Nitro Games Oyj

Hello, good morning.

Good morning, good morning.

Indeed. It's Jussi Tahtinen, CEO and co-founder here, together with... Antti Villanen, CSO, co-founder, board member.

Yes. Hopefully everybody had a great summer. Indeed. We definitely had. Yes, we had. Easy summer, bit of holidays.

Yeah. A bit of a holiday, a lot of activity, some of which you already saw in the brief teaser trailer thing we showed in the beginning. We don't usually show stuff that we haven't announced, but this time we thought that we would tease you guys a little bit with some stuff that we have been working on just to make

in more visual. And as we are heading to the Gamescom, the largest trade show in a year.

Yes, in Germany.

Utilizing the same materials there, so it was a good time to show the new stuff to you guys also.

Yeah, Gamescom is always one of the biggest events also for us every year because it's so huge and pretty much everyone's there.

It's like a start for the second half and then things that are starting the negotiations, there are something that materialize on a late, late, late on a year or early next.

Yeah, indeed. Cool. So let's go forward with the webcast today. And today we're going to be discussing the first half of the year. And also, of course, you know, what's about to happen or what are we doing during the second half of the year? But for those of you who are potentially new to Nitro Games, I think every time there's always some new people checking out our webcast. We are the Finnish powerhouse for action and shooter brands across all platforms.

We've been expanding quite heavily this year to the new platforms as it was one of the targets for the year.

Yeah, it's one of the big goals we have.

Yeah. All games are now played in more and more platforms and looking forward to new ones.

Yeah.

All the old ones that we already have been at some point, but the new.

Yeah. And through the Pate projects, we also covered the sort of console platforms. But moving forward, we intend to go there more and more with our own offering as well. And as a company, we're one of the oldest game companies here in Finland. Almost 20 years now we've been doing this. Yeah. So since 2007. And then Q1, sorry, not Q1, but H1 overall was very much what we call transitional period for Nitro. And while the performance in terms of numbers leaves a lot of room for improvement, especially if you compare it against the previous year, I think operatively we considered very much a success because we were able to do so many things. And I think this is a prime demonstration of the type of volatility that's part of the games business where we operate, where when you transition from one big project to new ones, it has an impact on the financial performance shorter term, of course.

But it's also a prime example of how we have built our setup so we can adjust quite fast on those changes, whether they're coming from the projects or market or anywhere outside. We have tools and processes and ways of working that we are quite fastly adapting into the, whether we are scaling up or scaling down or toning up or toning down. We are very fast on that.

And I'm super proud of our team that since they are so versatile with the talent, not just with being able to work on different platforms, but also versatile in terms of adapting to new team structures and stuff. we were able to pretty much instantly shift our focus on some new things that we didn't have the bandwidth to work on previously. So we were, I think, pretty successful in navigating through all of that. But more about that later and especially what it means for the second half of the year now. Still about the numbers and the overview. The cash position we have at the end of first half of the year is actually a little bit better compared to what it was after the first quarter. And this is a result of basically two things. Part of the revenues we had during the first quarter landed in the cash flow during second quarter. And also we have continued the activities to improve our balance sheet. So we're now happily in a position where we have completely paid off the debt that we had to know these games while at the same time making sure that we keep our focus on protecting our cash in the long run and keep our eyes laser focused on the long term profitability. Exactly. And maybe still worth noting that some of the events that we've listed there, those new agreements with Void Interactive and Star Priest, they happened after the period.

After the period, I don't know. Will be visible later.

Yeah, yeah. Okay, so let's move forward. We spoke that we had some goals for this year. So this slide here is a reminder, you've seen this earlier, that what are those goals? So we have three. So first one is basically expanding our game portfolio. And with expanding, we mean we want to build new games, new platforms, partnerships, and Well, those three.

But I think we have been quite efficient on this area in the first half. And now, even after the period, there has been activities on a new partnerships and new platforms areas. And new games are something that they're brewing. And maybe we talk a little bit later about the game portfolio. But I think

game portfolio target point of view we've been we've been successful yeah this is an area where i think we are slightly ahead of schedule compared to what we initially thought that how the year would go so that's definitely a thumbs up second one being the global team yeah and taking you know from the scalability of that uh maximizing the potential there

On that area, we've been working with the global team and this structure now for 18 years, 17 years. And especially on times like this, the model and the process pays off.

Definitely.

And also when scaling up, it goes in two ways. We've been improving the efficiency on our production internally and externally. Also, the kind of constant improvement is part of the DNA. And there are lots of initiatives where we are improving our ways of working with the global team.

Yeah. And I think how these things translate in financials, of course, everything is always actions first, and then you see the results in the numbers later on, like with anything. But But these things that we've now done, especially towards the summer, many of those are going to be more visible in the numbers after the summer, obviously. But I think safe to say that we have been successful so far in taking advantage of the scalability of our global team while still improving things and developing things further. And also in the middle of all of this, we've been able to do some new key hires in the team and optimize it for our updated portfolio that we have. really happy about that.

And creating new revenue streams and through the new platform expanses.

Yes, yes. And financial stability, that's something which we want to maintain because that's something we gained already earlier. But At the same time, we want to grow through new revenue streams and focus on long term profitability and also take careful investments in new products. So many of those things we have already done. But I think the thing that we're still working on this year is to, of course, build those new revenue streams bigger. So that's not something that we can say that we would have yet accomplished this year. But then again, that's why you have annual goals that you have to live up to those. But overall, we very much maintain the course that we set in the beginning of the year. And let's talk through this goes one by one and start with the game portfolio. Uh, so all the kind of heroes, uh, is a brand that's now available on mobile. It's on discord, it's on web and it's on PC with a game known as supercharged. What it is, uh, where it is not available yet is consoles. And that's something that, like we said earlier, uh, that's, uh, one of the next steps that we're looking into that. Okay. How, how do we go about that? And, um, Otakon Heroes, we've discussed a lot about how it's a game where we've in the previous years invested so much and thanks to our way of developing these games, we can now use those previously invested efforts and use those to bring it both time and cost efficient to other new platforms.

And I feel that the Otacon Heroes is no more just a game, as it's like several versions in several platforms. It's starting to be a small franchise. And out of that franchise, there are kind of several iterations and versions in a different platform and a little bit different monetization models. And I think that's something that will create value for the company in the long run on these kind of franchises.

And speaking of that value creation, during the first half of the year, we concluded our collaboration with Supersonic from Unity. And as a result, the game kind of returned back to Nitro. So that's now fully in our hands. And the reason why we concluded the collaboration is that we weren't able, together with Supersonic, to scale up the game to those type of levels that they are expecting. Their expectations were even larger than what we had. And the main sort of challenges there were related to the user acquisition and marketing, which obviously is on the publisher side if you have a publishing deal, but the increasing in what we call CPI, so cost per install figures. And something that we're now doing with Otagon Heroes brand, also including something new that we're playing around with that you might have seen in the trailer in the beginning. is to find ways to bring down the CPI and especially find ways to bring down the CPI in the type of scales that Nitro can operate through self-publishing.

And it can happen through the changes into the gameplay. It can happen changes into the marketing or even the kind of core game. And those iterations are ongoing and some tests ongoing.

yeah indeed we've already started um actually we already started i think before the summer uh with some of the tests and some some will still continue now after the summer then we have our nerve super blast exactly yeah and this is one of our fps so first person blaster uh game on on mobile and this is something that we've done obviously in collaboration with hasbro And we've discussed about NeRF quite a few times earlier, and we've been actively looking into different opportunities. We're currently again in discussions about a few ones. And we're busy trying to figure out how in the longer run, how the Nerf brand and anything we can potentially do with that fits into the project portfolio. So we don't have anything in terms of news from the first half on that one, but it's definitely not forgotten.

Fourth one, Pistolo.

Yeah, that's new.

That's new. And based on our old game, Lootland, somebody might remember that one. And it's interesting in the sense that we are touching not only the... new kind of gameplay, but also the new audience and the new platforms with this one and with the great partnerships taking the game into the world of iGaming.

Indeed, indeed. And this is something that we are pretty excited about at the moment, not just because it's new and everything new and shiny is always interesting, But also for the reasons that the dynamics in iGaming where we don't claim to be experts in that field because we're only scratching the surface and getting started. But what we have seen so far, there seems to be a really interesting match where we can take something that we have developed for free to play mobile and then do a couple of conversions, but essentially then take it into the iGaming space. And this is some area where I think moving forward, we definitely want to explore more and learn more and see how these things go.

And it's not only the old games or anything like that.

Yeah, but also with some new products.

Yeah, as we are gaining the expertise on our domain, there is opportunities to create totally new games. into the mix. Then we have a warframe with the digital extremes.

Yeah. And this is currently our longest B2B partnership. We've been working together with digital extremes for many years now. And this is a project that I'm not sure if you guys there remember, but this one we started pretty small. I think we had a very small prototype in the beginning, like many, many years ago.

Something like that. Yeah.

Where we showed that we can actually bring it on mobile. But since then, It's been a big partnership for us in many ways.

It seems that this kind of model is something that applies to many of the cases, as also the Void Interactive, the project with them, starting with the small and the expectations that when we prove ourselves and what we are doing, there might be an opportunity for some bigger stake on that whole project that we are working on.

Yeah, and I think I'm super happy that since we're starting two new partnerships now in Q3 with World Interactive and also with Starbreeze, where we signed an agreement also now during the third quarter, I think this concept of sort of starting small and testing out things on both sides.

Proving ourselves and trying out the collaboration seems to be working for us.

At least it has worked historically very well. And then last, but I would say definitely not least, we're a games company. So it's all about games and all about new games because like we said in the beginning, our focus is on the long-term profitability. And the plan here is basically that we want to take all the learnings from our previous projects and ongoing projects like we always do and adapt those into new product development. But we also want to make sure that we continue this platform expansion because it widens our audience reach, widens our revenue streams and you know, builds our portfolio bigger. And as a result of the first half of the year, we now have a total of four games in the early MVP process. We haven't announced this yet, but again, you might have seen a little bit of those in the video clip, VIP stuff. and our two of these are mobile free to play so we definitely want to continue exploring that domain as uh we are with every game every release we're always getting better and better and better at the potential in free to play mobile once you finally hit the scalability and two of them are pc premium console premium and uh exploring that old world for us yeah again yeah and gaining

gaining new expertise and new kind of ways of working in that category.

A lot has changed since the last time we were active on PC. And I think Otacon Supercharge is a good sort of learning tool for how the whole Steam dynamics have changed. Basically, the store still looks the same, but everything behind it has changed.

But as you can see, how we start with our partnerships, starting with something small and then with the success scaling bigger, the same method works in our internal new games process. Yeah. Calling it the NBA process, but still it follows pretty much the same. same kind of model internally minimize the risk for the investment risk in early days and then when there are enough proven results then invest more yeah indeed indeed and I think that's well in line with the other goals we have for this year and especially you know the

financial stability and the long-term profitability. If you compare this year to some years behind us in Nitro, we're making a little bit more investments in new product, but a little bit smaller in terms of money. Why we can do that is because we have obviously learned, but we have so much more efficiency in the team. Exactly. Speaking of which, let's move to our second goal for the year to further develop our global scalable team. and take advantage of the nature of the structure we have because this is something unique in nitro that we always want to repeat and one of the big usps it's our greatest and most valuable asset anyway the team internal and and our global partners yeah and this is the model that we've been working now for 18 years yeah and always further developing further developing improving it and uh

it's not only scaling up it's it's toning down it's getting scaling down scaling up and uh i think the flexibility that the model brings that when there are different kind of projects we always have a suitable skill sets and people suiting for the different different projects and also that gives us a benefit of adjusting fast

yeah yeah and in addition to having those benefits or i think not in addition to but i think what's the sort of key secret behind those is that our core team is so experienced and so so professional that they have worked on so many different type of games not just in nitro but wherever the previous careers might be different platforms yeah different platforms styles yeah So that's where it really shines that as a company, especially when we talk about our in-house staff, we always seek super seasoned talent in connection with we have very active programs for junior talent and trainees and try and nurture people into this business as well. And about the longevity, if we then move to the third goal we had, which is financial stability, if you look historically or zoom out, we now have five years of consecutive growth under our belt. Last year was therefore clearly the best year of those five, which is exactly as it's supposed to be. And now if you look at the first half of this year, it's a transitional period, which doesn't look as good as our first half of last year, but that said, our focus and mindset is still very much in this long-term line and long-term profitability so If we then transform into H1 numbers a little bit, basically what happened here is that we concluded our big, big, big project with Netflix. Then we transitioned from that, shifted the teams to focus on some of our new games, which we didn't have the bandwidth to work on those earlier because everybody was busy with other stuff. They also allowed us to kind of like return Autogun Heroes back to us and look at it a little bit differently moving forward. And it allowed our business development to adapt to the situation and work on some new partnerships in the B2B. So all of those things that had to happen, we were able to do. But obviously, actions come first and results follow. So actions have kind of happened, most of them already during the H1 or pretty much soon after that. But the results will then follow later.

Exactly. And now it seems also that the sentiment on the market is brightening up and that there is a sentiment that the games industry has been trying to start healing up twice and now maybe third time and maybe it's the third time says the truth.

Yeah, it's been a little bit tough in the industry around us for three years now, maybe.

After the pandemic, I think.

Yeah, yeah. And I saw a good LinkedIn post from one of our industry friends saying that there has been like, like you said, two sort of false starts that maybe not the third is the one where it actually goes. Of course, you never know. But then again, From Nitro's perspective, it's not like we don't care because of course we care and we care a lot. We love this business, so we want it to go well. But we also know that thanks to our almost 20 years of doing this business, we know how to navigate through these things. So we're not super concerned about that because we have been able to figure things out regardless of what's happening in the world around us. And then looking at the numbers in a little bit more detail, like we can see is that the first half of the year, our revenues slightly declined compared to last year. And this is a direct result of moving from previous big projects and then securing new ones after the reporting period. And this then again translates to basically everything below that. There's some changes in the staffing costs, which for us are basically in the materials and services, but also in the employee costs and personal costs. So it's a combination of those two. And basically, in the long run, our main focus in these transitional periods is usually to protect our cash. Exactly. So that's again what we have done here. And our cash position is slightly better than what it was at the end of Q1. And we want to make sure that whenever we go through short-term transitions, we always have that long-term mindset. Hence, we wanted to make sure that we continue improving our balance sheet, paying off debts. We wanted to make sure that we invest in new product development, but do all of this in a very mindful manner.

And protecting the cash while doing it all.

Yeah, exactly, exactly. So therefore, I think... we conclude the first half of the year, I think it's safe to say that we have successfully navigated through this transitional period. We now have a new portfolio, very much new opportunities. We have a great team set up at the moment that we're built for these new opportunities. And we have that financial stability thanks to some of our previous actions that we can now leverage moving forward as we continue and push forward towards a better H2. Exactly. Yes. So that concludes our webcast presentation part. And now it's time to see if there's any questions. Let me check here quickly. if there's anything in the in the inbox or anything it pretty much seems like maybe not so perhaps we have everything was clear yeah we have been very pretty empty in our press days and this time it seems Coolness. So thank you everybody for tuning in. Very much look forward to meeting you again in October when we deliver our third quarter report and the webcast. And we are now going to go and pack and head for Gamescom. Yes, a lot of business development this week. Thank you all. Have a great week. Bye-bye. Bye.