Nitro Games Oyj (NITRO) Earnings Call Transcript & Summary

Good morning.

Good morning.

It's your guys Jussi and Antti here from Nitro Games.

Good morning. Good morning.

Indeed. So for those of you who are new, I'm Jussi Tähtinen, the CEO and Co-Founder here at Nitro Games.

I'm Antti Villanen, Co-Founder and Chief Strategy Officer.

Indeed. Indeed. And we are here to deliver you the results from 2024. So we are Nitro.

We are Nitro.

We are action and shooter brands across platforms.

Exactly. We were last week at the largest video game executive summit in D.I.C.E.

Yes, yes. In Las Vegas.

What was your feeling about the market sentiment, where the market is going?

I was pretty, pretty, pretty positively surprised to see increasing amount of positiveness on the market, to be honest, because it's no secret that there's been lot of turmoil in the games business overall. And that also meant that we've had to navigate through a lot of that uncertainty overall. And quite a few events in the past, people have been pretty negative, because there's always news about big companies doing layoffs and what have you. But this time, it was also like finally a lot of light at the end of the tunnel. So...

I felt the same. And I think the tight focus that we have in the category where we are operating is definitely something that resonates on the market, and seems that shooters are somehow where the spotlight went when the new games and new projects are launched.

Yes, yes, definitely. And the way it seems to me is that like we're in a pretty prime spot to take advantage of that because you don't have too many companies out there like Nitro who know how to do mobile, but also know how to do the other platforms and like I think it's good to see that there's finally more and more concrete cases with bigger companies with bigger brands pushing into mobile which is an no-brainer, if you ask me, it's still half of the total market.

Yes, yes. And I think also us expanding into the other platforms as well were received and there seems to be market need for the company that is capable of operating in more than one platform and capable of cross-platform, multi-platform, cross play, all of those kind of areas of the game development and publishing.

Yes, yes. And one thing that was super cool to see is that like we've had what we call our MVP process, so the concept of testing games before they go-live, testing the marketability of games and the audience and everything and tweaking things before you make the big investments. That's something that has kind of like now returned in a way. So I was happy to see that more and more bigger companies sort of adapting something quite similar and are sharing the mindset. And that, of course, means good opportunities for Nitro moving forward.

Exactly.

Yes. So overall, last year -- next, we're going to look through the numbers, and then we go through who we are here in Nitro and stuff. But I think it's safe to say that last year was our record year on all fronts, definitely. And one of the big themes for last year was that we continued our expansion to other platforms. And especially towards the end of the year, we increased our investment on new opportunities that will become fruitful moving forward. But if we look at the numbers, it's like obvious that we improved on all fronts out there. Revenues increased, EBITDA improved and last year was the first year when we delivered profit in a long, long time. So that's definitely a big shift in the history of Nitro. So we turned the company profitable at the end of 2023 and have continued with that route ever since.

Another good theme of the year was very successful last year to see stable growth, while keeping the stability in all of the operations. And cost control, we still -- we're able to find the growth areas and building the platform expansions, introducing new projects and all of those are paving the opportunities into the future and for this year.

Yes, yes. And especially, I think something that puts last year in a good spot is that like it was definitely a year of lot of turbulence in the market and a lot of uncertainty and as a result, of course, we were super mindful about our cash and spending and all of those things. But still, despite of all of that, we managed to deliver a profitable year, profitable growth. We managed to deliver opportunities for new things moving forward. So I think if that's something we can do in tight conditions, I'm super excited to see what we can pull off now when things are opening up and...

Things get better.

Yes. In terms of the recent highlights from the fourth quarter, those were mostly circulating around Autogun Heroes, which is a good testament of the platform expansion. So we launched the game on web, on the first platform on web, and then we introduced the game on PC, which we will launch later.

It's very interesting going back into the platform where we started, and are now refreshing all the knowledge and processes and ways of working in the PC platform.

Indeed, indeed. And also during the last quarter, we raised little bit of funding from Business Finland. This is tied into the project we have with them and the funding from Business Finland comes in the form of a so called soft loan. So -- and this funding mostly goes into supporting our -- things that we do around AI. So there's a lot of R&D on that front in Nitro and a lot of concrete use cases already. And we are doing whatever everybody else is doing like we use all that industry standard tools and stuff. But in addition to that, we're also building things of our own, like educating our own models and building our own AI and stuff like that. I can easily see that becoming more and more relevant in the long term and helps us to continue improving our efficiency.

Exactly.

Yes. Then for those of you who might be new to Nitro Games, we have been seeing quite a lot of new shareholders towards the end of the year joining Nitro Games. So you see...

Happily see.

Happily see, yes, yes.

Seeing lots of new shareholders.

So maybe as a quick introduction to who we are and what we do.

We've been around for more than 18 years and it feels like a lifetime. And at least for us, it is a kind of like lifelong journey. And I think we have proven a couple of things that we can be resilient on the changes in the market. There has been several turbulent phases in the gaming industry throughout these 18 years and we have gone through on all of those turbulent times, and enjoyed all of those fun and good times also that there has been in the industry since 2007 and still continuing strong, and definitely have fun.

I think it's this sort of our ability to evolve under this what I sometimes consider pretty unique mix of like creativity, but also the very heavy business sentiment. So we've always been pretty strong in terms of deal making and building new opportunities. So we don't get stuck on -- hung up on any one single thing, but we're always able to evolve as the market continues to grow in different directions.

And almost always focusing on delivering the fun gaming experience to the gamers and kind of players and real gamers being in the core of our audience all the time and in the core when we are designing the new games and then also with our customer projects.

Yes. And our quality is, of course, that's one of our core values here in Nitro, and that's something that I think especially last year proved to be super important on many fronts, and that results in Nitro being reliable towards our customers and players on all fronts. And that's something that I think moving forward, we will continue taking advantage from the scalable model we have and putting more and more and more and more stress on the quality of our games. Coolness. So let's then have a look and see about how this scalable model we have looks like. So here in Nitro, the way that we work is that we have a combination of our in-house staff. We have 2 studios here in Finland. So we're Finland based. But the mindset how we operate is pretty much global, especially on the Western markets point of view. So we are on many different time zones. We work with our partner studios and contractors in different countries.

We've been building this network of great partners for 15 years at least. So started from the very early days to build up the reliable and scalable network of good partners, scaling up, scaling down based on the needs of the projects and keeping the ability to grow through the network is definitely the key thing here in Nitro and resonates very well on the market also. When we are discussing with our bigger clients, they seems to be valuing the model quite a lot, especially now when the times have been a bit tough on the industry, so it has been a kind of benchmark for many companies that you can actually do like that also.

Yes, yes. And I think it's good because it also allows us to do our share in the industry because I think Nitro, especially last year, has been pretty much a lifeline for some of the smaller studios we work with and the work that we do together with them has been very much key in keeping those studios alive and kicking. And I think that's very positive. And that helps to build these super long relationships and so on moving forward. And last year, I think it's a good testament to this model and way of working because as you can see in the numbers, we were able to increase our revenues and profitability without increasing our fixed headcount here in Finland too much.

Also I think a good testament for the model is that even the big U.S. players and big U.S. companies, they are starting to acknowledge and approve the model even though it used to be a little bit scary and kind of different for them.

Yes, yes, like so many years ago as well.

10 years ago, it was quite new that somebody is operating in this kind of model.

Yes, yes. But I think the benefits to them are also clear because especially when you deal with bigger B2B customers, they always want everything to happen like yesterday. So this gives us the ability to react fast when the needs change. We're obviously a games company. So here's the game portfolio. So at the moment, we have 6 things cooking here in Nitro. And first and foremost, let's talk about Autogun Heroes. This is our action platform on mobile and also now on web.

Also on web. There was lots of activity on the last year with the game.

Yes, yes. I think the biggest sort of shift with Autogun Heroes was when during the first half of the year, we signed the game with a publishing partner, Supersonic from Unity. And those of you who don't know who they are, they are a publishing entity owned by Unity, and they are pretty damn strong in terms of driving downloads. And the deal that we have with them is that Nitro takes care of the development of the game, the live operations, providing updates and so on, and they are in charge of the marketing and acquiring new users for the game.

And they have a huge reach of the users and being top 3 in a global scale for several years.

Yes. And last year, then after we signed the deal, then we continued forward with the road map for the game with new updates and stuff. And what we're working towards together with Supersonic is to get the game to so-called scalability. And that's like ever tightening race by us improving the game and increasing the monetization of the game while on their end, they're working to lower the cost of...

Yes, I think they're optimizing the CPI on that. Then hopefully, we find the sweet spot step by step.

Yes. And then we have our CrazyGames there. That's our first platform on the web. And essentially, what it means for the case is that there's exactly the same game running on mobile and also running on web. And on web, the dynamics are completely different. So the user inflow looks radically different. The type of users are radically different because you basically play the game on your browser as you go, you don't need to download anything or anything like that. And for us, in the long run, we see this type of expansion to web and new platforms moving forward as a way to kind of like get advantage on that user acquisition versus the game monetization game that we're playing all the time because it definitely acts as an influx of new users in the game.

Also the dynamics between us and the players are a little bit different as we have a direct contact with the players and building the community and community activities are starting to play more and more and more important role with the web game.

Yes. We're definitely seeking to engage more and more with the player communities directly. And also this web interface also means that moving forward, we're getting closer and closer to the point where you don't necessarily need to rely on the app stores on the mobile phone fully for your revenue because on web, you can go directly to the end customers. Next up Autogun Heroes: Supercharged.

Very exciting, Very exciting. Supercharged, very exciting platform extension or how would you call it?

Return.

Return into the old lovely platform of PC and Steam. And this has been a really nice initiative to take that IP and a brand rather than game into the PC platform. And it's also not only the one game, but it's a kind of segue paving the role for the whole PC business.

Yes, definitely, definitely. And for those of you who might be new to Nitro, our first game ever that was published globally was called East India Company that was in 2009 on PC and therefore, also on Steam. Back in those days, we still sold games in boxes as well. Something about this going back to Steam that I found super interesting is that on one hand, the platform is sort of exactly the same as it was back in the day.

Technically, yes.

But it has also evolved a lot. So how you're supposed to do things on that platform has changed a lot. So we are like learning new things with Autogun Heroes as we go now in many ways. So I'm super excited to see this new journey, expanding on PC Steam and also worth maybe highlighting that Autogun Heroes: Supercharged, that will be a whole new game experience that comes out of Steam. And hopefully, many of you are soon going to be able to try out the first playable demos of the game and so on as we work our way towards the launch.

Not only the platform has evolved, but also the marketing. Now it's all about short videos in the several channels and also the community side of the things are playing very big part on the PC game publishing and marketing.

Yes. And sometimes you need to take things a little bit less seriously and go a little bit more crazy on the marketing for a PC these days as well and that seems to be resonating well. Then we have NERF: Superblast, one of the leading toy brands or not toys necessarily if you use them as an adult.

But still you have blasters.

Yes, you have blasters, yes, and with Hasbro, we are continuing the relationship with them. We're proud of the game that we built with them and very happy that they are also happy with the game as well. And we're busy exploring different options and opportunities, what we can do with the brand and the game that we have moving forward. So that's something to keep an eye on as we progress through this year. Then we have Warframe...

With the Digital -- already old partner, Digital Extremes, we've been working for quite a few years already. And I think prime example of kind of returning customer and how well we've been able to serve the needs that they have and not only serving the needs that they have but creating the demand on their end and providing all sort of improvement suggestion for the game. And iOS have been out and now looking for the Android, most likely going to be even bigger platform for them than iOS. And I think relationship is very strong and the project going very nicely. Met the guys 2 weeks ago.

Yes, the week before last week. Yes. And I think Warframe is a prime example of the type of longevity you get when you really pay attention to the quality and to your audience and something that I find super inspiring about Digital Extremes is that they know their customers really, really, really well. They put a lot of effort in understanding their player community, which is huge. And as a result, they are able to build super long-term plans and look ahead for long times to come. And that's something that I think also we plan to do more and more moving forward as our position gets better, we are profitable and we keep growing and we are able to take more and more long-term thinking into our approach with our games.

As a project, it also very good reference for our new potential cases that we might have and what we've been discussing, it's a very good reference for the technical point of view on how great of the experience you can create on the mobile, you have high fidelity graphics and all that experience. It's -- there ain't that many companies can pull off that kind of experience on mobile.

Yes, indeed.

And it wasn't that long ago when there was still a lot of interesting data that are saying that you can never bring those type of experience on mobile, but here we are. And there's a whole new generation who actually uses it as a sort of first primary platform and then a little bit older generations that kind of use both and so on. So that's very interesting how things evolve in that direction because years go by so fast, and that just keeps expanding more. Then next up, we have Netflix. Obviously, everybody knows who they are. The project that we have with them hasn't been announced yet. So we can't talk too much because our mouths are shut, thanks to the pretty tight NDAs that we have in this industry. That's quite normal how we operate.

The project is very good fit to our strategy and what we are generally working on. So...

Yes, yes.

It's not a big stretch.

Yes, yes. And I'm personally excited to see how things roll forward with that one and when we get to talk about it a little bit more. And then we have something in the category of unannounced.

As always.

As always, yes.

There is something new cooking and...

Yes. In overall, I think we are paying more and more attention for the new things also. And there are lots of great...

Great initiatives within the Nitro and also outside of the Nitro, not only our partner network, but widely in the industry, lots of great creative stuff brewing here and there and everywhere. I think we are going to keep our eyes open for those opportunities.

Definitely, definitely. And I think the sort of increased attention to new product and new opportunities in our game portfolio moving forward is something that for the first time ever in our history, we've been able to do that without a significant backlash on the P&L and on the profitability. And that's largely thanks to all the great technology that we built during the previous 5 years, all the great game concepts that we built and those modules from one game to another, all the great IP that we have and so on and especially the fantastic team that we have. So as a result, we're now able to put more effort on new things with less in terms of investment, and that's very good for the long term. Speaking of numbers, this is how our previous 5 years looks like. So we've now had 5 years of consecutive growth since 2020. And I think this slide pretty well illustrates our -- sort of our persistent focus on building things and especially last year, our team was stable growth. So we wanted to make sure that the profitability we achieved during the last quarter of 2023 would continue throughout '24. So that's what we did. And parallel to that, we also delivered increasing revenues. So this is something that obviously we don't do financial guidance moving forward. We only report things backwards, but I think it's obvious that we're not done yet. We want to stay hungry, and we want to keep reaching out for more. And looking at the numbers in a little bit more detail from last year. On the left side, you can see our income statement. We report all our numbers in IFRS. And on the right side, you can see some of our key financials. And I think if you look at the revenue growth last year, that is obviously the main thing driving the improving profitability, but there's also a couple of other things. So we are like making those depreciations from our balance sheet, basically capitalize development costs from previous years, which obviously hurt the profitability and bring the profits down. But that's something that at the same time, our balance sheet keeps cleaning up as we go moving forward. This combined with the fact that we were able to pay pretty considerable amounts of our loans last year and so on means that we getting in a better and better and healthier shape all the time. So that gives us more and more leverage moving forward to deliver even better profitability. And then if we turn our eyes from last year into looking forward, so what are we now seeking to do in 2025? Obviously, we want to grow our game portfolio in many ways. Obviously, we want the existing products and games to grow.

But new games?

Yes.

New partnerships.

Yes.

And most likely new platforms.

Yes. So those are the things that new games, new partnerships, new platforms. And basically, all those combined mean new audience.

Exactly.

So that is something that we always want to keep in the back of our heads that it's all about the players. So we want to service our existing ones, but also reach out to new type of audiences this year.

Also, we want to take all out from the efficiency from the global team that we are working. We want to always be better in our operations and improve the ways of working and processes and share the values and tools and all that. We are already very far with our partnerships, but still keep on improving those and those are ways to more efficient and that way more profitable operation.

Yes. And we always have some people in Nitro who are basically looking into that side of things like how are we doing things now, how can we improve our process, how can we maybe get rid of something that isn't needed anymore. And I think the big theme on that global team is that we want to take so many of the learnings that we have here in-house in Nitro to our existing partners and continue improving those ways...

And sometimes in another ways also. And while working with those several teams across the world and also with the lots of exploration of the new opportunities, there are strategic opportunities coming to our way every now and then. And those are also something that we are constantly evaluating some sort of strategic opportunities. Sometimes some games we are chipping out and sometimes there might be small teams or something like that.

Indeed. And especially since we want to continue improving our financial stability, it gives us more and more tools to tap on the new opportunities. So last year, there were so many great opportunities that we had to hold back a little bit because we wanted to make sure that we deliver financial stability. And this year, of course, we want to maintain that financial stability as we move forward and keep building new revenue streams and keep finding new things.

But now maybe time to get some questions from you guys. Let's see what we have here. So where is the first one? There is the first one. So [ Daniel ] is asking why hasn't Supersonic doing more to scale Autogun. They are doing nothing. That's not exactly correct. They're doing quite a lot. So...

They have quite a big team. They are working with the game and going through the lots of AP testing and data analytics and analyzing the best performing campaigns and whatnot. And it's safe to say that they are doing quite a lot.

Yes, yes, yes. And what both Nitro and they are focusing on at the moment is getting closer to the point of scalability. And that's something that obviously, until we reach that point, it doesn't make sense to overspend too much because, of course, you always want to look at the game performance in the long run. So you want to make sure that you reserve your ammunition for the moments when you actually fire off on all cylinders.

But step by step and update by update and campaign by campaign, we are closer to that point.

Yes. And in terms of the cadence, there's also a question about when do we expect the game to get scalable. That's something that, of course, you never know beforehand. But the cadence we have at the moment is that we're rolling out roughly an update per month type of thing and different updates focusing on different parts of the game. For example, just earlier this year, we released an update where we introduced a new pace into the core game play for new users. Of course, all the players don't really see that, that's for new players and stuff. Then what do we expect from 2025? Hopefully, we little bit answered that already. There's a question that do we see better shareholder value and maybe even an offer for acquiring the company. Obviously, those are things that you can never predict because we don't have the crystal ball. But of course, our motivation is very much we keep improving the business. We are performing better than ever at the moment. We have no intentions of slowing down. And of course, when you build better games, better business, we have a better and better team moving forward, of course, we expect it to translate into positive progress on other fronts as well. Then question about associated cost of expanding Autogun Heroes brand to PC. So that's Autogun Heroes: Supercharged. The costs on that side are not huge.

Even comparing the potential payback of the first project, it's very, very reasonable. Breakeven is not very high on first right.

Yes. And I think that's the sentiment that we have with pretty much all new product development at the moment that we have done, bigger investments in the recent years and how we're approaching these things now is that we're taking advantage of those investments we have already done, which means that, for example, Autogun Heroes, we built tech-wise in a way that we can then later on expand it. So we don't need to redo everything and so on. So that brings down the price tag. And then update in a competitive landscape in the service business. So this refers to the part of business where we operate with bigger B2B...

There has been lots of consolidation in the industry last year and some of the colleagues who we faced as a competitor like 3 years, 5 years ago, they might not be there. They might be part of something bigger. And there again, the turbulence that there has been in our industry have also affected. There are some companies no more. And I think overall, there are less competition in a category and in a [ sector ] where we are operating. So in that sense, it might be a little bit easier proposition for us.

Yes, I can easily see that. Yes. And also at the same time, I think as it seems that there's more and more positivity and concrete new opportunities and concrete new cases out there, of course, when people want to be careful with where they put their spending in, something like Nitro who has almost 20 years of proven track record, we have countless of projects we've delivered for big buyers out there. So of course, it's different compared to some new studio that has just started who doesn't really have the track record yet because the bigger the projects get, the more reliability matters in the mix. And that's something we can definitely deliver.

And also, I think one key benefit that we have is that there has been so many different projects and so somebody asking that have you ever been working with the big IPs, yes.

Yes, [indiscernible] recently.

Have you been working with different timezones?

Yes.

So many of those kind of obvious questions that any of the newcomers might be falling down is something that we already have. And do you have expertise on several platforms? Yes, all of them. So in a sense, I think we are stronger positioned than ever on the B2B service business.

Yes. And maybe still about the landscape there. I think one thing that was different last year compared to many years before that was that there was quite a lot of these bigger companies who wanted to do the preparation things. So do those due diligence, technical due diligence. They didn't necessarily have the mandate to buy it but just to prepare for times when they actually get the mandate.

Evaluating the code that it's capable for the new platform, so evaluating some IPs, whether they would be in, for example, mobile and these kind of things that there was quite a lot of that and the kind of risk mitigation before the big investment.

Yes, indeed, indeed. Then it looks like the last one. Netflix stated in Q4 report that it aims to increase its games investments. Have we noticed any impact from this yet? Well, we cannot comment on what they do, but the reports are publicly available out there. So you can just read what they wrote.

And naturally, we are in constant discussions with them. So what they report have to be very much in line what they...

Let's still quickly check from here. I think it seems like that's it. So we are done with this webcast. Thank you so much.

We see...

April.

April.

Yes, yes. That's when we roll out the numbers for Q1.

Yes.

Until then, have a good one. Bye-bye.

Bye now.