Nitro Games Oyj
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Good morning.
Good morning.
[Foreign Language]. I'm Jussi Tahtinen, the CEO and Co-Founder of Nitro Games.
And I'm Antti Villanen, the CSO and Co-Founder and Board member of Nitro Games.
Indeed, indeed. And this is our webcast for the third quarter 2021. So welcome.
Welcome all.
It's been a pretty good quarter. So we have to talk about.
[indiscernible].
Yes. So without further ado, let's go forward with our agenda for the day. But before we get into details, a super quick overview for those of you who might be new with Nitro Games. And we are a Finnish mobile games company. We're a global powerhouse in a sense that we have teams pretty much all over the world that we work with one way or another. And we do action and shooter games. And that's a category on mobile that has been very much increasing recently. So that's obviously playing really well for Nitro.
And we've been around more than 10 years with long history and experience on this area.
Yes. Indeed. So that's where we are, video games. And if we check out some of the recent highlights, especially from our report and so on, we can see that our revenues improved, whether we compare the interim period year-on-year or whether we compare the third quarter to the previous one. And also, our EBITDA improved. And what this means for Nitro is that this is basically playing out like we planned unlike we've discussed earlier. We are running our portfolio strategy where we combine basically our service business, which gives us short-term revenues together with our game portfolio, which gives us launches in the future and hockey stick potential in a way, and step by step, we seek to improve our revenues and improve our EBITDA towards profitability. So the numbers now reflect our progress, and we feel it's very solid for the third quarter and the pace is good. And then in addition to the numbers, we were again active in business development.
Yes, on that field, we both were capable of signing the new customers. But I think even more important, we have quite a lot of returning customers and the new cases for the existing clients and partners. We did a new deal with the Snap. We came to the Snapchat channel. Pretty significant deal with Digital Extremes, and development project with them is going smoothly and according to the plan towards the next steps on that project. Then with the one U.K.-based PC and console developer, we were capable of selling in our prototyping and our method of early testing and validating the games and ideas early enough, kind of our MVP process, and that's very, very good start for the partnership. And on top of that, we were again selling something more for that one big U.S.-based publisher on mobile space. So overall, being capable of finding new clients but especially the highlight on our returning customers and returning sales. That was the great thing on the period.
Exactly. And it's perfectly aligned with our strategy because, obviously, we must have done something right that we get returning our customers with an increased order value. So that's obviously good for us. Speaking of testing, that's very much been in the plan when it comes to our game portfolio. So basically, after the summer holidays, we've continued with our margin of doing marketability testing, doing technical testing and preparing for soft launches. And now we're basically at a point where we step by step again based on the data how we start to roll out the games in the soft launch. And the first one to get to that phase is our first game with Snap. So that's now starting the soft launch phase. And of course, we're super excited because it's our first time ever on the Snapchat platform. Historically, we've been working with the native platforms, so Apple App Store and Google Play. And what we mean when we talk about soft launch is basically just taking the next steps in our project life cycle. So everything from the game concept phase is very data-driven, and we're testing some of the markets. So soft launch is a natural continuation point, and that's typically the point where people pay attention because it ultimately leads into the decision that, is this game good enough for the global release or not?
Can it be scalable and how high?
Yes. Exactly.
Yes. For the service side and especially on the business development, we've been strengthening the team quite a lot. And that will result in the good results on a period. And we've been doing the kind of more resourcing on the side of the new sales but also for the key account management. Now that we have returning customers, we want to put a lot of effort on making those new deals with them and keeping the relationships and keep the customer happy.
Yes, indeed. And that's something where historically, we've been working with different type of customers for so many years that we've learned to appreciate that there's one side of the coin where you need to deliver what you will create to deliver, but obviously, it's all about relationships as well.
As people can in a way.
And speaking about people, let's go forward and talk about our next topic, which is our team and partners. And if we look at our setup here in Nitro, what we have here is our global team. That's how we like to call ourselves these days. And this is a combination of our in-house talent and our external talent throughout the world. And in-house, we have two studios in Finland, and we seek to keep our in-house team lean and mean and effective. Our approach is basically hiring senior talent, hiring the best people we can get for our in-house team while, at the same time, keeping the head count relatively small. So we've been telling the same story over and over again in the past as well, but we're seeking to improve our team step by step with selected key hires, but we're not seeking to dramatically increase our head count internally. And the actual scalability and efficiency and the ability to react to more and more new deals comes from our external ownership.
And even we're talking about internal and external, the borderline is quite going hand in hand and pretty much all of our projects somehow include external resources, internal resources.
Yes.
And some of the projects are more driven by internal team, and then there are some supplements from the external teams, and some projects are vice versa [ and are ] led by our partner studio, and then we are putting some resources to the mix. On our external side, we have roughly 200 people in several studios here and there, everywhere, and scalability, reliability and also to support our business development is the key thing on this one. I would say that the -- now that model has been working for several years, it's starting to blend into the one team even though our payroll and our cost structure doesn't suffer from all of those resources all over the world.
Exactly. Exactly. And I think we -- especially during this year and especially after the summer holidays, we've gotten better and better in taking advantage of all the shared things that we have, like whether it's technology or processes and what you described by blending things together in a more effective way. And that's just means that we are able to increase the quality without increasing the price tag too much, and that's obviously a fantastic thing to have. And then if we look at the other important aspects, of course, we have our owners and the strategy. So the foundation, so to speak, what we're doing here in Nitro, and our foundation is very strong. What we mean with that is that on the other hand, the company is old. We were founded back in 2007, and we used to do PC games, and then we did a little bit of console along the way. We've been doing mobile for a long time. So a lot of people here in Nitro, not just the two of us, we've seen market cycles come and go. So that experience is there, and the understanding and the high-level perspective is there. But in addition to that, we also have a very strong foundation when it comes to our shareholders. So we have good support from Nordisk Games, for example, where we're part of a bigger family.
Yes. And I think in the Nordisk Games, it's pretty much same as with our customers. There are those deliverables and hard facts and projects and on top of that or underlying is the strong and good partnership. And I would say that with the Nordisk Games, it's the same. There is a really strong commitment in two ways and partnerships and personal relationship towards the Nordisk Games and all of the studios under the umbrella. And there are lots of business opportunities. There are lots of discussions, sharing the knowledge, supporting each other, and the model is actually working really very well.
Yes. Yes. I think it's very good for Nitro to have such an active shareholder who is very familiar with the industry, but still is...
Outside of that.
Yes, it's not an industry company like a game publisher or game developer, so we get to cherry-pick all the good parts, but we don't get the downside. And if we look at our strategy, we have a two-legged strategy or twofold where we have two main elements. And the whole point of our strategy is to take advantage of our capabilities in this very hit-driven creative and mobile games market. And the first part of our strategy is to build a game portfolio of action and shooter games. This is essentially us using our talented team, reusable technology, all the learnings as we step by step, get closer and closer of having that hit game. And this portfolio is basically building our opportunities for hockey sticks. So that's how we are seeking to maximize the potential in this hit-driven market. We focus on a very specific niche, and within that niche, we can learn and so get better step by step. And...
That's the same time. The service business for our creative partners, that's balancing the risk on a hit-driven, self-publishing also generating the steady revenues. Also, our people learn with the new things, new technologies throughout the different kind of projects. We give a validation while one of the Tier 1 companies from the industry is working with us. That's a great validation for the company and for the team our team members also. But in long term, also the service business side of the things is all about the upside. And we always try to formalize the deal so that there are some sort of upside after the project revenues.
Yes. Yes. And one could maybe say that the service business slightly more traditional way of us in [indiscernible] with the more traditional upsides as well, where it's, you can get access to revenue share, you can get access to different type of bonus payments, or sometimes these bigger players acquire your company, or there's so many ways how that can play out, whereas the game portfolio and especially self-publishing is more on the new side. But then, again, like we discussed with the team about we're blending these two, the same goes through for the portfolio and the business as well. So we might sign our own titles for some partners territorially or blend the things to control the whole process basically. Good. So that's our owners and strategy. And as of now, as we can see in our Q3 report, the strategy is working out. It's playing out like we anticipated, so we are happy with how things are progressing. But then again, at the same time, we're not there yet. So we're still very hungry going forward. Next up, let's have a look at our project portfolio, where we have a nice little blend of these games and service business projects at the moment.
As we're looking at this, I think this is a great proof of our multi-project model where we are capable with -- even the internal resources are not that big, we are capable at the external resources and run the kind of real multi-project model that's now proven to work.
Yes, yes. Typically, in games business, the thing that slows you down from increasing the amount of project is, how to say it, the speed and cost of hiring and recruitment in general. But for us, that's really not a factor in the play because we are in a happy place in a way that our business development and sales don't need to worry about how do we staff these things because we're constantly recruiting the people that we need for the in-house team, which is typically a minority of the thing and also wants to be looking out for new teams and partnerships that we can cooperate with. And so far, it's playing out really nicely.
Yes. And I think given the scale of the project from current amount, this wouldn't be a problem.
Yes. If we have a look at what's actually happening inside the portfolio, let's take the game with the Nerf brand first. So this one has been in technical testing and marketability testing throughout the summer. We've been validating a lot of things with target customers and so on. And right now, the team is busy pushing through the remaining steps in production, and parallel to that, we are together with Hasbro preparing the game for the next steps, which obviously includes soft launch moving forward and should everything goes into there and a global launch after that.
And it seems that the excitement for the game is -- in both side of the partnership is really very, very high, and there is a high expectation for good support for the game.
Yes, yes. This is one of the biggest projects we've had in our game portfolio for some time, and really happy to see it progressing so well. And then next in line, we have new mobile game for Snapchat platform. This is our first game with Snap. This is the one that we're just now putting into soft launch. So that phase is now starting. Everything has gone well, pretty much exactly as planned. And like I said in the beginning of this call, obviously, we're now super excited to see how things go. We know, obviously, what we have in our hands in terms of our game, but this is the first time we actually get to test it on the platform. So exciting to see the results.
And also, it's a new way of launching the game as it's in the Snapchat channel, and it doesn't follow the traditional mobile game launching method for, but there are some new things also on that.
Yes. And it's also a little bit new way of doing soft launches for us. We are learning as we go since Snap is very heavily involved here because it's their channel. They know how to do things on their platform. So we're kind of like learning all the time and preparing because we have more projects with them down the line as well. Then we have our Lootland, which the most recent developments are that we signed it with an external development partner who basically continues the finalization of the game from where we left off as we have to assign our internal resources to some new stuff before the summer. And Lootland has progressed really good with the new development studio. They basically...
I think ownership is mostly that they really took the ownership for the development. And they've shown that they really can do a lot with the game and especially how they got in quite fast and started to create a new needed stuff for the game and weak old ones.
Exactly. Exactly. And I think that's a really good way to put it because it doesn't feel like it's our game that they are developing, but it feels like it's their game, and they're really adding value and contributing. And I'm personally really happy with the new stuff that they're bringing to the table with the game. And I think it helps to maximize the potential once we take the game to soft launch moving forward. And then next up, again, Snap logo there. So as Antti mentioned in the beginning, we signed a new project with Snap. Obviously, we haven't announced. We haven't spoken about the details or any of that, so it's still super secret. But it's a new game. It has now started really well. Things are going as planned, and that's probably all we can say about it at this point.
Yes. I think from the development point of view, we can now then utilize the experience from the previous ones. And then now we are creating kind of Snap game powerhouse, one team that kind of concentration on those games and caters the knowledge and expertise on how to make the best possible Snap game.
Yes. And of course, it's very good to see our portfolio strategy mindset playing out there as well that we get several shots on goal. So it's not just depending on one title.
Yes.
Then if we look at the lower part here, then we have Digital Extremes. This is the project that we've already discussed, but it's a big development project where, obviously, we're cooperating with a big company there, backed up by even bigger company behind. And again, because it's customer project, we can't go into too much details, but what can we say, progressing really well.
Progress really well.
We're really happy.
Even though a little bit complex setup as being several stakeholders on a player, I think it has been really smooth, and even with the remote distance to the customer and all that, it has been played out very well. And we have gotten lots of responsibility from that one and kind of ownership from the -- for the -- our stuff is kind of on our end.
Yes. Yes. I'm really happy with the type of role that Nitro has been able to take in this project and how it's shaping up, especially thinking about the long-term potential with this one. I think we acknowledge that we're still early, but it looks super strong so far. So I'm really happy with that. Next up, we have the project with the U.K.-based PC and console games developer. And as you said earlier, this is our opportunity to actually take advantage of our MVP process and especially the early steps in that process in doing a lot of market validation and concept and prototyping and so on.
I think this is quite a new thing on our own PC and console environment to have a very data-driven early testing approach. And there might be something that our client will benefit a lot for this kind of approach.
Yes. I think the upside Nitro can bring to the table is that, okay, we're mobile games developer and publisher, but then again, thanks to our background and history in PC and also, to some extent, in console, we kind of get that mindset as well. So we have a pretty good understanding of what PC and console game developers think about even though we have a...
Yes. We're [indiscernible], and we cannot restore this quite easily having that experience.
Yes. And then we have the U.S.-based mobile games publisher where, again, we're working on something really exciting. But unfortunately, we can't go into details because it's not our game. But that's validation for Nitro. It's now returning to customer...
Very, very much consolidation.
Yes. Yes. And we're seeing really good synergies there in terms of like especially some processes and approaches and learnings how we can take advantage of those things moving forward but difficult of going to details without talking about what the thing actually is, but maybe one day.
Yes.
And last but definitely not least, we have our Nitro MVP process. So as I mentioned in the report, we have increased our level of activity with the early funnel to make sure that Nitro has a continuous stream of new opportunities and new concepts and new games to test for 2022 and beyond.
And this doesn't serve only our own internal and our own games but also our external partners and all the stakeholders at the same mindset and the same process.
Yes. Exactly. Then if we check out the numbers from the report, what we are seeing is basically us continuing our solid progress. So like I said earlier in this call, our revenues increased, and our EBITDA improved, especially compared to the previous quarters. And overall, the approach we have with our financials is that we are seeking careful managing of our cost structure as we seek to increase our revenues and improve our EBITDA step by step moving forward. So in that sense, there's no surprises in the financials. It's us taking the steps that we are -- I would say that we try to take. The picture comes a little bit more clear if we look at the progress with revenue and EBITDA quarter-by-quarter. As we can see here in this picture, there was a notable increase in revenues while still a healthy improvement in EBITDA, and this is the margin that we have moving forward as well as we take Nitro step by step towards profitability. And then if we look at the -- what all these things mean when we look at the big picture, here's our road map. This is a slide that hasn't changed too much in the -- for years now, I guess. So our plan is still exactly the same. So we listed Nitro Games in 2017 in First North in Stockholm, which was a very good move because it allowed us to really invest into our technology and team building and building our portfolio and fine-tuning our strategy. Then in 2020, Nordisk Games joined as a leading investor, which basically gave us the peace of mind and ability to really focus on the long term while we start delivering improvement short term. And I think that was the piece of the puzzle.
Big turning point.
Yes. Yes. And now this year, it's all about expanding our project portfolio, and that's exactly what we're doing. So we've been, again, signing more projects. We've been signing returning customers. We've been putting more of our own games into our portfolio. So expanding is very much what we have been delivering already this year. And...
All of this history and now expanding the portfolio will lead us into the -- our vision to become a household name in the shooter category and meaning that we have a portfolio of shooter games and portfolio exactly as the reasons you are planning to mitigate the risk and having the best possible upside on there. We are looking for scalable growth. We are already seeing some early signs somewhere regarding that one. And end of the day, to increase the shareholder value.
Yes, yes. And should everything go as planned here in this road map, we will continue our incremental improvements step by step and take this company towards our vision during the next few years.
Yes.
So, so far, everything looks good with the big picture. And that basically concludes our storytelling as of today. And then now I think it's good time for some questions. We have received quite a few questions through e-mail as well already beforehand. Thanks a lot for those because they help us to better understand that what are people following Nitro expecting us to talk about and hear about.
And if we take some of the first ones, we have some questions about one of our back catalog games, Heroes of Warland. What's cooking with that and the fact that we have killed the project? What does that mean? And is it ever going to see the light of day? And I think that's a prime example of our process working as it should.
Process and take.
Yes, exactly because you don't want to continue investing time or the money to projects which are not performing up to your expectations. But then again, the beauty of this portfolio strategy is that we can reuse the technology and the learnings and the things that actually did work in new opportunities. And I think the easiest thing there is to look at the game that we do with the Nerf brand. So it's taking advantage of the so many things that we learned and developed during Heroes of Warland, period. But in terms of Heroes of Warland as a game itself, no, you shouldn't expect anything to happen with that in any foreseeable future. Of course, we still own the IPs and the trademarks and everything, but it's mostly about reusing the parts that did work in future releases. Then what are the opportunities for Nitro to develop games for other platforms such as Snap, for example? I think...
That's we already proved -- proven. There might be some other instant gaming platforms that might be interesting in the future. But now at least seems that the Snap is quite dominant in the Western world on instant gaming.
Yes. It's very much the logical place to start at least. But I think it's worth mentioning that in our business development where we increased our capabilities, it also means that we are more and more able to explore a different type of opportunities on different type of platforms and secondary platforms and all that moving forward as well. And then this question about the acquisitions. And what's our thinking with that? And is it an opportunity to grow further by acquiring maybe some of our development partner studios and so on? And well, I guess this is something that we have been talking about in the past a little bit, and Nitro is very much open for that as long as we find the right target. So that's what...
I would say that the whole external development model is built so that we get to know the studios. We get the people. We know the finances. We know what they have done, what they are doing, what they are capable of doing. And that's kind of slow research of the market happening every day as our teams are working with our partner teams.
Basically constant due diligence process in a way.
Yes. And much better than just the paper as we'll be working with the several of good guys over years and years.
Yes. Yes. Exactly. Then let's see the -- then there's a question about the unannounced game, which we were active with in business development earlier this summer, which we've now left out. I think that's again a good example of our process working, so one of the upsides of the portfolio strategies that we get to choose the best opportunities for Nitro. And with this one, we decided that the opportunities on the table were not the best ones for Nitro. So we decided to focus on more lucrative things instead and go forward with those. So at least, for the time being, that's now off the table.
Also, one question regarding other resources to bring in additional projects.
Yes.
And with the internal-external development model that we have, we do have lots of resources to bring the additional projects, and our BD and sales are busy looking for those, and we have some projects brewing. And I would say that we haven't even seen the ceiling yet, and we can scale the amount of the projects significantly up.
Yes. exactly. And I think as we go forward step by step within -- with our journey, it should become more and more obvious for shareholders and people following Nitro as well [ to forget ] why are the guys choosing the opportunities that they are and how does it all fit together. It's, of course, when there are so many things that we can't talk in detail yet, it's difficult to form the big picture, but I think, step by step, that will become more and more clear to everybody as well. I think that's covering the stuff that we had from e-mails and other sources. Now I would like to check if there's any questions on the phone line, maybe.
[Operator Instructions]
So let's see. Typically, we don't have too many questions on the phone line, but...
Today we already had a few beforehand. That's really nice.
I think it's also related to that...
Sorry, there seems to be no questions from the phone lines at this time.
Okay. Well, I think what we were saying is that we're really happy with the increased amount of activity on the communications we've had with our shareholders and also happy to see the amount of shareholders increase because that's what we're about. We're here to build shareholder value for ourselves, of course, and for you. So in that sense, we are very much into having an active dialogue about how we're doing.
And feel free to throw out the questions also outside of these presentations.
Yes. Yes. To me, mostly. Okay. I think that's a wrap for this time. So...
Thank you so much.
Thank you. And long story short, third quarter was a good one. We will keep our heads cool. We're not done yet. We'll continue step by step to the right direction. Have a fantastic day.
[Foreign Language]
Buh-bye.