Nitro Games Oyj

Hello, hello, hello. Good morning. Good morning.

Greetings from Finland.

Holiday season is behind us.

Yes, yes, yes, yes.

Back in action.

Yes, indeed.

Already working a few weeks here and starting the season.

indeed indeed although like we always say Nitro never sleeps but we like to enjoy the traditional one month ish summer season here in Finland which is usually the month of July yeah of course there's always a little bit overlap when when different guys are on holidays but

This year it was pretty good summer. It was good summer and both in weather was nice but the operation went well during the summer also.

Indeed, indeed. So let's get into it. Welcome to the webcast for the second quarter slash first half of the year.

Ah, by the way, we didn't introduce ourselves.

Ah, how not so much. This is Jussi.

He's my co-founder and CEO of Nitro Games since... 19 years.

Yes, yes, yes. And here's Antti Villanen, chief strategy officer and co-founder here in Nitro Games and also a board member. Since 19 years. Yes, yes, yes. So Nitro, we've been running the show for almost 20 years now. So we're one of the oldest game companies in Finland. And here comes the overview of the report that we just released this morning. And overall, what I would say is that this is pretty, pretty well in line with what we're about to do this year and what we have already been doing this year. So like we've discussed before, this year is all about new growth growth. Yes. so we're investing in a lot of new things we are favoring and building a sound business so we're very much focused on the bottom line making sure that we keep our eyes on profitability we make sure that we keep our eyes on cash flow on the equity and do these investments in a manner that Basically everything is controlled very much.

And all of those are in very core in our new strategy that we started from the beginning of this year. And I think we're going to talk a little bit more about that. But all of the focusing on sound business and profitability and security cash and doing the controlled investments when we see the good balance of risk and reward. All of those are in very core in our new strategy.

Yeah. And now during the second quarter, we're happy to share that some of these new investments that we've been working on have been starting to surface already one by one. So there was some new things surfacing from the game portfolio. We went live with Project Frag for first public testing. We announced that we made a deal with Games Workshop for Warhammer 40,000 Boltcam Boom coming to mobile this year. and then there's also some stuff that we're expecting to surface now during the third quarter and then moving forward as well so definitely not done with the year yet and a big part of the first half in addition to obviously the operations and what happens with the games is of course making sure that we make sure that the groundwork for our new strategy period on other fronts is well laid so we've been also continuing our work on the balance sheet where step by step we've been getting rid of the debt we had had there so earlier we paid off our loans to our banks and new disc games and so on and now during the time for business Finland yes yes so they're a governmental entity that supports companies who do tech and exports and stuff like that and we've had many projects with them along the years and we had two projects where the support was in the form of a soft loan so to speak and now the older one of these two was kind of like waived during the second quarter and that means that essentially what was loaned in the balance sheet got kind of like converted into a grant so that obviously helps us in many ways and that is quite normal process within the Business Finland projects and as we have some of those still left it would be predictable that we can have a negotiation with them about the

Existing stuff also. Indeed. There was something new from the Business Finland also.

Yes, so we also started a new project. This one is a little bit smaller by nature, but this is directly supporting some of the things that we're building this year, especially in the field of mobile gaming and iGaming. So a lot of our business development help. And unlike the two previous projects, this one is directly grant. So the funds that we raise from them for this one is direct grants, so not loans. Yeah. What else? We haven't forgotten our partner business either. So there was quite a lot of activity on that front during the second quarter. We'll talk more about those as well. But we signed a new agreement with a European Games developer and publisher.

Actually on the new AT for the existing. And showing that we have like a very, very strong relationships with the partners that we are working on and they are trusting us time after time.

Yes, indeed, indeed. very good very good let's go forward then uh with the report so here's all the financial summarize the uh income statement as well as the balance sheet but i think uh what's worth mentioning well obviously firstly continue profitability um doing the sound business yeah it's very core in our strategy yeah so we were able to time some of the new investments to the same period when we also got the waiver for the Business Finland loan which allowed us to continue doing profitable report in connection with all the cost control and everything that we're doing. The revenues those came in mostly still from the partner business like before but also an increasing amount comes from the games business as we go forward and that's part of the big plan with this strategy period that we want to increase the role of so-called games revenue as we go forward and that's why we're investing in also new projects where we take a bigger risk in many ways. and uh still still keeping the strong gas position yeah so definitely investments are controlled controlled and uh we are always quite strictly evaluating the risk and reward profile on all all and every investment yeah yeah and uh i think we're saying about moving forward uh right now we're obviously investing into things that are happening inside nitro uh so our own ip we are investing and looking forward to investing maybe a little bit more even into some partner projects like co-investing together with the partner. But we're also laying our eyes on some of the external opportunities as well so that we can make sure that we make the most with the cash that we have and how it circulates as we go forward. But overall, key things were continued to be profitable. We definitely improved on our balance sheet, so reduced a lot of debt there and maintained our strongest position. So all in all, well in line with our plans.

as we started our new strategy period from the beginning of this year we laid down the or refined the vision that we have and now it's all about we want to be recognized from the category leading games yes and category leading games for us meaning Any subcategory, any subgenre. We want to work with the games that are on those categories and on those subcategories and genres recognized by players, recognized by industries and rewarding. in terms of the risk taking.

Yeah, indeed. And I think what's very much different this year and with this new strategy period that we have been enjoying a lot is that we're in so much better position compared to what we've been ever before. So now we're at a point where historically working with partners has obviously always been in our DNA. We've gotten to work with some of the greatest games out there and we're super proud about that. Now we're in a position where we can also put some more skin in the game into those projects and hopefully also see more of the upside materializing for Nitro over the long term. And that's what we mean with sound business that we want to take careful bets and sort of build the future revenue stream step by step.

And maybe worth mentioning that even our history from strategy and action and shooter games, now with the new strategy we are also widening a bit of reach. So any platform, cross-platform games, different genres, different audiences, we are looking for those opportunities maybe a little bit wider than before.

Yeah, indeed. Definitely. And especially because everything is getting kind of like There's so much overlap from one platform to another, from one distribution model to another and so on. So it makes perfect sense over time. And then, overall, the roadmap that we have. Like I said in the beginning, we're one of the oldest game companies in Finland. We typically operate in these roughly five-year strategy periods. It's not always exactly five, but in that ballpark. And now, like Antti explained, we just started with this new one, but our eyes are on roughly 2030, where we've set the endpoint for this. strategy period so everything we do today everything we do this year we have that horizon until 2030 and that's where we're building the things long term obviously we will start collecting the fruits of the strategy already one by one and many ways are already doing that but that's where the end and all the older even now in the first first half all the controlled investments that we have done are towards towards the vision and driving us into the be recognized for for for category leading games indeed indeed And none of this would be possible if it was just us two. So we've been fortunate enough to build what I consider the greatest team out there. So we have a pretty unique way of working.

It's not only our people that are working inside Nitro, but we've been building for more than 15 years to kind of Network ecosystem platform of studios around the world, people around the world that are working in our projects. And that's been very, very, very solid and sound model for us, whether it's scaling up, whether it's scaling down, whether it's looking for the best talent for this kind of project or that kind of project. And now that we've been running it for 15 years, it feels like being part of DNA. Yeah.

Yeah. Like if working with partners is part of our DNA, it also applies to development partners and partner freelancers and everything that you might have. And I think this is clearly visible also in our P&L where we are in many ways doing more but with less and with way better quality. And that's largely due to us just becoming better and better in managing all of these things and figuring out what's the optimal and ideal way of doing things. So like I said, great team, great people. That's what's behind all of these things. And that's how we believe that moving forward as well. We still have a lot of room to introduce new opportunities this year.

And speaking of the opportunities and games and stuff, if we have a quick look into our games portfolio.

So we have Nitro Originals games based on our IPs and games that we quite often mostly sell finance. And then we have Nitro Partners where we work with partner IP with some of the biggest brands in this space or in the field of gaming. And in the Nitro Originals portfolio, we were able to announce something new during the second quarter. So there's obviously a lot more going on. We're building quite a lot of different things. But Project Frag, also known as Wolf Commando, we started the first public testing in June. We've been really happy with the reception we've seen on that front. It's clear that what we're building and players instantly get it.

It resonates very well for the target audience.

And now we continue on that front. So I think this week, today, we start as part of the Ukrainian Games Fest, a considerable part of the development team is based in Ukraine. So we're happy to be part of that, supporting that event. And then parallel to that, we keep developing the game towards the launch sometime next year, maybe. Let's see. Then we have Ethereal Gaming. We announced a partnership that we're developing some games together with them.

And basically, Nitro develops, they distribute, and they... A little bit of a new category for us, even though we have already Pistolo in our iGaming world. But a bit of a new category, but it seems that our model is working on that category also.

Yes. Now we have a few horses running on that track. Indeed, indeed. So the first game we're seeking to release soon. We're right now in the, I guess you can call it like a pre-release phase. And already now it's clear to us that Ethereal has demonstrated pretty good sort of placement power, if you will. So they have connections to many of the different online iGaming game sites out there.

The biggest ones.

Yes. And they basically then are in charge of distributing the game to many of these different sites. So it's very much a different model compared to what we had with Pistol where we did an exclusive take for one exclusive partner. And first game coming out soon. And then we are already working on the second one and so on. So I'm very happy with how that is developing. then then then Otakani Heroes we were a little bit silent on that front the beginning part of the year but now towards the summer we activated when we finally had some time to focus on those and we found a great partner for that one yes so with Otakani Heroes the mobile and web we've transferred the game to a great team called Hyperkani who are now taking over the developing and publishing activities and we have agreed on a revenue sharing model with those guys So basically they take our IP much like we operate in Nitro Partners with somebody else's IP and then they work forward with that game and we're really excited with how that's now starting and expect to see some first more concrete results pretty soon. Then we have Otakon Heroes Supercharged, a PC Steam game, and as it stands now, we haven't yet announced anything, but there's things brewing in the background with that one too, and I'm pretty sure that still during the second half we'll be talking more about that avenue as well.

Pistolo is there. Yes, Pistolo is there. Generating nice little streams and it seems that the partner and the players are happy with that one. Of course, there is always something to work on, but it's quite slow. And on our MVP process, there are quite many new things brewing and some of them lead a bit further. There are some playables, there are some in the concept phase, there are some that we already presented to the partners and There could be something that we will be announcing.

Yeah, I think it's safe to say that at least something will surface this year still from that one. And next week we're going to be in Gamescom. That's the biggest gaming show in Europe. So I'm happy that every time we go into one of these major trade shows that happen quite a few times per year, we always have something new from our portfolio to demonstrate and show and discuss. So a lot of activity on that front. But overall, I think Nitro Originals and how things are developing, I think it's pretty damn well in line with our plan. So there's things that we specifically want to focus on our own. There's things that we want to give to somebody else to work on because we don't have the bandwidth for that. We're expanding to different platforms, different type of distribution models, different business models. and while doing that we're also still able to build new products and that's super cool.

With the controllable and reasonable risk.

Then partners.

With the Digital Extremes and Starbreeze we finalized the projects. The relationship is very strong with the both ones and there are lots of discussion about maybe something in the future with both of the partners and maybe you said something about the BoltCon I think we hit the 700k pre-registration that is already quite a big considering that it hasn't been launched yeah this is an opportunity on mobile so we're bringing the BoltCon franchise to mobile with this arrangement

we've said that we're going to release the game this year and we're now in the pre-registration phase where on both Google Play and Apple Store players can sign up so kind of like pre-order the game and unlike some of our previous mobile games this is not free to play this is a so-called free to try premium experience basically meaning that you get to try the game for free and then you pay a price tag to get access to the game unlock is a good way to put it and this is something that has gotten a lot of attention maybe even slightly more than we anticipated which is of course fantastic and it's interesting to see where how high the kind of pre-registrations are going before the launch but yeah let's see yeah we've been not only taking holidays during the summer season but we've been also Oyj visiting the platform holders on the US side because of what's been happening with the pre-registration phase so fingers crossed that we will get some strong support from them as well and for a game like this the key to succeed in the launch is obviously in the the quality of the game so that's something that gets a lot of attention now but also about the support from the platforms and how their algorithms boost the game and how we get or don't get visibility from there so but so far even though the pre-registrations we are pretty good point for the launchers 700k is already quite a big number yeah definitely definitely

Then we have a Void Interactive.

Yes, yes. That's also starting to be pretty long-term partnership now. So happy with how things are developing on that front and very much looking forward to when we can maybe discuss a little bit more.

Maybe reveal the game.

Yes. Let's see. Then, then, then, then, then. Sorry, now I got it. So this year moving forward what to expect from us this is exactly the same that we said in the beginning of the year because nothing has changed in our plans so we continue to invest in new growth and for us that means our new original games that we're investing in and new hardware projects and that means projects that are financed by the partner, usually mostly, but Nitro is seeking to put more and more skin in the game on that front as well, simply because we're in a happy place that we can.

I think in both categories, in originals and partner projects, one could expect hearing something during this year.

Yeah, yeah, yeah, definitely, definitely. So that's very much on the menu. And on the financial side, since we're talking about a financial report, we keep our focus on the sound business and on the bottom line, making sure that we focus on profitability, making sure that we manage with our cash and the equity that we have. So that's the direction. And now I think it's time for our traditional Q&A session. And we've already received some questions in the email. So let's check out some of that stuff. Obviously, there's questions about the Warhammer 40,000 bolt gun. So there's questions about the revenue sharing model, the size of the revenue share, structure, collaboration, those type of things. to recap what we have is a licensing agreement that we've signed with Games Workshop and like always we can't disclose the exact terms because we are happy with the terms that we have but those are always like you know not shared publicly But I think it's safe to say that we feel very good about the deal we have. We have a revenue sharing arrangement and revenue share is of course always subject to the commercial performance of the game. And then the PC and console version of BoltCon that was originally developed by Org Digital, a fantastic team.

And very small collaboration with them.

and we have an arrangement with them how we've got an access to then again the game license and the source code and everything so we're happy with that setup and I think it's safe to say that the setup overall is very good for Nitro as long as the game performs of course Um, then there's questions about the future with that one questions about bolt gun 2 and so on Obviously what comes to those things our lips are sealed but in general I think it's safe to say that with this free to try type of model. It's a little bit maybe like pc games that you sort of release the main game then building on the success of the release, you release DLCs. So that's overall the thinking behind any free-to-try game, of course.

Let's see what else, what else, what else.

There's a question about the business Finland. So we had them waive the loan related to the older roadship. We had the Sokolsoft loan, and now we still have another one in our balance sheet, which is roughly 1.5 million euros. And there's questions about that. Will that loan get the same treatment? Obviously, we do not know. These things are always case by case. There are processes related to that because it's governmental funding and so on.

But this far, the success rate has been very good.

Yes. Yes. So time will tell. and then there's questions about the cash flow but I think we already discussed about that quite a bit so we are definitely eyeing in on the cash flow and on the bottom line at all times but this year is about investing and we seek to continue doing so while staying very mindful to the cash flow and profitability and also equity and we've also gotten some questions about like funding side and so on we're seeking to manage with the cash and funds we have with the business that runs and also like we demonstrated during the quarter we might go after public financing with very favorable terms like grants and stuff if needed

Coolio, I think that's all this time.

And that means that we are nearing the end of this webcast.

Thank you so much.

Thank you for tuning in.

Nitro will be present in Gamescom if any of you will be there.

Yes, indeed. And actually, if one of you is coming, don't hesitate to ping us. We might have a little bit something for you. We're doing something fun again.

Yes, until next time.

Bye-bye.