Nitro Games Oyj
STO:NITRO
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Earnings Call Analysis
Summary
Q2-2024
Nitro Games reported solid results with record revenues in the first half of the year, emphasizing stable growth. They aim to enhance profitability while managing debt, reducing it systematically. The company is actively commercializing its offerings, notably Autogun Heroes, now partnered with Supersonic for further development. They plan to capitalize on existing IPs and explore new B2B opportunities on multi-platforms. The focus remains on controlled investments without heavy upfront costs, ensuring financial stability and positioning for ongoing success in the action and shooter game sector.
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Hello.
Hello. Good morning.
Good morning. [Foreign Language]
[Foreign Language]
And greetings from Nitro Games studio here in Finland. It's us again.
Us again. So I'm the CSO, Co-Founder, reporting back here in Nitro with my beautiful Co-Founder, Jussi.
Yes, I'm Jussi Tähtinen, the CEO and the other Co-Founder here in Nitro Games. And we are here again to deliver you guys a webcast and highlighting our results from the first half of 2024.
Hope everybody had a great summer, we did. It was efficient. There was a bit of relaxing. But still, I think we progressed within our business very nicely during the first half and summertime.
Yes, definitely. Definitely. And how things roll in Nitro, essentially, it's a powerhouse that never sleeps even though some people might be on holidays. There was tons of things happening actually well this summer, so good stuff.
And let's move forward. For those of you who might be here for the first time, as a quick recap, we're Nitro Games. We're a Finnish powerhouse for action and shooter games.
One of the oldest gaming company in Finland and living through our values and vision on a multi-platform action shooter powerhouse.
Yes, yes. One of the big things for us during this ongoing strategy period since 2017 has been in expanding our service and capabilities from mobile first to covering other platforms as well. That's pretty much where we are today.
Good. And the team that we have, we have a global team. So we are roughly 50 people in Finland and give or take another 50-ish around the world. And around the world, these are our partners studios, contractors, freelancers, Nitro people living abroad and everything in between. And that's the...
Building the model for more than 10 years and working with these studios and people in various projects, all the way from the early, early stuff into the latest projects. And morale is there and the processes are working. And I'm so excited, obviously, that the people and teams are very solid.
Yes. And that's our secret sauce when it comes to scaling up and down depending on the amount of activity here in Nitro. And I think that's also one of the reasons now when we look at things post-COVID, what made it maybe less difficult for us than it was for so many others because we have always been in the sort of hybrid mode already. So...
We've been in hybrid already, yes. And also that applies into the -- as we are going forward with our strategy, we are going into the bigger and bigger projects that is also an element how we can tackle the potential resourcing challenges, and we can kind of answer with the need of a bigger project by utilizing our network. And we are very capable and professional on scaling them, scaling the teams when the time is right and the project is needing a bigger or a smaller...
Yes. Yes, indeed. And during the first half of the year, we again saw Nitro becoming so much more powerful and stronger by getting some good senior super talent into the team without growing the actual internal headcount of the team. So that's a good sort of evidence of the recent ways of how these things work.
And then H1, in a nutshell, has been well in line with our theme for the year, which has been stable growth. And with that, we mean that we definitely want to focus on seeking growth, which again has materialized now during the first and the second quarter in terms of revenues again, but especially in focusing on the bottom line profitability and make sure that things stay stable and that we don't need to go and chase for external funding, for example.
Excellent. And still gaming market is in the recovery phase. And after COVID hangover, as they call it, it's now -- seems to be going a little bit away. And stability is kind of very important for companies to go through these times. And I think we have succeeded very well on that while bringing the growth on this company.
Yes, yes. And the world around us very much seems to be in a place where things are still super slow in the whole gaming spectrum, like making new deals is slow and getting positive movement forward seems to be slow, and a lot of companies we see around us are still struggling with something. But we have been fortunate enough to keep things stable here inside Nitro. So that's, of course, very good and reflecting the numbers, of course.
If we look at things on a little bit more detailed level in terms of what actually happened, let's start with the Games business, and this is the part of the business where Nitro invests in our gaming products and mobile games...
And it may be good to remind that we have 2 sides of our Games business where we invest and look for the scalable revenue sources, holistic set of scenarios if one will; and then for the B2B Service business, where the business is then more stable and we get lots of learnings and mature revenues and profits also.
And opportunities to work with so great games and projects and partners, of course.
In terms of the Games business, the focus topic for the first half of the year has very much been on Autogun Heroes. Like we said earlier, we have kept our NERF: Superblast more on the back-burner, and we have been actively maintaining the game as a whole, but we haven't actively invested in the game. And overall, during the first half of the year, the investments in our Games portfolio have been very limited, in line with the theme that we have for the year, which is to focus on the stability.
And when it comes to our gaming portfolio, the plan this year has been to commercialize the items we have there. As a result, we signed Autogun Heroes with Supersonic from Unity, who are now the publishing partner. We started the collaboration with them and already got the game logged through their accounts during the second quarter.
During the summer, we've been pushing out quite a few updates to the game. We've been optimizing the performance and have been able to carve out some solid improvements in the game performance, and Supersonic has been doing the same thing on the U.S. side, but we still have work to do on that one. So that's something that the work continues now moving forward as well as we seek scalability with the game.
Also, we've been looking for ways to utilize our existing IP portfolio, and there are some smaller cases that we have done with the old IPs; and going forward, looking to continue that track also, making more business with the stuff that we already have.
Yes, yes. For example, in the B2B Service business, we just completed a smaller project where we utilized one of our own back-catalog IPs and so on. So these type of things happen from time to time.
And in addition to these, we've been also busy with our Games portfolio in terms of building growth and growth also to other platforms. So that's something that we're working on in the background. But it's not just the mobile games that you can expect from Nitro in our Games business moving forward, but other platforms as well. And worth mentioning also the magic word, AI. I'm sure...
Yes, I think that's close to both of our businesses throughout the whole company. We've been looking for the AI-assisted kind of workflows here and there and everywhere and where we can [ positive ] either expand or then make things a little bit more easier with the AI-assisted tools and the workflows.
Yes. And on that front, I'm sure everyone is already really sick and tired of all the hype around the topic, but there's a lot of bang to the buck to be gained from your custom-made tools and stuff. And those type of things, we have been expecting with here in Nitro. And as a reminder, we have the project with Business Finland, which is the core governmental support organization that has been supporting our actions on that front for roughly 2 years now already.
Yes. On the Service business, I think we are very happy with our great partners or clients, and we'll be capable of growing the projects and keeping the client happy and expanding the teams and everything goes as planned within those projects. And clients and collaboration has been really in a personal level and team levels and company levels, all the areas seems to be covered really smoothly.
Yes. And I think this year so far has been, on the collaboration front, we've been so much more tighter with our partners than maybe ever before, I would say.
Yes, it's like a football operation. It's not a client or customer...
Yes. Yes, exactly. Yes. And to recap those things quickly, Warframe is a project that we've been working on for quite some time now. So it's more mature out of these 2 key projects that we have at the moment, and that can proceed to live phase now during the first half of the year. The game is live on iOS. We've been supporting that, providing updates and so on.
And of course, we are very much looking forward to continuing the collaboration with Digital Extremes moving forward as well. With Netflix, we have been pushing through reproduction. So we completed the so-called concept phase early this year and then we push to preproduction. So there's not much to share about that and we haven't announced it yet and all these things. So -- but that's moving forward as well.
Yes, it's like a milestone by milestone going forward.
Yes, yes. And on the financial side, you've already seen the numbers, of course, but what's been happening sort of behind the scenes there is that we also started the loan payback with Nordisk Games, a step-by-step payment plan. So we've now completed the first installments of those.
Also during the first half of the year, as we limited our investments in our Games portfolio, we did not capitalize any development costs. So what you see in our P&L is the pure results with no capitalizing happening. And overall, that's well in line with our plans for the year, which is to make sure that we build the best possible setup for the long term as well; while short term, we want to see stable growth both in terms of top line and keeping focus on the bottom line.
Then moving forward, what can you expect from us when it comes to our Games portfolio and Games business? Like I said, with Autogun Heroes, there's still so much to explore. We're very excited to see how things develop. And with that one, we have step-by-step plan, together with Supersonic, how we push forward with incremental improvements in the game towards scalability. And then, of course, once we reach that point, then we want to see it again growing for years to come. So that's a long-term play and that's contractually, and business development was already figured out in a way, which means that now we have room to explore what more can we do with Autogun Heroes IP, where do we take the game next. So that's...
Yes, in other platforms or something like that...
Yes, yes. And...
Of course, we are exploring the opportunities to expand our existing IP portfolios. And there are lots of interesting IPs that we've been working during the years, but there's some opportunities here and there, either mobile or other platforms. Also, we've been looking for some new third-party games.
Yes. And those are things that we have a little bit different mindset than now during the recent years. So we're not seeking to invest so much upfront into any third-party things, but more like building the investment so that it goes nicely in our P&L and our own financial goals. And it seems that the world around us that we already spoke about when things are a little bit slow, that's a really good position for us to look into things because there's so much good cases available out there. It's definitely a buyer's market in so many ways.
And we will continue exploring the new platforms on top of the new platforms for us, but the new platforms, in general, in the gaming. And there are, every now and then, there are some interesting new player coming into the market. And naturally, the AI and all the workflows, AI-assisted development is something that we continue to explore and practice and taking into the use of best solutions that there is on the market.
Yes. Service business side, there again, we see a lot of opportunities moving forward with both of our existing partnerships and accounts and projects. So that's, of course, something that we're seeking to continue. And in addition to that, one thing you can count on that Nitro is always active in terms of business development, seeking for new opportunities. And the more we go forward, living through our vision of really being the experts and focusing more on excellence in the category of action and shooter games, the more interesting opportunities we have. So this is an area where I definitely think that we can also expect great things moving forward and that will then serve our strategy and vision for years to come as we move forward.
And not only the pure mobile or only mobile experiences, but multi-platform experiences and/or cross-platform cases. Those seems to be resonating on the market and our vision and the brand. I would really deem it in a really good result on that front.
And financially, we are not giving any financial guidance or make any forecast or anything like that. But our focus this year is stable growth, like we have said, which means that we focus on making sure that we keep improving our P&L moving forward and also more and more managing our balance sheet to make sure that we systematically reduce the debt that we have in our balance sheet while also we want to keep increasing our ability to invest because moving forward, we are, of course, seeing more and more opportunities to invest in our Games portfolio and basically build opportunities for success down the line in the long run as well.
And overall, how does this year so far tie in with our grand strategy at the moment? So we started with this strategy period in 2017 when we used that against our [indiscernible]. And it's been a lot of building thus far.
Yes. No, we started to collect the fruits of the strategy period and maybe throughout and the values, and it seems that it's resonating very well in the market, especially on the B2B side of the business, of the brand is very strong there. And also, operators within the action and shooter category seems to be -- we are there where those games are discussed and where those projects are discussed...
Yes, yes. And if last year was all about steering our business from active investing phase into turning it into towards profitability, and we reached breakeven in Q4, this year is all about building on top of that with stable growth. So making sure that we take positive movement on the top line while we focus on the profitability.
And that's why we talk so much about commercialization and how can we make money with things that we already have and stuff like that. And moving forward, of course, we're headed towards our vision where we are the guys who are known for the best action and shooter games out there. So if you want action and shooter games expertise, you come to Nitro. And that's also stuff that we keep investing when it comes to our own games and so on.
And then this wouldn't be a webcast if it wasn't financials. Our first half was again obviously better than the previous because we've seen record revenues while, of course, also focusing on the bottom line. During the first half of the year, there wasn't anything super surprising going on with the financials. It's been well within our plans as we've been focusing on making sure that we grow and, at the same time, we control our costs and we haven't invested heavily. So that's why there are no capitalized development costs either. So all in all, really, really solid.
And on the balance sheet side, we were able to start reduction of debt in our balance sheet and do it in a way that we still protect our cash flow. So we landed with EUR 3.1 million cash position at the end of the first half of the year. So all in all, very, very in line with the last -- yes.
And that's the sort of operative update from us and a quick peek into the financials. And before we take questions, maybe worth mentioning where we're headed next after we wrap up this webcast. We're going to Germany.
Tomorrow morning, we will join the largest European gaming event, gamescom annual event, and meeting existing clients, existing partners, lots of new ones, industry friends. It's going to be the big week that kind of kicks off the autumn season of gaming industry, so to speak, and that everybody is starting to talk about those topics that we discussed well on there.
Yes. It's going to be a busy week. We have a nice handful of people with Nitro T-shirts and hoodies headed there. And gamescom is like -- I think it's more than 300,000 people attending...
Yes, it's super huge. Combined with the business side, I mean it's like a city full of gaming people.
Yes. And let's see if we have any questions here. I checked out the e-mail. At this time, we have none. Surprising.
Because it's still summertime.
The first question, when and will we see a new strategic partner for Nitro?
I think this is, of course, something that when it comes to anything happening in the future, you never know. So things happen when they happen and then we, of course, communicate about those. But I think what is sort of clear with Nitro is that the whole point behind the B2B Service business, in addition to being a very good source of projects and opportunities for Nitro when it comes to the operative business, of course, we seek to work with partners who we like to work with and with partners who we can envision with longer-term collaboration. And that means that any sort of more strategic collaboration might happen down the line at some point. But we are focused on making sure that the business side makes sense first and then projects and [ U.S. mobile ] and then we'll see how things play out.
Also, new games or is it just Autogun Heroes now? Definitely not just Autogun Heroes, there's new stuff brewing.
And we keep it all, the part...
Yes, yes. Yes.
Like a few -- last year, we've been more picky about old games also on the portfolio. We've been very selective where to invest and how much and looking for those real, real, real, good opportunities from them or from our whole games side.
Yes. But in Nitro, sort of playing around with new things, we often call it our MVP process. That thing happens all the time, sometimes more, sometimes less, but that's a sort of background process going on all the time. And now I think...
That's looking for games from the market.
Yes, yes. And during the second half, I think it's pretty certain that we will try out some things with Autogun Heroes in very initial stages and see how those play out. Like you said, we're looking into few interesting opportunities on the third-party game side as well. And if things click, then something that might come out of that.
And then -- where is it? When will Supersonic do what they signed for more UA? And sharing for overall nice report. Thank you.
So with Supersonic, like I said, we have a step-by-step plan. The focus on both sides is very much in the long run. We see great potential in Autogun Heroes and, obviously, the partnership with Supersonic because they are one of the giants when it comes to this.
And the plan is also very much in line with them. We are synchronizing the plan like a body because there's -- it's very much in line.
Yes. So what you can expect now during the second half of the year is that we'll continue doing exactly that. We continue pushing out improvements and getting closer and closer to the magical moment of scalability. And after that, we seek to work together for years to come on the game.
Then what else? How do you plan to balance new investment with profitability? That's a good one. And that's something that we've been looking into quite a lot during the first half of the year when we've been building different type of approaches and what we can do and what we can't do without jeopardizing the P&L and cash flow, of course, as well.
And that's something that, like I said earlier on this webcast, you shouldn't expect us to put tons and tons of money upfront on anything, at least not now during the second half of the year. We are not in that position yet, but more like a steady step-by-step progress towards those things. So essentially, anything and everything we're planning to do and negotiating is something where we can take things step by step in a more controlled fashion, making sure that in the long run, we, of course, increase our ability to invest as we go.
And for us, we're investing in some new opportunities, not particularly investing money, but very good investing. Yes, it might be existing, I agree. It might be our expertise, and it's more than that money.
Yes, yes. That's actually a very, very, good point to make because we see so much more interesting cases where people approach Nitro not with that, hey, I need money, but I need this and that talent or help from you or the expertise.
Then, any chance for NERF or is it done? It's the next question here.
With NERF: Superblast, like I said during the first half of the year, we get it very much in low investment maintenance mode. Now during the second half of the year, we seek to figure out what's the best foot forward with that in the long run. We're looking into opportunities to commercialize on the gaming one way or another and things like that.
And also discussing with the likely holder on the topic.
Yes, yes. So there's going to be activity around that now. Whether that will result in something we want to go forward with or whether it's best to keep it in the back-burner mode, that we don't know yet. But we haven't actively focused on it during the first half; and now during the second half, we'll plan to figure it out one way or another.
I think that's it. There's quite a bit of questions that repeat what has already been asked. Yes, yes. What should we look out for in H2?
Stable growth, that's what we are seeking out to do. So we're not seeking to do anything dramatic or in a way that would be somehow jeopardizing our plan. Of course, dramatic upsides are something that, by nature, we, of course, always say, but like we don't want to go crazy with anything.
Yes. And of course, we are continuing with our work in our [indiscernible] looking forward to doing good partnerships and looking for the new games internally, externally, those are natural things that you could...
Definitely, yes. I think that's a wrap. We are done here. So we will close this one, and we'll prepare for our journey to Germany, to Cologne for gamescom. And we will see you again the latest in October when we put out the Q3 report and do the webcast. And also this week, Friday, I'm presenting on the projects, so you can also tune in there.
Wonderful.
Yes. Thank you so much. Have a good one. Bye-bye.