Remedy Entmt Oyj

Ladies and gentlemen, dear Remedy investors, welcome to the webcast for Remedy's third quarter of 2025. My name is Aapo Kilpinen from Remedy's investor relations. Joining with me today are Remedy's interim CEO, Markus Mäki, and Remedy's CFO, Santtu Kallionpää. Markus will guide us through the Q3 business review, and then Santu will dive deeper into the financials. We'll then look at the outlook for the year and end with a Q&A session at the end of the webcast. If you have any questions already, feel free to send those over by leaving them to the box below the webcast. But without further ado, Markus, please, the stage is yours.

Thank you, Aapo, for the movie-style announcement and introductions. Welcome, everybody. I thought I would say a few words about myself to start with, since this is my first I'm here with you, with the audience. So I'm one of the original founders of Remedy. I've been chairman of the board since 1997 until this point now. And I've been operationally involved also since founding of the company for the past 30 years. I've done almost every role outside of the kind of artistic domains during my history with Remedy. And I've also been an interim CEO before about 10 years ago. So just before we got listed to the First North Marketplace. So it's not the first time I'm stepping into the issues either. I wanted to bring a bit of a context kind of to the history and Remedy's history has been built on games being successful, profitable in the past. This is an exceptional track record for any games company. It's also rare that a games company is even alive after 30 years. And this is the success that we built this company. But now if you look at kind of the... more recent history, we started for what was for Remedy a massive growth spurt, both in personnel and in the number of simultaneous projects in 2017. And for a company that had grown, let's say, much more slowly for the past previous 20 years, I think on Hindsight, if you look at the recent results, the expansion, the growth was a bit too rapid, and it has caused us to miss some critical signals. But we've done some great stuff. We have a really talented, great team. We don't have a need for personal or project count growth at the moment. What we need to do is to learn to move faster and act more decisively in the future. So the focus is on the games, and we have some really fantastic stuff coming up, and that's going to be my key focus as the interim CEO to ensure that we succeed with those. If you go to the topic of today's cast, it's of course the Q3 highlights. And I won't go too deep into the numbers. Santu will cover them more. And we also kind of disclosed this in our profit warning. as the pre-numbers a couple of weeks ago. I think the big thing that I would want to highlight here is the positive operating cash flow, which is something that is, let's say, really nice to have money in the bank at this point. Looking at kind of the quarter highlights, we had a great 30-year anniversary celebration in August. We pushed really hard to improve Firebreak with a major update in September. And as then the results of that were not sufficient, we did recognize a non-cash impairment of the majority of the capital as development costs for it. And it also caused us to update our outlook. And as a last highlight, we had the change of the CEO and also a change of chairman of the board. But let's spend a bit of time talking about Firebreak. Just a few observations from my side. The game was launched in June and we bought multiple smaller updates and then the major update in September. And all of the focus was to improve the game, work with the player feedback, make what players want to do. We also had the first discount campaigns and we did see the player metrics and the feedback improve after the update. But unfortunately, our sales were not on a high enough level and I think it's kind of easy to say now that changing the first impressions in players mind is going to be really really difficult. But this resulted in the write down of the capitalized development costs and the profit warning. I guess there's quite a lot of questions about the future of Firebreak and we do still plan on updating the game and we have the next update planned for later this year as it's been on an advanced state of development. We have had a roadmap based on the success of the game. But going forward in 26 and onwards, we are going to evaluate the updates quite strictly based on the commercial viability of the game. So this is not me saying that we wouldn't update the game. We will, but we will be critical about the return on investment. And while it didn't really go how we wanted, I still wanted to say that we gained some valuable learnings from the investment. First of all, I think it's a big achievement that a first multiplayer game that Remedy has done since Death Rally in 96 was technically successful, launching on all of the major platforms at the same time and working for the players, technically. This is something that not even all experienced multiplayer studios succeed in. We have also been able to operate the game in a live service model and managed to update the game and learned a lot about that. I think the second part of the learning is gaining knowledge how to really work with the digital marketing channels for games. What works there? What doesn't work there? How do we drive audience to the, for example, the Steam page? and just opening up our experience on all of those channels. And we've also gone through one round of full technical publishing steps, whether it's console certifications, storefront setups, stuff like that. And both of these things are things that have been in most parts done by our external publishing partners in the past. So these are, in my mind, valuable experiences in self-publishing journey we have undertaken and it really hopefully lowers the risk profile for our future launches. As a last thing about Firebreak, I wanted to kind of go back to a bit higher level and remind everybody that Firebreak was our smallest project, both budget and team wise. And even though it didn't succeed commercially, I'm still proud what we achieved as a company. If you look at kind of the larger market atmosphere and so on, especially Finnish stock listed companies are often criticized that they don't invest in finding new businesses and finding new customers. That's what we tried to do here. And we knew that Firebreak was the risky venture in our portfolio and I think it was done for all of the right reasons. So with that, Let's move forward to kind of looking at the other games we have in the market. So, Alouette 2, we had good sales. Royalties grew in Q3 compared to the previous quarters this year. We have the game now as the PlayStation Plus game of October, and that's great for the lifecycle of the product as well. And we have seen, as with Control, that great games can sell for a long time in the digital marketplaces and new opportunities can come up over time. For example, we had some encouraging early results in bringing the game to Chinese markets with Epic. On Control, We've been focusing on the marketing and sales since we've now been in full control, no pun intended, of the publishing of the game. We've been working with all of the sales channels there and had a great 30-year celebration activation to drive the sales. We have had good sales traction for what's now a six-year-old title. I think we are all amazed how it's doing still, and we will continue doing systematic work on expanding the reach of the franchise and, for example, looking at kind of the outside of our traditional strong markets, what opportunities we do have. Then as a reminder, of our portfolio of the games we have in development for projects. Control and Max Payne have the bigger teams. They're in full production and they're tracking towards their milestone goals. The new project, which we're not yet revealing anything, is in proof of concept phase with a smaller team. Quick look at the strategy and targets here. There's nothing really that's changing on the top level. This is what we've communicated earlier. These are still our strategic goals. All of the building blocks for achieving these are in place. It's just a matter of execution and getting there faster. And on strategy and targets, we do remain committed to what we communicated about a year ago in our CMD on these targets. So with that, I will be passing over to Santtu for the financials.

All right. Thank you, Markus, and good afternoon, everyone. And now the finances. Let's start from the revenue. So in the third quarter of 2025, our revenue was 12.2 million euros, declining by 32% compared to the third quarter of the previous year. Decline was driven by development fees, which were 6.1 million euros, being lower than in the comparison period. This is explained by one-time payment, which was recognized in Q3 2024, related to the development work done for Control 2 before the start of the strategic partnership with Annapurna. Now, during Q3 2025, the sources of the development fees were the Max Payne 1 and 2 remake-related fees from our partner Rockstar and Control 2-related fees from Annapurna. Remedy game sales and royalties increased significantly from the comparison period and were 6.0 million euros. Growth was driven mainly by revenue from FPC Firebreak's subscription service agreements, royalties from Alan Wake 2 and game sales of Control. Our revenue was impacted negatively by weak USD rate, and as an additional information, FX-neutral change for Q3 revenue was minus 29%, whereas the reported change was minus 32%. FX-neutral change was calculated with 2024 average FX rates for USD pound and Swedish crown. If you look back at our historical revenues, the total revenue year to date for 2025 is now 42.5 million euros, which remains on a higher level compared to the previous year's Q1 to Q3 revenue, 39 million euros. We can start to see the effects of the self-publishing strategy as the game sales and royalties have started to provide a larger share of our total revenue stream compared to the previous years. In 2025, game sales and royalties have generated 43% of our total revenue so far. In comparison, during the first three quarters of 2024, royalty share was 9% of the total revenue. In Q3 2025, development fees accounted for approximately half of the total revenue. If we exclude the one-time payment from Q3 2024, our total revenue would have been up plus 55% in Q3 2025 from the comparison period. The operating profit of the third quarter 2025 was 16.4 million euros negative. The operating profit was affected by a recognition of a non-cash impairment of 14.9 million euros related to FPC firebreaks, capitalized development costs and allocated purchase, publishing and distribution rights. The impairment covers majority of these capitalized costs. Without the impairment, the operating profit would have been 1.5 million euros negative. Q3 EBITDA was 0.7 million euros positive. The decline in EBITDA compared to the previous year is explained by the higher revenue level in the comparison period, which was driven by the recognized one-time payment for Control 2 development. In Q3 2025, the total operating expenses excluding depreciations remained on a same level as in the comparison period. Then let's look at the analysis of unneeded amounts of expenses and capitalization, which provides transparency in our costs. If you look at the external development and personal expenses in the third quarter of 2025, our total cost level decreased by 9% from 11.4 million to 10.4 million euros. External work expenses were 3.1 million euros and on a 36.5 percentage lower level than in the comparison period when they were 4.9 million euros. The change in external services cost level is part of normal game development process and there is variation in the level of outsourcing following the needs of the game projects. Personal expenses increased year-on-year by 11.7% and were 7.2 million euros in Q3 2025. Headcount grew by 7.7%. Capitalized development expenses were on a higher level than in the comparison period. Capitalized amount is in relation to the direct costs of the project's development costs. In the third quarter of 2025, the depreciations related to game projects were on a high level due to the recognized non-cash impairment of 14.9 million euros related to FPC5 break. This impairment represents a majority of the game's capitalized development costs and allocated purchasing, publishing and distribution rights. Excluding the impairment, depreciation expenses in total were 2.2 million, of which 1.5 million euros were related to game projects. The other depreciations remained on a stable level year on year, also in Q3 2025. In the comparison period Q3 2024, we depreciated €3.4 million expenses capitalized related to control franchise products, which was connected to entering the deal with Annapurna. Going forward, following the impairment that we recognized on Q3 2025, depreciations related to FPC Firebreak will be on a low level, as the remaining activated cost related to the game is modest. In addition to FPC Firebreak, depreciations will keep running also for Alan Wake 2. Then let's move to the cash flow. So during the third quarter of 2025, cash flow increased compared to the previous year as we received more inflowing sales-related payments. Paid operating expenses remained on a similar level to the comparison period Q3 2024. This year's Q3 includes also considerable non-recurring elements related to Firebreak subscription service contracts. Also, if you look at our networking capital at the end of Q3 2025, it was on a similar level compared to the networking capital at the end of 2024. It's anyway good to keep in mind the timing of development fee payments as well as some royalty and game sales related payments are agreement based and there are variations in the timing of revenue accruals and the actual cash flow impacts. End of the third quarter, our total cash level was 36.5 million euros, increasing by 8.9 million from the previous quarter. The main explanation for the increased cash reserve is the timing of incoming revenue cash flows. At the end of Q3 2025, we had 17.7 million euros in cash management investments and 18.8 million euros in cash. Then let's still look our results from the historical perspective from Q1 to Q3 2025. Our revenue was 42.5 million euros with the share of game sales growing steadily during this year compared to the previous years. We can see that our EBITDA margin has been improving year on year since the end of year 2023 and is now year to date 17.6%. Additionally, positively, positive development of game sales and royalties, a share of total sales is definitely one of the positives for this year. However, this year, our year-to-date operating profit margin is worse than previous year, being 36.7% negative following the impairment booking done for Q3. And now Markus will continue regarding the outlook.