Nitro Games Oyj ($NITRO)

Hello. Good morning.

It's Jussi and Antti here again.

Welcome to the webcast.

Yes, yes, yes. Second time this year.

Yes. First quarter is behind us and it was good.

Yes, it was good in many, many, many ways. And the year ahead looks pretty damn exciting as well. So that's cool. So like Antti mentioned, we're here to deliver you guys the results from the first quarter. And I guess this time, we maybe want to start by going through the highlights from the quarter. And as you can see from the numbers on screen, and I'm sure you checked out the report already, by the way. But anyway, we focus on the bottom line at the moment very much, like we've said in the previous webcast. And we've discussed about that already earlier quite a bit. And part of our -- maybe even a key part of our new strategy that we started beginning of this year is to focus on the so-called sound business.

Sound business model rather than optimizing the top line, the bottom line.

Yes. And I think that shines very well in our results now. And other big component is to be super mindful with the cash. And why we talk about the cash so much is because we have a strong cash position, we've had for quite some time. Yet again, it improved now during the first quarter. But it's super important for Nitro because a big part of this new strategy is to invest into this, what we call, [ blue ocean ] opportunity and overall take more skin in the game to build better success, better profitability long term. So that's why we need to be super mindful that we make sure that we have that cash...

And the whole plan for the year is the new growth, intend to find those growth opportunities for years to come.

Yes, exactly. So overall, I think in that sense, first quarter pretty much represents well what we were about to do also in terms of numbers. The events during the period, we already discussed in the previous webcast that we did some changes in the management with some new members in the management. That's a natural evolution.

Evolution and homegrown, one of the sign of our model where the people are growing inside the Nitro and step-by-step taking the career path inside of the Nitro. I'm very happy that both [ Milka ] and [indiscernible] have been growing into the current position at the C level.

Exact and other events after -- sorry, significant events after the period. Actually, from last week Friday, we had a decision from Business Finland regarding one of our previous projects, this mobile eSports ecosystem project that we did in 2019 to 2021, if I remember correctly. And like we sometimes mentioned earlier that if the projects would fail for whatever the reason, then there is a chance that they would not demand the payback for the loan, but is that it would be avoided. So that's what happened now. And while that has no impact for the first quarter, obviously, it's very important for us here in Nitro because it means that, obviously, getting rid of EUR 1.6 million of loan from balance sheet is, of course, a good thing, but it also helps to build the EBITDA for the second quarter. So that's positive.

There has been quite a lot of discussion on different kind of governmental subsidies and different kind of programs in different countries, but I think this shows how well it works in Finland. And it's very important that the government is supporting the games companies and games business in general.

Exactly. And that has worked out really well for them as well since there have been so many successes from the games business in Finland. So I think it goes both ways pretty well.

On the other events, we expanded with our games world.

Yes. So with Ethereal Gaming, we signed a deal where we are the developer, they take care of the distribution and so on and then we split the earnings there. And that's pretty exciting because we come from a world where we started our exploration last year with Pistolo. We have been happy with the results we've seen with that one. So obviously, we're keen to explore things further. And there's so many things we hope we know now how to do also better moving forward. So we look forward to seeing how this plays out. And during this year, it's safe to expect some game releases on this front from Nitro.

And this is also part of our new strategy where we are looking for those passive revenue streams and growing the games business. And as I said, there is a chance that we are seeing some revenues coming from these initiatives during the year.

Indeed. And then kind of in line with that, we also did a software purchase and development agreement. So one good thing about what we call Nitro platform or NG platform in our text is that we build reusable things, whether it's modules or solutions for the client side or for the back-end side. So that opens a lot of opportunities. Sometimes we're able to reuse something we've already done in the past and build something new based on that. That happens quite a bit. And sometimes it's stuff that we're able to then provide our partners with, that's convenient. So this is, again, a good example that what we have in our backlog. So we are actively seeking ways to make good use of that. So it's a prime example of that happening. And then Business Finland again. So EUR [ 340,000 ] of funding. This is for the previous project we had with Business Finland. So we completed that last year. And after completion, we always need to file the so-called ending report, which we've done. And once that's approved, we get to collect the last round of funding. So this now happened during the first quarter as planned.

[indiscernible] in our cash position.

Yes. Indeed. Then when we go forward in financials, here are some more details. But I think overall from the first quarter, the themes are pretty much the same as they were already during the fourth quarter. So continued profitability. As a reminder, we've been profitable for quite some time now since late '23.

'23.

And that's something that while we don't give any financial guidance, we have been, I hope, very clear that we focus on profitability.

On top of that, I think we've been focusing on a lot of working not only harder, but smarter. And the leaner cost structure is kind of clear signal on that one, and that also resulted capabilities of creating those cash reserves and improve the cash position in general.

Yes, yes, yes. And when we say leaner cost structure, we don't refer to cost savings exclusively, part of that is that we are doing active cost savings as we go based on what we think is the right thing to do. But also a big part is how we've been able to improve our ways of working and do stuff smarter. So obviously, focusing on certain things and staying within a category of choosing helps us to develop things that we can then become better and better as we go forward. And that also means more and more effective on things as we go forward. So good stuff. And if we look at the bigger picture and where we come from and what we're seeking, we are now seeking to be recognized for category-leading games. This is the vision that we have for that new strategy period, which is, again, 5 years like we always have. And where this comes from is that we have worked with a lot of industry-leading partners throughout the year across many categories and so on. Last year, we've been focusing on the category of action and shooter games and brands, especially. And moving forward, that stays in the focus. But then again, we [ don't ] have limitations. So we're likely going to expand a little bit outside of that as well.

You could expect seeing some other games also coming from Nitro and maybe some other projects, but all of them are somehow to be recognized as a category-leading games we will be working in the future.

Indeed.

And I think the logos on the bottom shows the kind of experience of the team and Nitro and also the trust that there is within the industry. So many, many big players from the industry trust our expertise, experience and especially the team.

Yes, definitely, definitely. And I think that ties well back into what we discussed in the beginning about that skin in the game and why we want to make sure that we keep our good cash position is because we're seeking to take more and more benefit also from post-release side of things. And I think we've written it that we want to be more selective with the partnerships that we have and so on. And it's all about developing the business long term and building those things. And then where we come from? We're one of the oldest game companies in Finland, this thing I'm sure you guys already know. And now this new strategy period that we said that it is roughly 5 years. So end of 2030 is the sort of horizon where we're currently looking. So it looks like we have really exciting 5 years ahead of us. The beginning has been really cool so far. And the team, we have 2 studios in Finland. And then the way we work is that we have this global scalable team. So we have a lot of external partnerships, a lot of contractors, partner studios that we sometimes engage one-off things or sometimes like longer arrangements and stuff. And then we have really solid team here in Finland with some of the best people in this industry that we've been able to attract in the recent years, combined with Nitro OGs like you and me and a few others who have been here.

Now the have been a bit of a turbulent past years. I think both the team that we have here in Finland, but also the scalable model have been proving itself again and again. And now a couple of new initiatives that we are working on with the hybrid teams where there are people from Nitro and people from partner studios, it seems to be really solid foundation also for the growing the bigger projects when time is coming that we need scale for some projects to tens of people. Kind of upscale potential is existing all the time without going into the very labor-intensive and costly hiring process, we can scale very fastly through the reliable partners that we've been working for 10 years, 15 years. So it's a really, really strong asset for us.

Yes, yes. And it also helps with the efficiency in terms of time like we have this one case where we started to work on this new playable this spring. And since we engaged with a partner that we have worked with at least 10 years, maybe even more to help us with some of the outside production from the moment we said that, "Hey, maybe we want to consider them to the moment when it was up and running." This was like, what, 48 hours or something. So things happen super fast when you have the...

For example, that partner, we are now working 24/7 in the time zone that when we are sleeping, they are working. and it's very, very efficient in the calendar point of view.

Yes, indeed, indeed. And this year, like we said last time and also mentioned earlier, it's all about new growth and...

There are lots of new [ cities ].

In many, many ways.

Yes.

And I think to recap, we already said it last time, but what we expect from Nitro this year is new original games, new partner projects. Those are very much what we're looking for and...

Hybrid projects also, something that is growing from our original side and then partner coming along. And another way around also, there are some new initiatives, new leads where we are working with the existing games or existing IPs that might become ours. So it seems that this goes in two directions. And I think the big thing is still to get those passive revenue streams and get those game revenue on top of the service revenue where we have been quite good.

Yes, yes. I think that's definitely the direction. And while getting those things to dramatically change those dynamics, it takes time to build those, but that's definitely the direction where we're aiming to go. And so far, so good when you look at the first quarter. And if we look at the portfolio in a little bit more detail, I think that will reflect on this balance. Like if you remember what was here in the previous webcast, it was like 3 and 3. So these things were even, but now we put so much more attention on the Nitro originals and have more stuff there. We already discussed through the [ Project West ] is what we call the collaboration with Ethereal Gaming. So that's the iGaming space, some game launches happening this year. That's what we're aiming to do. Then we have [ Project Drag ], which if you pay attention, you might have seen something about that earlier in the -- yes, a little bit, yes.

It's very much falling into action shooter category. And that's also a good example that it's a [ natural ] original game, but there could be a room for the partnerships.

We've been discussing some pretty interesting IP collaborations and things like this. So we're now trying to figure out, okay, which is the right way to go with this one, super excited about how that's coming along. And of course, it's also co-op. So that's a big thing at the moment in many ways and something that if you ask me, I love co-op because...

And it seems that the market players are looking for that kind of experience.

So it's a cool match in that sense.

Yes, some improvements, but the performance seems to be solid, partners seem to be investing into the game. And I think it's a good baseline project for us.

Yes, yes. And that's something that moving forward. Thanks to Pistolo, we are now seeking to find more and more ways of exploring the iGaming. It's something that seems to be really good match with where we see overall the games industry going and our plans and so on. So it seems like a no-brainer direction, at least for the time being, continue exploring. Then obviously, Autogun Heroes -- games that we released already during the previous strategy period, so Autogun Heroes Live on Mobile, Discord web and Autogun Heroes: Supercharged on Steam. And this is one thing that we've been looking into how can we leverage those things and learnings more moving forward and so on. And obviously, one thing that we've kind of like entertained the idea a little bit in the past is about maybe considering bringing the IP to consoles, and people have been asking about that. So let's see how things go.

On the MVP-process, there are lots of news for the new growth, and we've been quite busy on exploring the what kind of games our team is willing to work on, what kind of games there is a demand on the market and matching those. And then on top of that, talking with the partners and then looking for those kind of opportunities where we could match our technology, we could match our expertise, experience and market needs and the partner needs. And there are quite a few going on. And I think after summer, maybe we can talk something.

Yes. I hope that more and more good stuff will keep servicing from that because it's been insanely active now beginning of this year. There's been like -- in addition to the things you mentioned, then there's been like we've had [ games ] like building [ promos ] together with the team and everything, and it's been sort of both the scientific approach, the partner discussions approach and also just having a lot of fun trying good games on screen, really cool stuff. Nitro Partners is where we offer our expertise to industry-leading partners and their action and shooter brands.

VOID Interactive being one of the greatest at the moment.

We started with those guys last year.

Last year with those guys, and we're very happy with the collaboration. It's been widening and deepening the collaboration. People are quite close to each other and that also to be kind of one-team mentality to bring the experience on the players.

Yes, indeed, indeed. Then then Payday 3. So Starbreeze Entertainment, we collaborated with those guys last year and then also beginning of this year. And now it was last week when the update featuring some of our work went live. So we're now done with that work at least for the time being. This was really cool thing to work. And obviously, Payday is a fantastic brand, and Starbreeze is a great company to work with, not just because they are Swedes, cool games and good people. So that was fun thing to do. And then also with Warframe, we've done our heavy lifting now when the [ Android ] went live in February and...

It's been performing quite well, and partner is really happy about the performance and even a bit of a surprise of the [ Android ] performance. And there also, it's long-term you could say, even strategic partnership. partnership with the Digital Extremes and Nitro. And there are also lots of discussion about the common feature and what we could work on together.

Yes. And in addition to the stuff that we have in the portfolio, there's obviously tons of activity on the business development front at the moment. And like we kind of like earlier on this call, a lot of the stuff that kind of falls in between these two and sort of hybrid models and ways of working. And now I think the second quarter, something that we're seeking to do quite a bit is to retain and use this momentum that we have to build a lot of new things. And these new things, some of them start from Nitro originals, some of them start from partner IP, and then we try to match up and build some cool hybrid cases from those. So I think from what's happening inside Nitro, the second quarter seems so much more busier and more exciting than the first one and really cool times. And then that concludes the presentation part, but...

Time for questions?

Yes. Let's see if we have any. I'll get that. Maybe people have been asking less and less, and that seems to be the case again this time. Yes, it doesn't look like there's any questions. So maybe people get pretty good at explaining stuff. [ All right ]. And we shall meet again in August. In August, we release the first half report and share stuff. But between now and then, still lots of things to do, and keep your eyes on us.

Plan to be active.

Yes. So thank you for joining, and see you the latest in August. Thank you. Bye.

Bye-bye.