Nitro Games Oyj

Hello, hello. Good morning, good morning.

Indeed, it's us, Jussi and Antti here again. From Nitro. Exactly. And this time we are delivering Q3 interim report. And our traditional webcast. Yeah, welcome. Very much welcome. But let's get going, shall we? And for those of you who might be new to Nitro Games, we are your powerhouse for action and shooter games. We come from Finland. We have two studios here. We are a little bit more than 100 people, a little bit more than 50 here in Finland, and then the other half are here and there and everywhere in our network of partners, studios, contractors, freelancers and so on. And we are one of the oldest Finnish gaming studio. Indeed, indeed. We've been around since 2007 and we've been listed at Nasdaq First North Growth Market in Sweden since 2017.

exactly our vision and focus is in shooter and action category and games and whereas there are lots of good examples from the industry where companies are focusing on strategy games or somebody's focusing for casino games or somebody focusing on puzzle games or something like that but focusing to the shooter and action category has been starting to pay off and Brand of Nitro Games to be the powerhouse within the category of shooters and actions are seems to be well received on the market and there are more and more traction and more and more people know us from the excellence on those games and I think we focusing on that area now for already quite many few years. Yeah. Yeah. Yeah. Three, four years, depending a little bit on where you draw the line.

Yeah.

But now it seems that it's starting to pay off and brand recognition and our expertise recognition in that category is clearly something that is benefiting the company in the long run.

Definitely. Definitely. And every time in our history when we do some changes or we go in some different direction or we sharpen our focus around something, it always takes super long to hammer through that message and I think in this case, the concept that Nitro focused on action and shooter games and starts to be recognized for the things that we've already done and achieved, that's there. Now maybe what we're hammering on right now is that we're not just mobile, we're doing cross-platform, working on many different platforms. That's one thing that we're busy hammering right now and one day that will be checked and there will be again something new that we do. But that's us. Action and shooter games are in high quality. And I'm happy to say that what we just released this morning is our fourth consecutive report that's profitable. And this hopefully starts to deliver the message that this is not a one off thing that we did one year ago or anything like that, but a result of very systematic step by step approach. We love to use the word step by step because that's how we do things in Nitro in many ways. i think our focus team for the year has been uh stable growth so that's something that we've very much been able to deliver and uh i think uh me personally i think it's exactly what this time in the world needs not just from nitro but in general from gaming companies like we keep our heads cool we focus on our own game and we push it forward yeah and uh i think the step-by-step approach applies also for the

our B2B service business and our client ships there and one good example out of the step by step deepening the collaboration and continuing the collaboration is the latest deal that we signed with the digital extremes and expanding the expanding the collaboration but that is also something that we've been very good for past few quite many years actually yeah deepening the collaboration continuous continuous deals with the existing clients and going deeper and further with the with the project together with our our clients and i think we are very happy to show that also with the digital extremes we can achieve the Small milestone in the long journey.

Yeah, indeed. And I'm super proud that we are able to do these long term partnerships because it speaks volumes of how we operate and how we are perceived as a partner. And of course, it's important for us also that we find partners that we like to work with because it's games business, it's entertainment. We're supposed to be having fun when we go through difficult challenges in our data works. Other stuff about the recent highlights. So one thing is that our cash position continues strong. We've been active in so-called cleaning of our balance sheet, reducing our debt, and we've now paid all the acquisition fees for Otakon Heroes as planned and all those things. And regardless of those, our cash position still continues strong. So that's very much a good thing. And then also during the quarter, our nudist games they sold their position in nitro games so we want to thank you it was a wonderful journey together yes yes so they were there when we needed them and they helped us to grow they helped us to reach profitability and now we're happy to stand on our own legs and go forward from here so thank you thank you If we look at what's happening now during the second half of the year, and obviously, you know, beyond that as well, this slide is pretty much like almost exactly the same that we showed in our previous webcast, because not much has changed in terms of the plan. And of course, we've updated the numbers and so on, but basically the core message is exactly the same. So when it comes to our games business, Otakon Heroes continues to be our focus title. When it comes to Otacon Heroes, we continue to focus on the improvements in the game to get the game towards scalability together with our publishing partner, Supersonic from Unity. And where we go with that is that we have done a bunch of different improvements in the game during the third quarter. And as of right now, right now, we're busy measuring some of those and seeing where we stand. And parallel to that, we continue developing the game forward based on the roadmap that we revised with Supersonic guys basically all the time, but bigger revisions with roughly every three to six months periods, depending on how the data looks like. And I think overall what we can see in the mobile free to play space is that it continues to be very attractive. It continues to very much be almost half of the total games market, depending on how you look at it, but especially from the point of view of revenues. But at the same time, it continues to be in this ever changing evolution. Mobile free to play seems to be taking new trends all the time.

And also regulations are playing a much more bigger role on free-to-play mobile than other segments.

Definitely. And how that impacts now Otakon Heroes is that we're maybe going more and more in the direction where we are a little bit expanding the target audience by making the game more approachable to a little bit larger audience. And in that way, we are aiming to get more competitive edge when it comes to the marketing side of the game. We wouldn't need so much targeting and stuff like and also exploring data platforms to expand the IP wider than the mobile audience or it might be even the same audience but still playing the games with the other platforms in the someday future I think it's safe to expect that there will be more stuff happening with Otagon Heroes expanding like you said and definitely focusing on building the brand and the IP moving forward so watch us yeah yeah yeah so that's one thing we want to mention uh in our games business so uh we operate with previously we often call it as our mbp process we still kind of like follow the same process but it evolves all the time but uh right now what's happening behind the scenes here in nitro office and uh and what our team is working on is that there's more and more new things brewing. We don't talk about new things in detail until we actually announced and then they come to life. But there's more and more new things brewing, some of which are very much powered by AI in many ways. And I'm super proud what we've been already able to achieve with the use of AI driven tools and stuff like we have our own AI running for different things. And I think our teams are pretty clever in having the right approach when it comes to using that and avoiding that. the hype and bubble that always surrounds any cool new technology. There's always hype and so much hype going on and we try to avoid that.

I think the approach that the team has been taking and we as a company is the AI as assistant. It's assisting humans to make better decisions, better games, whatever, better code. Definitely. All of that. I think the approach is something that

place to our benefit very long run yeah indeed and on the games business i get tons and tons of questions from our shareholders which i love and quite a many of those are that okay what's going on with new games what's going on with nerf and all those things so with new games there's more and more stuff brewing both internally but are also in the third party game side so we are looking into a

handful of games i would say at the moment are on the third party game side and uh maybe one of those will happen at some point we'll see and uh internally there are also some new stuff brewing and i think it would be safe to expect that if if and when we are bringing something into the

out it most likely be in a shooter and action category yeah that's a pretty good expectation to have yes and with nerf super blast we're seeking to continue forward with the game and as mentioned already earlier this year we are basically figuring out how we want to position it in the long run there's been some progress on that front but we'll let you know once we have the conclusions on that side Now we can go to B2B service.

On our B2B service business, as already mentioned, we are focusing on step-by-step long-term collaboration with our key clients, and we are very happy that we have two great companies to work with, both top tier in their own world, being the Digital Extremes and Warframe and Netflix with their unannounced IP and project that that's very very very exciting both of them both of them are in a kind of a bit of a stretch with the technical side of the things where we actually love the challenge and we are actually can bring something new into the market and and and go beyond the kind of traditional ways of ways of bringing the games and uh in a sense like a free project for our team yeah and also very good as a as a references to the our pd funnel where then we can kind of showcase that what we are capable of and if there ain't that many studios into the world that can pull off such a project that we are we are working on a technical point of view yeah and uh that's definitely where our background coming from building our own engines and whatnot, and using pretty much all the commercial engines, we are really shining on that area. And definitely not pushing us into the fierce price competition as where we can produce the quality and bring that expertise to the use of our clients. So in many sense, it's working very well.

and i think one thing that you mentioned is the passion process for the team and and that's something that i hear not not nitro but people outside of nitro quite often refer to our b2b service business as consulting business but i think that that's a little bit misleading in the sense that for us we work on projects that we have passion in we work on projects that we take great ownership in we treat those with as much love as if they were you know our own and only so so the fact that we work on those together with a partner doesn't sort of uh it doesn't make them any different internally in a way so yeah so those are very much something that we are super excited about super proud and and and we take that positive ownership of those as well and while we are working with our current project we are naturally

all the time looking for the new projects and our PD is very strong and efficient and nowadays spread around at least the western world and lots of activities on those front and the funnel is healthy. So we are getting progress in many cases and we are getting no ghost that shows that the funnels work.

And I think overall, when we look at the gaming market, if in mobile and free to play, it seems that the direction is more about competing on the sort of marketability of the games and the landscape is in constant evolution and things get more and more challenging in certain way, but also things get bigger and bigger. So it's kind of like positives and negatives at the same time, which is exciting. On the B2B service business, I think It seems that on one hand, these sort of challenges that the industry has been facing tend to continue. There's not too many companies making deals out there and not too many opportunities. But at the same time, I think it helps to isolate the best ones from the rest. And I'm very much in the... in the category that i believe that nitro is definitely in the category one of the best and like that that's something that's really working in our favor at the moment so in tough times uh it's the best ones that shine and that's us yeah whereas in our games business we are exploring the new new platforms new meaning outside of the mobile yeah also in a p2p service business

the focus has been on more and more in a cross-platform or cross-sale or cross-play or multi-platform projects. It's a little bit how you want to define those. But anyway, one could expect that the projects that we are working in the future is more than just a mobile. There might be some existing game that we are part of boarding into the mobile and then operating both in mobile and other platforms or even multi-platform projects.

exactly so cool and then uh the last part financials we'll discuss more about those uh shortly but i think uh in a nutshell the growth continues profitability continues and that's a result of us being able to increase our revenues by making a little bit better business step by step uh but also us being super focused on the cost control side that's not the most sexiest of things to advertise out there but that's something that we've been laser focused on making sure that we are optimized on that side through all these quarters, and that's the way we plan to be moving forward as well. Let's talk about the numbers. So the first nine months for the year, I think our first observation is that the growth continues, like we just said, and we're almost already close to what the last year was in full, with the big difference that now we're profitable, whereas last year in full we were not. So that's obviously a big positive thing. And I think what's more interesting is that if you look a little bit behind the numbers and observe them in a little bit more detail, how we've structured this year compared to previous years, that this year we haven't capitalized any development costs. That's something that we might do at some point moving forward. But this year we haven't had the grounds to do so. So that hasn't happened, which makes the P&L more healthy in a way. That's a common practice that I would say almost all the game companies do out there that when they're developing something new and so on, then they capitalize. But this year our focus has been on our existing projects, so there hasn't been grounds for capitalizing. So it's more pure in a way. And this has also, on the flip side of the coin, helped us to reduce some load from the balance sheet so the balance sheet looks better and better quarter after quarter in a way and that's good and basically our focus has been very much on the long run we're not optimizing a single quarter or we're not going into playing any shorter tactics but observing the long run and making sure that we have a good solid way forward and if we look at the development this is showing revenue trailing 12 months and EBITDA margin from every quarter. And in here, I think that sort of systematic long-term approach can easily be seen. And the EBITDA margin, this dip here in Q3 last year and second quarter last year, second quarter was basically when we started to invest heavily into the launch phase of Otakon Heroes and pushed into marketing. we continued uh that through the third quarter and then third quarter also uh took a big uh dip because uh we did the preferential rights issue and there were so many one of course associated with the fundraise that uh hurt our ppa margin but after that starting fourth quarter uh we've been profitable and pretty much in a stable fashion being able to uh control uh the level of EBITDA we have and obviously improving towards the end while the revenues have continued growing so that I would say is a pretty good example of the long-term focus that we have and of course thanks to our games business and especially now when we're expanding we increase the chances of this hockey stick potential step by step moving forward so that's that's positive but maybe it's time to hear from you guys so let's see uh what questions we have and uh there was at least some in email i noticed earlier so let's see um there's One question about our collaboration with Digital Extremes that is it still two different projects or what it is and it's Warframe at the moment. So there was another project which never got announced and that we, I think it was in January this year or February when we announced that that got completed.

So now it's Warframe. To be very clear, Warframe Mobile, it's several sub-projects.

It's a huge game, so there's tons of vectors to work on on that one. Then there's questions about the Android version of Warframe Mobile. What is the status and is Nitro working on that? We can't comment too much on that front other than what digital extreme spits out in public fashion. I think they have already publicly earlier said that there will be an Android version and stuff like that. So we'll see how things roll moving forward on that one. Then question about the focus for Otagon Heroes in Q4 and moving forward to next year and how much development resources are dedicated to the game and what key features or improvements are you planning for? And how do we expect these to impact the UA activities and spend from Supersonic? Good questions. So Otagon definitely in focus very much in our games business. We have The full team are working on Otakon Heroes at the moment. I think if you count in all the external help we get from time to time, it's a little bit more than 20, around 20-ish people. Then there's of course tons of supportive functions like data and stuff like that on the sidelines. Then there's a bunch of people from Supersonic side who work on the game. So there's very much manpower involved with that. And something that I think is often not understood correctly. If you look at things from an outside, when you have a live game where you operate, you roll out new updates, you run live events, you have existing players to serve and all these things. It's super labor intensive just to keep the game running. So the concept where the whole thing could be focusing on just building something new, that's streaming that never happens anywhere.

And balancing serving the existing clients and balancing to

serve the new new players and uh and introduce new features it's very very complicated definitely puzzle to handle all the time but to answer the question uh in in more detail what's happening now is that we are still doing those new things like we have done with all the updates thus far and uh how the roadmap looks like we don't sort of uh how to say it We don't spoil the surprise beforehand, but what we can say is that the themes are that there will be a little bit continued technical improvements because that's what you want to do all the time if you ask me. There will be focus on retention driving features, basically optimizing the existing one and also building new, we call them progress and vectors, but new systems to take the players through on different journeys. That's what you want to do in free-to-play. And there's a little bit of... making the game more accessible to a wider audience, like we said. That impacts in different things, how we introduce things to new players, early gameplay, a little bit of balancing, things like these. And then there's the concept of all things in the longer-term social features that we drop in one by one as the right time comes. And how do all of these then impact what Supersonic is doing? That obviously as a publisher, they are investing in the user acquisition to measure these changes and so on. And we are seeing where we stand, what has happened on the marketing side, how those things evolve. It's a constant evolution on that side.

And how the market is evolving and how the competition in the market is evolving. It's a very big puzzle to look at all of the vectors and then make

the goals yeah but through all of these we are seeking to get closer and closer to the point and eventually reach it when the game is so called scalable and then that means that then it's time to start investing more into the marketing of the game when exactly this will happen of course no one knows are we going that direction very much yes so that's something that we're now working on and then

and even one day the numbers will match yeah and whenever ever the one day comes everything that previous said will continue on yeah yeah yeah definitely definitely um

Then there's questions about Netflix and their recent activities. There was some articles that they closed down some AAA gaming studios and how does this impact the collaboration and so on. I think we will not go in as far as commenting on what they're doing elsewhere.

Our relationship is very transparent. we are discussing about all the topics with them.

I don't expect any changes in our direction, and we have been very happy with the collaboration so far. And I think that whatever things there are elsewhere, that's not our job to comment on those. But from our point of view, we're very happy with how things are developing in progress. Then there's a question about Medals of War. That's one of our older mobile games. We call them old classics. Just recently got an update in iOS App Store. What are your plans for this game? That's a good question. The answer is there are no active plans. So what has happened recently is that we did indeed update the game in iOS App Store. And that was basically just a special service for some fans who wanted us to do it. So there was a group of players who wanted to continue going through that game and playing. So we made a couple of tweaks so that we can keep it up there and alive and running. So there you go. That wasn't a commercial decision, but just we wanted to feel good and as a service to the fans. Can you tell us something more about plans for Nerf 2025? Are there plans to sign a publishing agreement with Supersonic or someone like them or anything like that? never know so right now we're exploring different opportunities so we're looking into obviously how the game could best benefit from what has happened to the free-to-play mobile games market we're of course looking into partnerships that's very much in our DNA then we're also exploring all the different avenues for different type of ways of utilizing the game maybe on other platforms and stuff like this so there's plenty of things we're exploring at the moment so but that's in our heads very much going as planned and once we have conclusions then we'll talk more about those then let's see if there's anything more here no and then let me check from the feed did you pay back ng nudist games everything or is there more uh we are paying with a payment plan where we have a regular installment so we don't pay the loan back in full one lump sum but i think we press release this in march or earlier this year there you can see more details and then you can check the remaining balance in our balance sheet so we we have now paid uh close to half of the loan uh not not exactly but close to half of the loan and we will continue paying exactly as planned Do you think the collaboration with digital extremes will lead to a strategic partner in them? You never know. We're all about long term partnerships and I think right now we're very much focused on driving our business forward. So that's in our interest. But at the same time, we are building long term partnerships on all fronts because that's how we work. what happens as a consequence, you never know. And sometimes this kind of partnership might lead up into the strategy of collaboration and sometimes not. Happens in this business quite often. would you rate collaboration with supersonic this far are you satisfied with you eight they do or is there still work to do there uh i would rate the collaboration of a plus yeah that's a word uh so something actually there are a bit of a bit of a challenges or on their end because of the yeah yeah geopolitical situation and those are

a little bit affecting on the cooperation also as the people are a bit distracted by what's happening there. But other than that, I think it has been really, really, really good.

Culturally, partnership wise, I think that's something that we Finns love a partnership where we spit things out pretty directly. Some might perceive that as harsh. And that, I think, is something that works really well. We have very direct communications in the very much positive sense of the word. So it works really well for us. And I think these geopolitical things, obviously, beyond our control, we can't do anything for them. What comes to the UAE stuff, it's a thing where everybody, of course, wants to see the game reaching scalability and skyrocketing yesterday. I'm sure everybody is in that boat. But then again, that's not how free to play works. Free to play works in a way that you make data-driven decisions in an environment where conditions change all the time and you keep improving on both fronts so obviously we can't say that we would be satisfied with everything until we've actually you know hit it pretty big and that is the area where they are very good on analyzing analyzing the potential of the game and market climate and how the ua is performing and uh all of that they are very very strong and i think the big impact to us is that compared to when we sell publishes that they can jump into conclusions this much faster because they have so much of data from any other games from the same time period and stuff so they can kind of like draw the hypothesis and analysis much quicker than we could do with just one game and that's super valuable uh There's questions about Supersonic and UA. I think these are somewhat the same than the previous one. And I think there's questions if something has changed since we started the collaboration with them and things. I think the answer is both yes and no. So the market is in constant change and therefore we must adapt to that with our game all the time. But that's the same for everyone. No surprises there. Has something else changed in terms of what we are seeking, what type of success we are anticipating moving forward, where we want to be with the game? I would say absolutely no. That's based on all the latest discussions. We haven't decreased the level of expectation towards the game. We haven't decreased the part. It's still very high where we want to be.

And that is also something where we are very much in the same boat with the partner. Everybody's looking at the same target level.

Yeah. Then this question about our margin profile in our B2B process comparing to what we might have done in the past and things like this. course it's not in our interest to go into commenting too much in detail about our specific margins of specific things but I think in general what we can say is that for one, we're able to work on better and better things as time goes forward, which means that they're also paying better and better. That I think is one thing. And that's exactly how you want to do business. You want to climb up the ranks and that's what we're doing. In terms of margins, We're on one hand, we're spending more and more because we're working on bigger and better things. But of course, it means that the more you work in specific category and niche and stuff, the better you get at it, which of course helps with the profitability. So that's a complicated thing. But I think that as you can see from our P&L, we have definitely been able to improve the profitability of Nitro. So maybe then the answer is yes, but it's not as straightforward as just increasing some margins of whether that's not how things work. Long question. Let me read it first. Oh, yeah.

There's a critic from Norway. Hello, Norway.

Hello, Norway. Actually good to hear from people from there. Rather long question, but basically I think asking about how we structure our offering in B2B service business and how these projects generally work and stuff like that. So I think one, The role of B2B service business for Nitro is that we get paid. And without going into details, we favor deals where we get paid, how to say, regularly and pretty short intervals. There are companies out there who do this very differently, like they develop something for a long time, then they deliver some milestone and then they get paid if it's approved. And maybe use some factory services to get the cash. We don't do stuff like that. We have done things like that in the past, but we want to de-risk the approach.

Deliveries and milestones and checkpoints with the client are quite short interval and most of the time we are getting paid from the same interval that we are checking in something with the client. So that seems to be working. Also, it brings commitment from the client side of that so that they are all the time on the top of what's happening with the project. And quite often our projects are such that we are not alone developing something but it's a kind of true collaboration with the client that there are sometimes full team on client side sometimes few people and then our team but anyway it's more like a collaboration than working for something so definitely yeah yeah and i would say that maybe one big difference compared to us and some of the other companies out there is that uh the way we work is super transparent we are like you know

or things by our DNA, even if Nitro is very multinational and very multicultural in that sense as well. But still, the DNA of the company is very Finnish, and that's like we share everything. fast we share it as it is you know pros and cons positives and negatives and i think that helps with that collaboration we call it one team mindset but that it's in the best interest of everyone to go through all the things as openly as possible as soon as possible because that helps to prevent small things from becoming big topics uh over time and even it is a hybrid working model in in a

new normal our people tend to spend quite a lot of time with the client or clients are visiting us there are pretty much every month or every second week somebody from somewhere yeah either out of our people flying somewhere or our clients coming to us and so it's true yeah yeah and through one team mentality within all the projects.

Yeah. And I would say that maybe even if, you know, I think we're pretty good in making deals because we've been doing this for close to 20 years together with you and also as a company and all that stuff. But that's not where the secret sauce is. The secret sauce is in making sure that people function well together. And that's where the magic happens.

Yeah. And we've been focusing more and more in kind of shows social dynamics within inside of the night robot also together with our clients so trying to match with the personalities from our clients for the people who are good match with those personalities and also also it's a it's a people's business then and end of the day in the service service business that people need to have a fun together yeah yeah Cool.

I think that concludes the questions. So thank you all for joining and we are grabbing up and we will see you next year when we push out our year end report. That's going to be in February, but can't remember the exact date, but that's on our website so you can check it from there. Thank you for tuning in and wish you a great day. Bye bye.