, but that side has worked out very well. We haven't seen any major technical issues and early updates were appreciated also by the community. Obviously, there are also important matters that have not been in order. We have identified and started to act also on the negative findings, issues we need to improve on. The main negative things are these. Early game experience, it was slow and unenjoyable, leading into quick player drop-offs and negative reviews. Also, players overall expected more playable content. On top of that, our early gated mission structure and progression system barred players from having the full job experience fast enough and seeing everything the game has to offer. So the way we presented content for the players made also the game look smaller than it is. There are also challenges in how to coordinate teamwork, especially when you are not playing with your friends. There are multiple ways to implement this type of communication tools in multiplayer games, and we need to improve on ones that best fit with our game. To address the issues, make the game better and bigger, and bring in elements we believe are right for the game, we continue developing FPC Firebreak. We have already, with a bit less than two months' time, rolled out patches and communicated on how the game will continue to develop. Looking ahead, a larger major update in September will be the next key step for FPC Firebreak. This update will then be supported by targeted marketing activities, which we expect to drive interest for the game. We are committed to continue working on FPC Firebreak, serving and engaging with the community and expanding the game. Then shortly to a related important strategic topic. We are now a self-publisher and will publish our future games as well. FBC Firebreak was the first self-published game on that route. Reflecting on that, publishing operation-wise with FBC Firebreak, our marketing plan was clear and targeted. It was carried out efficiently. It did build player interest and drove traffic for the game. we naturally also gain good learnings on what to improve on and what potentially to do differently in the future. All these learnings are valuable for the next steps of FBC Firebreak and also for all of our other future games. Then let's have a look on Alan Wake 2 and Control Sales. Alan Wake 2 continues to sell steadily. We are getting now royalty income from the game sales. And as has been mentioned many times in the past, good games can sell for a long time. And with our partner Epic Games, we seek for the right opportunities to find new audiences, promote and sell the game. With Kontrol we received back all the publishing rights in the first quarter of this year and since that in the second quarter have now been in full control of Kontrol sales activities in all its sales channels. In second quarter of the year Kontrol sold well and exceeded 5 million lifetime copies sold. During the second quarter, we, as a publisher of the game now, took a special approach in seeking if we could reach new audiences for the game in non-Western markets. Early results are good. These non-Western markets are part of the reason for Control's good sales in the second quarter, meaning there are new potential audiences to be found for the game. Encouraged by this, while we keep on supporting Control, of course, overall, we keep on serving its community. We will also continue aiming for new audiences and finding sales from there also in the future. Then, looking at the games we now have in development, there was overall good development progress with our projects. We have already discussed with FPC Firebreak, which is now in post-launch development phase. Control 2 is tracking towards its next milestones, focuses on overall all the time improving the gameplay, the game's environments, the game's missions. And Max Payne 1 and 2 remake project remains in full production. We haven't yet communicated anything else on the fourth projects, the new one that we have. With all this, our projects are progressing all the time. Firebreak will become bigger and better. And when the new games are progressing well, this does provide a steady release of great games for the upcoming years. As a reminder, we are advancing according to our strategy, which we introduced end of last year. We are focused on executing our core strategic pillars to create and grow world-class gaming franchises, making distinctive category-leading games, working in ways that enable efficient, successful productions, and we will self-publish the games we own. Through this, we are aiming to achieve our set targets for the year, for this strategic period, which is doubling the 24 revenue by the year 2027 and our EBITDA margin in 27 being minimum 30%. Now at this point, let's move the financials with some

Thank you, Tero, and good afternoon. Let's start by discussing first the key changes in our P&L. After that, we will dive further into our finances. Background of these changes is our transition to self-publishing, and the P&L structure is also modified to support this change. In our main P&L under reported revenue, we are adding the split to development fees and game sales royalties. And now when we are self-publishing games as part of reported game sales, we include sales before any platform fees are deducted. As part of the same line, we are reporting also revenue from royalties and possible B2B contracts related to game sales in the market. Then looking at the expenses, we have added two reporting lines under materials and services line to provide information on a more detailed level. Game development related materials and services is comparable to materials and services, which has been used in earlier reports. As a second line, we are adding revenue related partner expenses where we are including the platform fees, which are paid in connection to game sales. And the same line includes also other potential royalties paid out for our partners. Otherwise, elements in our P&L remain the same what they have been in earlier reports. And now the financials, and let's start from the revenue. In the second quarter of 2025, our revenues were 16.9 million euros and grew by 63.5% compared to the second quarter of the previous year. Remedy game sales and royalties were 9.5 million euros, being the driver of our revenue growth for the second quarter of 2025. The main source for growth were FPC Firebreak-related game sales. Major part of FPC Firebreak's reported revenue comes from listing of the game in Microsoft's and Sony's subscription services. Considerable part of the revenue from these subscription contracts will be recognized also coming quarters until the end of the subscription service deals. Development fees were 7.4 million euros and they were lower than in the comparison period. The main source of the development fees being the Max Payne 102 remake related fees from our partner Rockstar and Control 2 related fees from Annapurna. Our revenue was impacted negatively by weak USD rate and as an additional information, FX-neutral growth for Q2 revenue calculated with 2024 average FX rates for USD, GBP and Swedish crown was 69%. When looking back at our historical revenues, the revenue levels continue to be on a higher year-on-year levels. For Q2 2025, the main driver of the revenue growth was the self-publishing of FPC Firebreak. For the first time in 2020s, the game sales and royalties were on a higher level than the development fees in total revenue. In the comparison period Q2 2024, development fees were the main driver of revenue and royalties contributed only a little to the total revenue level. When looking at the history, it's good to remember that the development fees on the third quarter of 2024 included a one-time payment regarding Control 2 developments done before we entered into a strategic partnership with Annapurna. The operating profit of the second quarter of 2025 was €0.5 million negative. Compared to Q2 2024, there was a €2.7 million improvement. The operating profit improvement was driven by higher revenue level. Our cost level related to staffing and external work remained stable during the second quarter compared to previous year, but the EBIT was impacted by an increase in depreciations. This was driven by the start of depreciations related to FPC firebreak. EBITDA of the second quarter was 4.2 million euros positive and it improved by 6.6 million euros from the comparison period. Then let's look at the analysis of unnetted amounts of expenses and capitalization, which provide transparency in our costs. In the second quarter of 2025, external work expenses were 4.3 million euros and on 14.2% lower level than in the comparison period when they were 5 million euros. Personal expenses increased year on year by 2.9%, while the increase in our employee amount was 6.6% from 361 to 385. The difference in personal expenses in relation to the employee amount growth was mainly due to decrease in work time accrual levels and other compensations. Capitalized development expenses were on higher level than in comparison period. The growth is due to higher share of expenses being capitalized related to projects, remedy plans to self-publish. During the first half of 2025, the game project related depreciations have increased. As we first started Alan Wake 2 related depreciations on the fourth quarter 2024, and now that FPC Firebreak has launched and we can see the first revenue from the game in Q2 2025 numbers, the depreciations related to FPC Firebreak's capitalized development expenses and control distribution rights have also started at the end of the second quarter. The other depreciations remain a stable level year on year. As a reminder, as we look at our depreciation history in the graph, in the third quarter of 2024, we depreciated 3.4 million euros expenses capitalized related to control franchise products. And in Q4 2023, there was an impairment loss related to codename Vanguard. Then cash flow. During the second quarter of 2025, cash flow increased compared to previous year Q2 period, even if the June sales and therefore FPC firebreak related items are not yet included in the inflowing revenue cash flows. Looking at our net working capital at the end of Q2 2025 compared to the situation at the year end of 2024, our trade receivables remain at higher level, which indicates that revenue-related payment streams will also follow for the coming quarters. It's good to keep in mind the timing of development fee payments as well as some royalty fees are agreement-based and there are variations in the timing of revenue accruals and the actual cash flow impacts. During the second quarter, our total cash level was 27.6 million euros, decreasing by 0.4 million from the previous quarter. Besides the timing of incoming revenue cash flows, our cash position was affected by the offer made to key personnel to purchase their remaining 2019 option rights. Taking into account the following share subscriptions and the subscription payments that Remedy received as per the terms of the offer, the total impact of the transaction to our cash position was net minus 0.5 million euros. At the end of Q2 2025, we had 17.5 million euros in cash management investments and 10 million euros in cash. Then let's still look at the longer time period. 2025 first half reported revenue was 30.3 million euros, share of game sales being growing. Since the end of 2023, our operating profit margin and EBITDA margins have been improving. EBITDA margin during the first half of the year was 2.8% positive and EBITDA margin for the first half of the year was 22.4%. And now Tero will continue regarding the outlook.