Nitro Games Oyj (NITRO) Earnings Call Transcript & Summary

Yes, yes, I think the fact that we have what we call frame agreements with a lot of these partner studios in place and then we kind of order workloads from time-to-time depending on what the need is. It definitely helps when we're scaling up because then we can get more stuff to work on the project is weaker, but it also helps if times are trouble in when we want to scale down and that is also something that we can quickly, simply not ordering more stuff. And I think the fact that we've been building long-term partnerships with the key studio we work with, is something that helps us to navigate again through uncertain times in the world because we can rely on those partner still being there. We weather them over and over again. And then again, in the long run, those are still potential targets for acquisition or deeper collaboration when these go that direction. For example, like we do today, we ended up acquiring the game project from them and working with the quarter be.

Talking about the partnerships, I think the strongest one that we have is our main, Nordisk Games and that has been developing now for some year and deeper and deeper in operative level, we are working very closely. There are lots of synergies between the -- between the companies in Nordisk Games family. We are sharing the marketing intelligence. We are sharing lots of different kind of information and best practices and how to handle the difficult situation if the world is shaking around us and we couldn't be more happy of this partnership and order.

Yes and I think it gives us really good leverage also in terms of being part of a larger group of companies where if somebody hasn't maybe heard of Nitro, in some case they definitely have heard about some of the other companies or Nordisk Games themselves. And I think the fact that they are very much gaming people without with not directly being a games company, means that the whole world is open for us to explore in terms of -- especially with our B2B service business, but still we get the leverage and support from those people who are very connected in the industry. So...

Excellent and I think you said kind of magic key word people and even though there are business between the companies, but the people in this group, they are really sharing the same mobile.

Yes, definitely. And together with our team and obviously with Nordisk Games, who very much shares our vision and that's the reason why they are on board supporting Nitro so much is that we want to be your global powerhouse and household name in the category of shooter games and action games in mobile. Shooter games in mobile are something that is already very big. There's been great successes in the category, but also something where there's still very much room to grow and different type of approaches to the category. We will soon talk about the games that we have and explain a little bit about why we're going little bit different directions with each and so on. But that's definitely something that we focus on. So we want to be laser sharp with that.

And how we measure the success is that there is a kind of long-term play with our games. We are not just the blockbusters of one weekend, they are kind of years and years of live operation and further developing the game and optimizing the marketing funnels and optimizing the LTVs and all that. So we want to create that sort of experiences where people are spending time and money, well, for over.

And I think sort of defining success by how much your players want to spend money in your game is a great way in free-to-play because no one is obliged to spend anything. And I think it's good to see that both with NERF: Superblast and with Autogun Heroes which is only a soft launch, but still in both guests players are definitely happy to spend their money in the game. And that's really good and especially consider the long life cycle of the games.

Excellent.

Yes, from people point of view again, we definitely want to be the best employer varies in this business. There's no question about that. There is bigger companies and Nitro there are smaller companies and Nitro and everything in between, but we want to be the best place to work in this business and we want to be the best people as well, whether it's about the level of professionalism or the culture that we are actively developing here, but...

No that is area where we are investing a lot and especially investing a lot but of course there are some resources require, but mostly kind of thought. It is the team is something that we are discussing all the time with the leadership forms and how we can improve as leaders and how we can improve the conditions within our team here in Finland and also with our partners.

Yes. And I think from story point of view, what sets us apart maybe from some other companies are not necessarily from all of them, but at least some is that we're definitely here to make huge things happen. So even though, like, for example, last year, our revenues 175% increase, some might consider that like bigger and so on. But for us, it's just a stepping stone on our way moving forward. So we're definitely in this business to make huge things happen. And we will not be satisfied until we get there, no matter the growth that we get out of the way. And of course, we're happy for that as well. Then how are we exactly getting there? That's why we have our strategy. And in our strategy, we have 2 legs, we have our games business and our B2B service business. And our games business is the business that is there to generate the hockey sticks, that's our sort of risk part of the business where we're seeking those big successes and are seeking to get this thing into the -- being huge. And moving to 2023, we have 2 games that made it as a result of 2022. So in 2022, we measured several titles, either in soft launch or in our MVP process, some of which were developed within Nitro, some of which were developed outside the company and simply put selected the best. And NERF: Superblast went into the launch phase in September last year that are in here in Nitro we have roughly 6 months launch phase, no now the game is approaching the end of the launch phase and we have been measuring the KPIs and trying out different thing and so on and now what we're seeking to bring new system, move forward to the live operations phase. And with NERF: Superblast, the focus at the moment is very much in profitability. So that game is now going through this type of steering where we prioritize profitability over revenue growth. We are in position where we could grow the game a lot bigger by investing more into user acquisition. But then again, seeing sometimes in the world are not the most certain and especially the markets being what they are, we don't want to end up in a position where they are too big of a risk with that one. So things that we're taking slow and optimizing profits first and then growing the game afterwards. And we believe that with the long-term mindset this is definitely the right strategy to take in this point. Then again, Autogun Heroes, which is also a great game is something completely different. If NERF: Superblast is a multiplayer team, a shooter where we are doing like a lot of different type of evidence with a lot of players involved, Autogun Heroes then again is a single player experience, which is much more controlled in a way players go through in a different up funnel. So it's definitely not cannibalizing NERF in any way because it's a completely different type of experience, but still a shooter game very much.

And there is a kind of sub [ share ] this kind of game in market with very successful games in short currently, market is still up there and early feedback that we have gotten from the market is very, it got.

Yes, definitely. And I think with Autogun Heroes even though it's just kind of like in the very first days and weeks of the soft launch phase, of course, we mentioned the game already last year and last summer before we decided to go into acquiring it, but we're super happy with what we've seen so far and very much looking forward to how things go with that one this year.

As on games business, we are focusing on winners so to speak and it's good to remember that at the same time, there are bubbling under some new stock, but same we did with our B2B service business also. So focusing for the big impactful cases, focusing for the cases where we have clear view on the project, we have some sort of elements of potential success. And also we believe that those cases are something that could break through on our market. So digital experience being a very good example with the game on that one. Very exciting times, working towards the times that we can reveal what we've been working for quite a long time. And same applies with the supermassive games and game with them and now going through the steps on our development that it won't be too long when we can come out with what we've been working.

That's, of course, one of the highlights of this year in particular, if you ask me, is the fact that the sort of maturity of our projects has increased a lot. So with our games business, we are now at a point where NERF is already generating revenue and it's already on the market and we are growing and moving forward with that one. And then we have Autogun Heroes where we've already seen that it can make revenue from the data that we've seen so far and we are looking forward to getting that rolled out with the full launch and everything. And while overall, we can expect our games business to increase in its size and role for Nitro overall this year, the same applies in B2B so is different.

Also both of the projects are currently, but then there are naturally our busy of looking for opportunities for Nitro all the time.

Yes. Cool. And then if we put our strategy into the context of our roadmap, we start with the current strategy from the beginning of 2017. And what we've been now doing the last few years is that in 2021, we expanded our process portfolio. That was the theme of the year to expand in a lot of horizons to make sure that we can go forward with our process where we measure everything and then focus on the winners. Then last year was exactly that year when we measured a lot of things and started to focus on the winner. So we did tons of launches in MVP, soft launch and so on and so on and concluded with NERF: Superblast and also Autogun Heroes.

We have brought some new areas like instant gaming, inter profile gaming and all of those and now we feel that the portfolio fit is very good for that we have in-house.

Yes and this meant that also a lot of the things that we thought were super good, but not good enough compared to the other stuff. We also decided to either let go completely or put on hold and some of these things were influenced by external factors as well as for example, Snapchat decided to close the whole games business that we have 4 titles that I don't know of the market in a way. We decided to put load on hold and figure out an alternative approach with that one, something people ask us every now and what's going on with that game, absolutely nothing at the moment. We might do something with it one day. But as of now, we don't have any specific plans. And this year now then again, with those 4 projects that got selected during last year, those are now the cornerstones of our road map for 2023. And if NERF is now going through a phase where we -- based on the data and everything we've learned and optimize, that's how towards profitability as it goes into live operations. We're looking forward to getting Autogun Heroes launch moving forward with the B2B projects. We are driving whole call Nitro towards profitability. Naturally, as a disclaimer in games business, anything that can happen, quarters can be volatile. So it's not necessarily going to be super systematic every quarter being the previous type of approach. But overall, that's the direct action where we're now definitely very much going because we're starting to approach the end of our strategy. We don't have a specific date, but we've used 2025 as the kind of like end date and 2023 as the year when we start to materialize the shareholder value and have the portfolio of live games and so on. And if you look at what we're doing, one can say that we could have delivered shareholder value because the share prices and so on, how they have developed in recent months. But definitely, in our business, we are now have the portfolio of live games, there's going to be new launches that are generating revenue, we're growing them and at the same time, we are seeking to grow the B2B service business as well. So we believe that we're definitely getting there well on our way to becoming household name in this category and getting to reach those huge things.

Exactly.

Then if we look at some numbers because this wouldn't be year-end report if there weren't any numbers in play. Here's our income statement. And as we can see, the revenues increased a lot compared to the previous year. And also for the fourth quarter, we saw a very notable increase compared to the previous year. Our EBITDA decreased slightly as a result of these planned investments into the game launches, game acquisitions and marketing. And that's also the front where we're a little bit control the spending towards the end of the year. So we started to decrease our spending on the marketing because in free-to-play things go in a way that when you invest in user acquisition for example, you quite often do a projection of 365 days, so one year when you expect to make the fund with that and you get certain amount in the first 30 days and so on and so on. And that's a game that you sort of play when it comes to the marketing and growing the game. But we want to make sure that we don't take any risks that we don't have to take at the moment as long as the times around us are uncertain and focus on making sure that we can go forward with our own strategy without minding too much about the world around. Nothing we have succeeded pretty well with that so far. And if we look at the longer-term development towards profitability, which is our main theme this year, we can see that this is exactly what we mean when we say that things can be little bit volatile from one quarter to another, but the overall trend line is very much with profitability. So if there's something to expect from moving forward is that we will do what we have to do to make sure that things get to that direction moving forward as well. Now we are done with presenting. Yes, let's see if we have any questions, there is actually quite a few.

Someone asks that where is shareholder value? That's something that we're definitely very much building on. For governance reasons, we've been always thought not to comment on the share price, I think that's a big no-no. So we won't be commenting on that. But definitely, we are very much are determined to deliver that this year.

And I strongly believe that going towards the profitability and scalable growth that will be resolving shareholder value.

When will you be profitable is the next question? We don't do financial guidance, so we don't know exactly when we will be profitable, but that's something we're very much working towards and something that's very much in our focus this year. Then there is a question that snap deals was something that excited some investors in 2021. Are we planning new deals with existing companies like Snap or any others? That's something that we might come up with something on that front, but no guarantees on that. And why we say that we might is that we want to make sure that the business opportunities are relevant, big enough to make sense for Nitro still in 2023 and moving forward. When we first signed with Snap, that was in 2020 earlier and were smallish sorry, in 2021 but still. Yes, but at that point, those were still opportunities that were good for us to take. But I think we probably wouldn't take those anymore. I think we're way beyond that point. And parallel to that, what we have learned from this instant gaming field overall is that the trends that were visible beginning of 2021 and moving forward to the end of the year, those haven't really continued in a way. So it's not the type of a business opportunity that we would see it anymore.

It seems that there was a bit of a hype around the segment and then world changed, yes.

Then there's a question about for one year, no real game dealers have materialized. Why is that? I think there's a few different reasons for that. One, we want to very much sell publish when it comes to, for example with NERF: Superblast and Autogun Heroes. So when you have something as good as those, you don't really want to go shopping around too much. So that's definitely one thing. Then I think second thing is something that is true in the whole industry is that if you look at any industry news or stuff like that, there really isn't any deals made too much this. There's been some sort of funding things going on, more companies need funding and then quite lot of activity on M&A and consolidation because, obviously, when companies tend to be cheaper when the world is priced, then it's a good opportunity for lot of players to snatch good purchases in a way. But there wasn't too many business development deals announced overall in the business. And I think that's where our long-term partnerships come into very crucial play that we can move forward by having returning customers in a way.

But now it seems that starting this year the market has some hope in waking you up on beating side also and that there will be lot of big conferences around the Spring time and let's see what is the kind of result of those market is actually making up or not on [ BD ].

Then there's questions about our runway and is there any instant risk of a rights issue? Well, there is no instant risk of a rights issue. We have never done a preferential rights issue. We have typically wanted to make sure that the way we operate is that we always mean that at least one year horizon moving forward with our cash and stuff. So that's something that will also come by the stock market rules and so on to some extent that we need to make sure that we have funds to operate. And that's exactly why we are now taking or have already taken the stance that we have limited some spending and made sure that we optimize profitability to make sure that we don't need to go into topics like that. Then again a question regarding Lootland. So if I didn't come through earlier, Lootland is currently on hold. We are not actively doing anything with the game.

There are some discussions around it, those are most likely in a long run.

Yes and if something ends up being too small, we probably don't want to do it. The dividends are being big and meaningful, given the context of this year and where we want to grow, then we might end up doing it. Let me see if there's anything in the e-mail inbox. Nothing there, everything was in the question call. That means that we are done with the questions.

We are very much in turn.

Yes, thank you so much for tuning into our webcast, I think putting all things in context, last year was pretty solid, especially in considering what happened in the world around us, we still managed to have a pretty great year and we are in very, very, very good position now moving forward to 2023 because we have exactly the opportunities that we need, which will go towards profitability.

We'll see you in few months.

Yes, in April when we put out the Q1 report. Until then, have a good one. Bye-bye.

Bye-bye.