Nitro Games Oyj (NITRO) Earnings Call Transcript & Summary

Hello. Good morning.

Good morning.

Greetings from Finland.

Spring is coming.

Yes, yes.

We are here.

Indeed, again. And we are here to deliver you fresh off the bat the new Q1 report and the key things inside it.

Exactly.

Yes. I'm Jussi Tahtinen. I'm the CEO and Co-Founder here at Nitro Games. And with me, I have my Co-Founder.

Antti Villanen, Chief Strategy Officer together running business with Jussi now for 18 years.

Yes, yes, yes. Live sentence.

Live sentence.

Yes. Okay. So just in case you are new to Nitro Games, this is what we do. So we're a games company from Finland. We've been doing this for a long time, like Antti mentioned already. And we focus on action and shooter brands across platforms.

With the brands, we're meaning that we are not only on developing the games, we are working with the big IPs, we are partially publishing some of the games.

Yes.

So we are widely working with the big entertainment brands and developing games, publishing games, licensing games.

Yes.

Sometimes even acquiring some gaming assets.

Yes.

It's a quite wide range where we are operating.

Indeed, indeed.

And why in the shooter and action category?

I think that's because, firstly, we like it a lot. We liked games where things go boom. But also like when you look at the longer history of gaming, it's action and shooter that has always sort of become the leading genre on any given platform on any given generation, one way or another, of course.

[indiscernible] also in the mobile. Mobile shooters are dominating the charts. Naturally, there are many other categories that are very profitable and working fine within the customers, but shooters action being the one definitely dominated categories.

And it is this type of category for gamers in a way. There's so many casual categories as well.

And it seems that the shooter brands in any platform, they quite often become evergreens. There are lots of these go off duties and what that are living for decades.

Yes. And something you will see when we look at our portfolio is that why we get to work with so many leading brands, whether they are our own brands or brands of our partners is because of our background in the field of marketing, where we come from before we did games. And I would say that maybe in Nitro Games, you have two big unique selling points in a way that one, we're super strong in the technical side of things, which is essential in this type of game development and maintenance but we are also especially strong when it comes to understanding brands. So we know what makes a brand a brand, and we know how to deal with different IPs in a respectful manner that we true to the IP.

Also understanding the customer, customer behavior and market trends, and that's where we have a heavy focus on business intelligence and customer insights and looking for those perfect combination of the game play and brands and monetization and meta game to fit for the needs of the evolving customer needs.

Yes. Indeed. Indeed. So that's us. And now we look at the recent highlights from the first quarter. It was definitely a quarter full of many different events, and we have this transformation with our game portfolio going in many ways. There was obviously some bad news during the quarter as Netflix canceled the project we had with them, but also like always in life with every negative surprise, there's always something positive that comes with it. And for Nitro, that means that we were able to focus so much more on new things in our portfolio, which is smack bang in line with our plan for this year. We want to expand our portfolio. We want to expand the new platforms and especially to new type of gamers and audiences out there. And out of this short term, what we've already done is that we pushed out the first public demo for Autogun Heroes supercharged...

Expansion to the platform reach for the customers. And there, we saw the kind of customer needs for this kind of game play feature and this kind of brand on also in the kind of traditional gaming platforms.

Yes. It gives us good benchmark against the mobile and web, where we have a little bit different type of consumer behavior and what they want from the game. Then behind the scenes, we also continued the web expansion for Autogun Heroes. We've been trying out stuff on some new platforms, but we will talk maybe more about those later as things become public. And then on the mobile gaming side, we, of course, pushed forward with Supersonic and seeking our way towards the scalability.

And we expanded the new area of gaming.

Yes. Yes.

IGaming world and being a bit of a different from the traditional mobile gaming, but very interesting area where we could utilize our existing brands in a very new environment and maybe touching the new consumer segments also.

Definitely, yes. And it's Pistolo we are talking about. And I think it's a prime example of that because we have such a big back catalog of various different game brands, gameplay mechanics, elements, what we call in our Nitro platform and that we have produced with our -- what we call our MVP process where we tested many different things. And there's a lot of good stuff there to pull from moving forward as well.

And it seems that there is a market for that kind of experiences modified to fit into the iGaming ecosystem.

Yes. And in terms of numbers, we again continued by delivering profits. So we're not talking huge profits during the first quarter, but we are proud that we were able to go through this transformational period with our portfolio and still deliver revenues and still deliver positive EBITDA. So that's also well in line with our goals for this year where we want to focus on the profitability. And then how we go about all of this is thanks to our fantastic team. So this is something that we maybe don't talk enough in a way, but it's all about the team and in our case, teams in [indiscernible].

Yes, it's not just the two teams or two locations that we have here in Finland, but we have like several partner studios that we've been working for years and years and years, pretty much all around the world, and some of those studios are working purely for us. Some of them are working partially together with us. Models varies but for us, it brings scalability to direction. And then access to the talent, best possible talent whenever the project lands where we have some specific needs for the iGaming sector or something else. And that's very both cost efficient for us. It's a risk management tool, but then it's also a very good way of scouting those smaller studios that are specialized in some field and maybe have some longer-term strategy with the studios and evaluate the collaboration and what is the cultural fit between the teams. And there are many, many kind of factors to consider while operating like this.

Yes. And especially this year, when we seek to expand our game portfolio and where it's no secret we're also looking a lot outside of our current teams like what can we do other games that we could collaborate with from third-party studios and so on because we have worked with these different studios for so long. We know the people and so on. So now it's a natural next step to see what they have in their own game portfolios as well.

And we are scouting those teams all the time.

Yes. And speaking of games and brands and portfolio, this is our brand portfolio at the moment. So maybe we go through these things one by one.

Yes.

So Warframe is obviously a very, very big brand. It's one of those evergreens with way more than 10 years history under their belt. And we have worked together with Digital Extremes for maybe more than 3 years now.

Something like that.

Quite some time now.

Yes. Yes.

And this is a good example of a partnership where we've just strengthened it moving forward and become closer and closer in terms of the collaboration despite a big time zone difference.

Yes. And I think as we earlier mentioned about the unfortunate cancellation of the project with the Netflix, I think this is more like a process than a project. And it has become like a collaboration process where our team and their team are seamlessly working together towards their common goal.

And this one is by Nitro Games out there on iOS, and it's no secret that we are working on the Android version of the game. And then, of course, the game is available on all the other platforms out there as well. And this is a good sort of example of how we treat a cross-platform evergreen brand on mobile in a way that, one, it runs technically smoothly. It's the same game you can play with the other platforms out there, but we also treat it in a way that respects the mobile audience, what they are expecting in terms of usability and the whole interfaces and everything.

I think the technical side is something to highlight on this case even higher because there are not too many teams around the world who can pull this kind of AA, AAA experience on a mobile with a similar quality as in big console or PC. And that's definitely based on our unique strength of having a very strong technical capabilities.

Yes. And with Warframe, we are proud to say that, again, the game has received some new industry award nominations and so on. So during the second quarter, we are nominated at least for two different awards at the moment. So happy to see how those play out. That's always a good sort of stamp of approval also from...

And customer ratings are another one.

Yes. Yes.

Getting better and better.

Yes.

Then we have Autogun Heroes.

Yes. That's our dear brand that we've been working on for a few years now as well. And that's live on mobile together with our publishing partner, Supersonic from Unity and then it's live on web together with our publishing partner there called Crazy Games. And like we said, we are also behind the scenes looking into other new avenues for that game, how we can expand it to more audiences. And where we go now with that project is that with Supersonic on mobile, we have been searching for the scalability for a while now...

Which is a combination of cost of acquiring users and the money that we can generate from the users. And it's a balance of us making games better and better and then optimizing the customer acquisition funnel.

Yes. And like we've said, I think it was in the previous webcast that this is kind of like chasing a moving goal in a way that you keep improving the game and then again, the audience and the cost of acquiring customers that evolves and so on. So that's like a game where you try to get both ends match. And just recently, we launched a very big update to that game to the new user experience. That is something where we revised things from game player perspective, also a little bit visually. And we're now at the moment with that update where we are collecting a lot of user input and feedback, but also data. And based on that, then we are seeking to make the conclusions about the next steps moving forward. And this is how the game rolls moving forward as well that we see that scalability that magical point where the user acquisition costs and what the game produces meet nicely in a scale.

And look and feel is maybe more casual, maybe targeted more for the wider audience where we then keep the kind of deep monetization and deep progression within the game. And there might be a combination that works on the market.

Yes. And that's, I think, the beauty of the data-driven development in mobile where we can try out more and more radical things if needed to move the needle and get the numbers where we want them to be.

Then we have Autogun Heroes Supercharge.

Yes. This is then again, nothing to do with free-to-play anymore. So taking us and the other cool guys on PC.

A bit of a gameplay mechanics taking from the original Autogun Heroes, but now introducing it to the new platform, little bit of new target audience with the new kind of mechanics of how to download and play and pay for the game. And it has been a very interesting journey with one of our kind of key partner on this area.

Yes. And this game is something that you obviously can play with your PC, mouse and keyboard, but with a pad, it really comes to live, and that's something that also makes the core game play very sort of big screen friendly if you think about consoles and stuff for that one. And with Autogun Heroes Supercharge, we're now at a point where we did during the first quarter, some closed testing with the demo and everything. And until we were satisfied with those results, we now pushed it to live demo testing. So if you haven't tried it out, you can go and get it from steam. And next up, we're obviously continuing to finalize the game and get ourselves ready for the launch, which we, of course, never announced beforehand when those things happen.

And also looking to expand the brand even wider in other platform.

Yes, step by step, long term, we keep expanding the audience. And then as a fantastic thing when all of this then finally come together, then we're looking at a brand that's available on many different platforms, many different audiences and with interconnectivity between all of these to maximize the potential. Then we have NERF Superblast. That's a combination of our brand, Superblast and NERF brand by Hasbro. And this is something that we've been working basically maintaining the game and updating it. But behind the scenes, we've been working on opportunities for this project long term. So this is something that we hope that moving forward, we get to talk about some cool new things happening with NERF Superblast. But while waiting for those, we get the game alive, we keep pushing new seasons of gameplay and so on for the players out there.

And it seems that there is happy community playing the game and consuming game.

Yes. It's a prime example of how we are loyal to the Masters brand, how they feel and how they look and everything we treat them just right. So we're happy about that.

Then Pistololo, we already touched a but it's a new take on a new sector segment on iGaming. And it's very interesting to see now how the game will perform. It has been live for a week or 2.

Yes, yes.

Something like that. And we are gathering and collecting the first data points and doing some small maintenance stuff for the game and expect to have some more on gaming -- iGaming area if this proved to be kind of successful.

Yes. I think it's an area where we can definitely see a lot of synergies, if not with the audience per se, but with the things that we do on the other platforms for the other audiences. And I think this was a good case for us to learn how things work, not just technically, but how things work in that ecosystem and environment because, of course, everybody knows that iGaming itself is huge. And if you can introduce something new there, who knows about the potential. So that's...

That's not something mobile free-to-play is so binary. You might have a great game, but there is something with the marketability, there is something with the monetization or something. But now we can also recoup some old investments in new ways and that way introduce new revenue streams to the company.

Definitely. And then on the last box, we're highlighting some of our previous partnerships.

Existing.

So like we mentioned in the beginning. Yes existing too, yes. We've been doing this for quite some time now. And something that if you look at the long history of Nitro, something that we're known for is that like these B2B partnerships and projects, they kind of come and go in the big picture. Sometimes that...

With unique approach. [indiscernible] completed process, sometimes something happens in our side or client side.

Yes. But it is a combination of longer term and then sometimes shorter term, then sometimes we have small little projects as fillers in between and everything like that. But it's no secret that, of course, at the moment, we're very active on this front looking into new opportunities. And that's something that this year in terms of how the outlook for action and shooter category looks on mobile and this combination of the talent we have both on mobile, but also on the other platforms, that looks very, very exciting to Nitro at the moment. So that is something that time lines are, of course, always difficult to predict how much time certain things take, but we're very excited about what we see ahead of us at the moment.

Definitely.

Yes. And then speaking of history, again, this is our history from previous 5 years numbers-wise. So this is where we come from. We have 5 years of consecutive growth behind us. And we turned the company profitable at the end of 2023. And last year was the full year when we delivered profits throughout the year. And like we've said earlier, of course, we want to continue on that but despite the fact that we don't do any financial guidance. But of course, as a company, you want to become better and better and grow moving forward. And in terms of numbers, here's our income statement from the first quarter and also the key financials summarized. And I think the key takeaway from these numbers is that despite the transformation in our brand portfolio, we were still able to deliver revenues, deliver a profitable quarter, so keep up that pace. And moving forward, of course, we're seeking an improved balance between our own games in our games business in our portfolio as well as our B2B partnerships, both existing and potentially new ones. So that's how we go about these things. And talking about the future longer term, this is the same slide that we had in the previous webcast, but we wanted to reiterate where we go now.

On the game side, what we are looking for, expanding the new platforms. New games, as I said, we are exploring the -- there are some initiatives within the Nitro itself. We are exploring the third-party games. And on top of that, we are exploring the new platforms where we could take our existing assets and that way, introduce new games to new platforms with or without the new partnerships. So I think what could be expected from the Nitro is expanding the portfolio.

Definitely. Yes. Yes. And it becomes more and more of a spider web where these things are connected and so on. So it's a good base to build on in many, many, many ways. And in terms of the team, this we already spoke about a little bit earlier, but I think during the first quarter, we have shown the power of this global team and the scalability in both ways. And this is also what gives us the leverage moving forward. So we are happy to take in more opportunities to work on and expand without it becoming a distraction for the existing projects or the existing things that we work on. And this is something that during this previous 5 years, we've been doing this a lot in different ways.

And working with the various partners all the time that creates also the strategic opportunities to Nitro. Sometimes it might be acquiring some gaming assets as we have done with Autogun Heroes or it can be even something more. And those are something that when we get to know with the people on the teams and the studios that we are working, the cultural fits are starting to melt in and there might be a day that somebody might even choice.

Yes. Indeed, indeed. And last but definitely not least, what we're seeking this year is financial stability. So this is something that we very much achieved during last year, and we have absolutely zero intent of letting it go. So everything we do this year, when we talk about expanding the game portfolio or even working with more and more teams in new type of ways, we definitely keep the whole financial stability.

And as [indiscernible] profitability as a key driver.

Yes. So we focus on making sure that the existing profitability, existing cash flow we have and so on so that we can go forward with those. And that's all this time. I hope we gave you a good picture about where we are now at the end of first quarter and especially where we're headed for the rest of the year.

Happy to hear some questions.

Yes, let's see.

Was there anything on the chat. Let's see from here.

Long question, let me read. How do you plan on staying cash positive now that the Netflix is gone? It's worrying that you have not signed anything new instead. Also the Autogun update was really something totally new and surprising. Well, that's good, I guess. Can you elaborate on that and what do you expect from it now and so on? So well, firstly, the financial stability, I think that we have demonstrated already many times historically that we are able to scale our costs up and down depending on the staffing needs that we have at any given point. And...

That is partially because of the model how we work with some part of the costs being on an external side. That's the way not only to scale up, but sometimes to scale down.

Yes, yes. And those we typically always sign like project-specific type of arrangements and so on so that there is this flexibility. And I think there really is no too much of secrets. We're simple guys, so we like to keep things simple. So we base our costs on what is needed at any given time. Then about signing something new. Well, that's, of course, a combination of things that you sign for longer periods, maybe some bigger things and then something you do in between. But for example, now during the first quarter, we signed the iGaming deal and then pretty soon after that, we released it. And these, of course, are smaller things on the side. But then again, they come with -- in a positive sense of the word, unknown upside over time. And then these bigger deals, just look back at our history. This is what we do. So those things will come. And then what we expect from Autogun Heroes. Well, of course, we are seeking that magical threshold of scalability where the cost of user acquisition meets what we make from single user. And right now, we're very much headed in a mode that like Antti mentioned earlier, that we're expanding it to a wider audience and hence, playing with different visual styles and so on. So now we're curious to see how the data plays out. We already have some user review -- sort of user feedback that we've taken in and then take it from there. If we're headed in the right direction, then you can expect us to expand more in that one or if there's anything wrong with the direction, then you can expect some more [indiscernible]. That's what we expect there. Then there's a question about is there a risk of rights issue moving forward? We're not planning any fundraises at the moment. Regarding Autogun, I see one can play it for free on the web. What is the plan there? Nothing is free. So while it's true that you can play it for free, that means that whenever you play Autogun Heroes on the web, you get exposed to advertisement and that's how we make our money from that one. Why don't you try to launch the Autogun Heroes on PlayStation, Xbox, et cetera, it has the potential for real. We agree about the potential, love playing it on the pad and big screen I have at home. We don't talk about things before they actually happen, but I think it's natural that we talk about platform expansion and the way we've designed the game, it's built with that type of connection.

Is already in a PC, and it's not big chunk from...

And then there's a question about -- talking a lot about the scalability of the team and should we expect costs to come down in the upcoming quarters and so on. I think it's safe to expect that during first quarter, we were in a transition phase, and that's always a little bit more cost heavy when you do transition. And maybe after that, things settle down to the level where they have to be.

But overall, I would say that we are very cost cautious. So whenever there is a need, we scale down or up.

Yes. And -- then there's, again, a question about Autogun Heroes and the scaling of that and question about how long are we willing to invest and so on in the product. We don't have any end dates for these things specifically. We always go by the data. But I think that you can look at it in a way that when it comes to previous titles in our game portfolio, there's always a point where we conclude to balance the income versus the cost to make sure that like if it looks like the scaling up is going to be too expensive like with some games, it has been, then we might scale down the efforts and do some line maintenance instead so that we can keep the products profitable revenue.

Explore other platforms or other sectors in gaming and iGaming being a good example of old asset to be monetized.

Yes. And then over the longer run, something that we've already seen with the whole Autogun Heroes brand and with the different games that we now have for that brand is that this combination of platform mix that can be the type of spiral web where the ends magically meet in a way. Let me still check this other interface of this. No more questions there. Okay. So we're done with the questions. And that means that we shall meet again in August just when we delivered the results for the first half of the year. So be sure to tune in then and don't miss that one. Yes. Thank you so much. Have a good one.

Bye.