Nitro Games Oyj (NITRO.ST) Earnings Call Transcript & Summary

Fourth one, Pistolo.

Yes, 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 game play, 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 to 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 more and see how these things go.

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

Yes, but also with some new...

Yes. We are gaining expertise on other ones. There is opportunities to get totally new games into the mix. And we have Warframe with the Digital Extremes.

Yes. 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 still remember, but this one we started pretty small. I think, we had a very small prototype in the beginning, like many, many years ago.

Yes. Something like that.

Yes. 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 there are 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.

Yes. And I think, I'm super happy that since we're starting two new partnerships now in Q3 with VOID 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 how to...

Afterwards we're proving ourselves, trying out new collaboration, and it seems to be working for us and for our partners.

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 add up 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 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 two of these are mobile free-to-play. So we definitely want to continue exploring that domain as we are with every game, every release, we're always getting better and better and better. The potential in free-to-play mobile once you finally hit the scalability, that's obviously, enormous.

And two of them are normal. PC premium, console premium and exploring that old world for us again, and 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 Autogun Heroes: Supercharged are good, sort of, learning tool for how the whole stream 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, then with the success scaling bigger with the same method works in our internal new games process calling it the MVP process, but still, it follows pretty much the same kind of model internally. Minimize the risk for the investment risk in the early days. And then, when there are enough proven results, then invest more.

Yes, indeed. Indeed. And I think that's well in line with the other goals we have for this year and especially the financial stability and the long-term profitability. So if you compare this year to some years behind us in Nitro, we're making a little bit more investments in new products, but a little bit smaller in terms of money. And why we can do that is because we have obviously learned, but we have so much more efficiency in the team. And 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 there is something unique in Nitro that we always want to repeat and one of the big USPs.

It's our greatest and most valuable assets, and way the team, internal and our global partners, and this is the model that we've been working now for 18 years.

And are always further developing.

Further developing, improving it and it's not only scaling up, it's toning down. It's not scaling down, scaling up. And 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 projects. And also that gives us a benefit of adjusting fastly.

Yes, yes. 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 professional that they have worked on so many different types of games, not just in Nitro, but wherever their previous careers might be.

Different platforms.

Yes. In different platforms, yes. 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 train -- and train and nurture people into this business as well. And about the longevity, if we then move to the third goal we had, which is our financial stability. If you look historically or zoom out, we now have 5 years of consecutive growth under our belt. Last year was, therefore, clearly the best year of those 5, 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 margin 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 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. This 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 says also that the sentiment on the market is brightening up. And 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 a third time, that's the truth.

Yes, it's been a little bit tough in the industry around us for 3 years now, maybe.

Yes, after the pandemic, I think.

Yes, yes. And I saw a good LinkedIn post from one of our industry friends saying that there has been, like I said, two sort of four starts that maybe now 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, and 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 pivot 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 they are securing new ones after the reporting period. And this then again translates to basically everything below that. There are some changes in the staffing costs, which for us are basically in the materials and services, but also in the employee cost and personnel costs. So it's a combination of those two. And basically in the long run, our main focus in this transitional period is usually to protect our cash. 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 debt. 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 all of it.

Yes, 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.

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 question. Let me check here quickly. If there's anything in the inbox or anything. It pretty much seems like maybe not. So perhaps we have we have been...

Everything was clear.

Yes, we have been very pretty preemptive in our presentation this time it seems. Coolness. So thank you, everybody for tuning in.

Thank you so much.

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.

Gamescom.

Yes, a lot of business development this week. Thank you all. A great week. Bye-bye.

Bye.