Nitro Games Oyj (NITRO) Earnings Call Transcript & Summary

During the year, we were very lucky to get new blood into the team. There are several new key hires. And mention a few. Ari Kuokka joined as a design director with the background from the Grand Cru, Dodreams. And he's focusing mostly on Lootland but also taking a wider view under the whole design in Nitro Games. Harro Grönberg joined as a senior producer from the background of Rovio and Dodreams and RedLynx. And he's also on the Lootland team as a senior producer. Then Kenny Chan joined us as a senior product manager from Wargaming. He's also in gumi and Ubisoft. And he's leading our live operations and running the [ Nitro Plus ]. That is our live operations tool.

Yes, we will briefly talk about that one as well today.

One more guy, Giuliano Cremaschi. He's creative director coming from Armada, Crytek and Sulake, and he's leading the creative side on a Nerf game cooperation with the Hasbro. We're very proud of getting these super professional guys to joining the team, and there are bunch of others on top of these guys.

Indeed, indeed. And me, personally, I'm especially proud of how we tackled the whole COVID thing last year. Like everybody else, we went into the remote working mode and so on. And I think last year, overall, was a super good stress test for not just our culture, but also for our management and these guys. And I'm super proud how they navigated through all the challenges that COVID brought to the table. And not everybody is able to sort of introduce new members, especially in key positions in these extraordinary times. But I'm really happy to say that we've done pretty damn well on that front, and we're now stronger than ever as a result. Let's have a look at the strategy side of things and the owners. In Nitro, we have a really solid foundation, where one of the oldest game companies are coming from Finland. We've been on the NASDAQ First North Growth market since 2017, so for quite some time now already. And as I mentioned in the beginning, the big thing happening last year was that Nordisk Games joined as a leading investor and we became part of the Nordisk Games family. And it's a group of companies in Europe who are all obviously game companies. So in addition to the obvious funding and support for our long-term strategy, we're now part of a much larger group of companies where there's a lot of expertise inside the group, a lot of potential synergies moving forward as well. Let's have a look at our strategy in more detail.

Yes, as mentioned already a few times, we have a portfolio strategy where we have our own IPs, our own games. Now we have a license games. We have a -- historically, we have had several partner projects, and we're also developing our own tech. The tech is something that we share the technology between all the projects. We run the minimum viable product process to find those pearls. And then we have [ Nitro Plus ] when we have a game on a live operation we can utilize and scale all the potential of the game with our tech.

Indeed, Indeed. So overall, after last year, our sort of stack of Nitro-branded things includes Nitro Platform, which is our proprietary development technology that we've been using for more than 5 years now. It helps us to build all our games on the shared technology platform, both on the client side and on the server side. And then we have Nitro MVP process, which is our way of developing the games and getting that data validation from the market very early on. But as a new thing, as a result of last year, we now have [ Nitro Plus ], which is our live operations tool. And what that essentially means is that we can operate all our games in live without having to do client-side updates to the game to make any changes. So we can just go into web browser and the guys can modify a lot of things on the fly, from live events and so on. And this whole offering is something that we utilize in our own projects, but also in our projects that we do with different partners out there.

I would like to highlight that even though that tools and tech is for our own use, pretty much all of our partners in past have been in validating and evaluating our tech, and it has been proven to be good development and testing and live operation running tech and tool stack for the Wargaming. Amazon has been evaluating it. Unity has been evaluating it. Netmarble, Avalanche been using it. So it's working.

Yes. It's definitely a valuable asset for Nitro to have. And speaking of partners, let's go to the following slide.

Yes. Partner network is something that we've been building for more than 10 years, and then we have very wide network of industry friends all over the world. And even during the times of COVID and travel restrictions, we've been keeping very close relations with our key partners, something that is typical for our partner projects and is that normally, we're starting with the pretty small projects, testing something, looking for data, looking for the suitable concept as we do with our own projects. So we first find the fun and then we find the data to prove the fun, and then the projects normally expand to be something bigger.

Indeed, indeed. And the upsides of working with these big partners, like we have done historically, is obviously that we get to work with some industry-leading players and making sure that they are aware of how Nitro does things, and it helps us to kind of like stay in the loop. But it also gives us a ton of new learnings. Like every new partnership, every new project, we always get insights into how they are doing things and learn so much about these things. And obviously, it helps us to drive some revenues as well and create some long-term upside in the end. If we look at the game portfolio and the opportunities for 2021. Obviously, the first thing to talk about is Lootland. This was very much a game in our focus during the second half of the year. And with Lootland, we are now like very enthusiastic about all the cool things happening in 2021. We put a lot of effort and focus into this game, this team, the whole process of taking it to the market during last year. And with Lootland, we are taking things step-by-step in a very disciplined manner and making sure that we don't rush through any phases in our pipeline, but take things really, really carefully. And so far, what we've seen has been really promising and really encouraging in the technical testing. And we've gotten some questions from our shareholders, like before this session that -- what's the difference between technical testing and soft launch, for example. So if we go to the following slide, what we have here is our game life-cycle funnel. And technical testing is something that we do in -- basically, all the phases, starting from concepting to preproduction to production. And the big difference between doing technical testing in production versus going into soft launch, for example, is that in technical testing, we do measurements in what we call bursts. So we might acquire a bunch of users, then we measure the data, and then we continue forward with the development of the game based on the data. Whereas once you go into soft launch, you are still basically live on the same selected few markets, but you're actually sustaining the amount of daily active users you have and supporting that with continuous user acquisition. So things are much more bigger in soft launch and much more expensive as well than in technical testing. So now when we have the luxury of focusing on our long-term strategy and the long-term scalability, we don't want to rush things, but take things step-by-step and making sure that we have solid grounds after every step. And that's a big difference between technical testing and soft launch. Obviously, for Lootland, soft launch is very much on the horizon. We're looking forward to getting that started.

Our big breakthrough from the second half of last year, the cooperation with the Hasbro, the Nerf game, it's not yet into the -- any of the testing, but still on a preproduction. Cooperation with the Hasbro team has been very good. We have had several connections and workshop with the guys. There is a huge community on Nerf, around Nerf, both the adults who are friends of the childhood toys, but also the underaged who are still playing with the toys. And we see there a big focus fit with our expertise, our tech, our capabilities on this sort of action games. And there is also opportunity to have a kind of schoolyard win product where all the kids on the school are speaking about our upcoming game with the Hasbro and the Nerf game. That's something that we are really, really excited and taking it step-by-step towards the production and, later on, the technical testing and the soft launch.

Indeed, indeed. And with the whole project with the Nerf brand, things are like -- it's something very different to what we've done in the past in terms of that. This project is based on all our learnings that we've done, both with our sort of launched shooter games and also games that we have had in the MVP process. We have the dialogue with Hasbro for more than a year before we even signed the deal. So it's been prepared and cooking for a long time already now. And with this one, it's something that, while we are seeing the market and the category developing and creating avenues for new type of titles, we also believe that what we have here is a sort of perfect brand to gameplay match, which is super essential when you work with licensed IP in general. And then, of course, we have a third game in the lineup for this year, which we haven't announced yet, and we'll leave that for a later date, but that's also something that we're pushing forward. If we look at the what's cooking in terms of our future opportunities, as we said already so many times, we're seeing an increasing amount of interest towards Nitro because we are working on a very sexy, very hot category at the moment and we have the capabilities there. And overall, what we're doing is we're seeking new opportunities for Nitro that support our long-term vision. We're not seeking any sort of short-term relief or any wrong type of things, but things that support our long-term vision, much like we did with the Hasbro brand, for example.

Yes. There are lots of opportunities around different entertainment IPs, branding licensing opportunities on our existing tech or concepts that we have seen new platforms rising. It seems that the instant gaming platforms, that there is starting to be a room for the real games. There are some mobile games going into the PC, supporting the -- some existing mobile games into the PC. Some of the Western companies are starting to, again, to take the games into the Chinese market, and there are lots of these kind of not new opportunities, but maybe opportunities that has been in a pause for -- during the COVID time. Now that the situation is getting better and better day by day, it seems that the business development and opportunities, there are more and more action every day.

Indeed, indeed. And from our point of view, it's good because, basically, all of these opportunities, one way or another, are something that we have done in the past in our history one way or another. So there is really nothing that would be completely new for Nitro in a sense. Moving forward, let's have a look-see at the financials. So what we have here is our P&L from the previous year and obviously comparing to 2019. And most of the activities on the financial side in 2020 actually happened on the balance sheet as a result of Nordisk Games joining us as a leading investor and investing SEK 45 million into the Nitro. But despite of the fact that we focus very much on our portfolio and building our pipeline for new launches this year and chasing new opportunities, at the same time, we still saw a notable increase in revenues during last year while we were able to work on improving our EBITDA further. That's visible on this slide here showing that the direction where we're going is definitely the right one. But obviously, we are very keen on increasing the pace, like we are seeking to get scalable growth in Nitro and this is the foundation that we have right now. If we look at the bigger picture in terms of the road map that we have, this year, it's all about the new game portfolio. We have the 3 titles in our pipeline for this year as well as a bunch of new opportunities that we're seeking. And all of this is part of our strategy, chasing our long-term vision, which is to become a household name in the category of shooter games. And that means we're seeking to have a portfolio of these shooter games on mobile and, therefore, scalable growth. Let's summarize all these things a little bit. So overall, Nitro is super well positioned. The market is positioned exactly like we want it to be, like everybody seems to be wanting what we are building, which is a very healthy and happy place to be. We have our own titles to match for that, and we have some new opportunities cooking as well.

Yes. The category is growing, and there are new subgenres and subcategories are born all the time. Our capabilities, expertise, tech and tool, we are in a very good momentum to utilize that growth and momentum. And there are several opportunities brewing on our business development pipeline and also in our internal development pipeline that we are planning to utilize going forward.

Indeed, indeed. So I think that wraps it up for this time. And now let's see if we have any questions. Thank you very much for joining.

[Operator Instructions] And there seems to be no questions, so I'll hand it back to the speakers again.

Perfect. Thank you. Looks like we were sort of preemptive with our presentation and did a good job there because no one has questions. Very good. So that's all from this time. 2020 was a good year for Nitro. 2021 will be even better in so many different ways. We are well positioned and very much looking forward to this year together.

Thank you. See you.

See you all soon. Thank you, and bye-bye.

Bye.