Nitro Games Oyj (NITRO) Earnings Call Transcript
August 22, 2022
Earnings Call Speaker Segments
Hello. Hello. Good morning. Good morning.
Good morning. It's us.
Yes. Yes. It's your boys. Jussi and...
Antti.
Yes. So I'm Jussi Tahtinen, the CEO and Co-Founder of Nitro Games and...
I'm Antti Villanen, Chief Strategy Officer and a Board member here, together with Jussi. It's been a hot summer.
Yes, it's been a hot summer, and we have a great year in the making overall. And we just put out some news while we started this webcast. So we are now starting -- or have started the preregistration of NERF: Superblast. But more about that later. Yes, yes, busy times. It's been probably one of the most busiest August month ever in Nitro, I would say.
Yes, August had busiest time of the year, executing our plan and sweating alongside.
Yes, yes, yes. Without further ado, let's get into the business and check out what we just delivered in terms of our report for the first half of the year, and we're also going to talk about what's going to happen during the second half of the year and beyond. So overall, for those of you who might not be familiar with Nitro, we're your global mobile games company. We specialize in action and shooter games on mobile, and everything we do is taking us towards our vision, which is to become a household name in this category on mobile.
And this is, and going forward, we've been taking very concrete steps towards our vision, and now everything is starting to finalize what we've been planning and executing a lot exactly.
Yes, exactly. And as a reminder, shooter games and action games in general are typically categories that on any platform out there, as the platform becomes more and more powerful from a technology point of view, become usually the dominant platforms. And what we're seeing on mobile is no different. That's therefore...
Always following the trends as have been, global platforms.
Yes, exactly. So what we've been up to recently, like we said in the beginning, it's very much a great year in making in Nitro. The first half of the year has already been pretty awesome despite the fact that not everything from that autumn as yet translates into our financials. We did deliver growth in revenues again, pretty impressive, plus 400% year-on-year whether you look at the second quarter or the first half of the year. But still we're only getting started, we feel, and a big part of the good things that we've been up to are hopefully materializing moving forward rather than behind us. And overall, if we look at the first half of the year, most of the growth came from the B2B service business and most of the spending went in the preparing for the upcoming game launches.
Yes. And on the B2B service business, we've been quite successful and -- removing the -- our customer model and also our development model. So we have a multi-project model, and we have proven that we can run many projects simultaneously on a scalable fashion, giving the costs in a reasonable level while enabling the scale when needed. And also the fact that the customers are coming back, and we are signing new returning deals with the existing customers proves that the model works, the qualities where the top-tier guys from the industry are expecting it to be, and we are making credit focus on that front.
Yes, definitely, definitely. Overall, the whole investment in the quality in Nitro has been very much on the table for the previous recent years, which reflects in what you just said. It's a direct result of us getting better and better people and focusing more on that topic. And overall, it's really good that in times like this when the world is going a little bit crazy outside of Nitro, we've been able to strengthen our position, get several different revenue streams, diversify that whole thing and we're going to be bigger and better projects with the customers we have. And in that way, kind of like bring stability into our business.
[indiscernible] I'm not forgetting about the potential high scenarios with some of the projects where we have models where we can then make a big success also with the game launches.
Yes, yes. And we're going to talk that a little bit later today soon because, as you can see in the numbers, we've been investing pretty heavily in the upcoming game launches. And that's exactly as planned, and we're super happy about that. One thing worth mentioning still from the first half of the year, what we achieved is that we also strengthened our Board of Directors again.
Old friend of ours joined for the Board and -- with the great experience, great expertise and I would say, most of our credit energy.
Exactly. Exactly. For those of you who don't know, Nitro used to work with PC games back in the early days when we were still young and beautiful. Now we're old and beautiful these days. And back then, we worked a lot with Paradox Interactive, and that's how we got to know Susana Meza Graham, who now joined our Board of Directors. So good times. Then and then, let's have a look at how we're doing with our team. And we often like to say that our team is our most valuable assets, and that's definitely so big because these are the people that make all the magic happen here in Nitro. And overall, what we're doing here is growing in a very controllable -- controlled moderate fashion, I would say. We've been increasing the level and amount of talent in Nitro a little bit during the first half of the year overall. Now when you text to people on our payroll, and the freelancers were 60 people in-house distributed here and everywhere because we're still very much in a hybrid remote working mode. And then we have our global network of partner studios where we work with different partners from time to time from one project to another.
I think in both areas, both in the payroll and partner side, our kind of reputation is getting better and better, and we are attracting the better people to work with us and better partners to partner with them. I think that is kind of good progress that has been seen in the past months and during the year.
Yes, yes. It's awesome that the way we work is that we have people from Nitro's in-house team and people from our partner studios in same projects, and it's always a mix. And basically, the teams are always global as well. For example, last week, we had visitors from South America here in Kotka in Finland, so from the other side of the world. And that's the true Nitro way of doing things. You find the best people and the best talent no matter where they are and in which company they work from, and then we put those people together. That's how we deliver quality.
Yes. And that also allows us to have a multi-project model where we scale up and scale down very flexible when needed.
Yes, yes. And on a positive note, this means that we don't need to do too much of hiring when we start new projects. We need to do some, of course, but not too much, so we can give the cost and risks at bay as well. Then and then about our owners and strategy of the company. Like we've said so many times before, we have a strong foundation here in Nitro. We're proud and happy members of the Nordisk Games family as we call it. So Nordisk Games who are then again part of the Egmont group here in the Nordic countries are our leading investor.
And guy's been supporting us ever since they started.
Yes, from 2020.
Yes. And that there's a lot of synergies, lots of support, lots of Danish food here going in and...
That, too.
In that partnership or operation.
Yes. Plus then, of course, the fantastic companies in the public. And we've been working together with -- some of them are working together with some of them as we speak and might work with some of them more in the future. But in any case, it's a great pool of great talent in this business. And there's so many learnings that you can share within the family. And that's, of course, good.
No, I think I can share something and relate really some on that front.
Yes, definitely. And then when we have a look at our strategy, this is one of the good things about this ongoing year that now we can really see our strategy working out. We've been able to increase the business from our service business, which is supposed to bring in security and stability, but still having an upside in the future as well since we work on games. And then at the same time, we've been able to focus on our game portfolio and the upcoming game launches without kind of like hurting our base business too much. So we get both the upside and the protection. It's, of course, always a balancing act. But this year, it really looks like it's working better than ever before on that front.
On the service business, I'd say that the quality has been able to scale up the teams and then the multi-project model. Those are the key factors for the success on our service business, bringing the security and stability for our own game launches. Model works.
Definitely. And obviously, moving forward, we are seeking to be active on this front as well. So we're on the constant lookout for new games. We're on the constant lookout for new partnerships and new projects in the business development as well. Speaking of which, let's have a look/see into our project portfolio or as Mr. Villanen and we call it multi-project model, which is very fancy term for describing that we work on several things to distribute our risk and also to build several streams of revenue and upside. And we'll talk about NERF: Superblast a little bit later more today, so let's keep that for now. But Blast Heroes is our first ever instant game, which we launched at the end of the first quarter. And Blast Heroes is part of our initiative where we're exploring new type of gaming, new type of platforms together with the leading platform owners, Snapchat in this case.
Yes. It seems that many of those instant platforms and social platforms are entering into the gaming space. We get a little bit differences, and there are quite a lot of new interesting things happening on that field.
Yes, yes. And with Snapchat, we have still 3 more games in the works at the moment, which the game #2 is currently in soft launch, and we are looking to get that into the launch. And with the first one, Blast Heroes, we gained so many good learnings that we can now apply into the upcoming ones. And overall, the business with this new type of things, it's something where we are making money, yes. It's not huge monies yet, but it's all about exploring the big potential that might be there for future with these big platform holders. So in that sense, we're really happy with how those things are developing. And then maybe worth highlighting that in our MVP process, we are on the constant lookout for new winners into our portfolio. We have...
Not only for ourselves, but essential part of our business.
Yes, yes.
Business development. And when we are engaging the new partners, we are entering with the process that is proven with ourselves and with our partners to be the way to start the projects.
Very much so. And during the first half of the year throughout this summer, we've been pretty damn active when it comes to testing new games that could potentially find their way into our portfolio. And on that front, it's -- we're happy to see that the sort of maturity of the games that we are testing and the maturity of the data we get, it just is getting better and better. So it looks very interesting on that front as well. Then we have Lootland and the third unannounced game that we've been referring to in the past. Those are now at the moment in a point where we decided to put them on the whole phone now. So we're not actively developing them as we speak now after the summer. We've done all the testing and govern results. And right now, we're focusing on the NERF: Superblast and the upcoming launch with that one. And once we have done that one, then we'll revisit Lootland and the analyst can see that what's the best foot forward with those.
I can say, but there are some discussions going on how to monetize those potential or something.
Yes. Coolio. And then we have, obviously, our process with our partners. So Digital Extremes is a partner that we just signed up an expansion agreement with. So we can't talk yet too much about this one. But like we said before, it's a very cool project that we're working on, and we're really happy about the collaboration so far.
And collaboration going deeper and deeper, and we are essential part of the structures of that game experience in total.
Yes, definitely. So -- and then we have our different supermassive games. Again, it's a project where we're working with directly.
Part of the Nordisk Film Games.
Yes, yes. True that, yes. That, too. The game is progressing fantastically. I would love to show it, but unfortunately, we can't yet. But again, it's awesome. So take my word on it, we will talk about it one day when time is right. And then we are working with fellow Finnish, Metacore. We haven't announced which project this is, but we are helping them with their IP with few you guys our team.
A very good learning for us also how to -- very big game runs in a live market.
Yes. That's a good one. And then we just announced a new project with U.S.-based mobile games publisher, so the same guys we worked with last year quite a lot.
Again, lots of learning.
Yes, yes. And this new project is something where we are pretty damn excited, and we're interested to see how things develop moving forward from here. So overall, we have what we call record order intake this year. We have signed more than EUR 7 million in service business revenue this year alone, and we have no intention of slowing down either. So that part of the business is definitely moving to the right direction and with an accelerating pace, yes. But then and then, let's talk about NERF: Superblast. So this is something that I'm sure you guys have been waiting for a while now. And we've been in soft launch throughout the year so far. And like we've said several times, we've been really happy about the reception that the game has received and excited about the results and everything and...
And we've been testing a lot.
Yes, yes. There's so many things that we need to look into when you're building a real-time synchronous multiplayer game on mobile with so many aspects.
We're running those tests and are analyzing the results, it's -- all of us brings the kind of trust and credibility for the game and also for our investments in the future. There is a strong foundation with the game.
Yes. And I think, overall, if you just look at the game or if you are not able to do that yet, just look at the materials that you can see online about the game. It's a pretty good example of the quality level that we are reaching these tests here in Nitro. So we're really, really proud about the game overall so far. And as of now, we are in the middle of preparing for the actual hard launch for the game together with all the stakeholders involved. There's tons of stuff going on, on that front. And we believe that moving forward now to the actual launch phase that we will hit our targets with the game and that we can develop something great out of this. So we're really, really happy about where we stand now.
And as of today, we just announced preregistration.
Yes. So the preregistration for NERF: Superblast is now open. And the whole point with that is that people who are interested and excited about the game, they can sign up and they will be notified when the game is available. We haven't announced any launch dates like we never do in advance, of course. But obviously, we're very, very much busy working on that as we speak. And as the mandatory disclaimer part of the fund in launching games is that no one can ever predict how they actually go. So there is always a level of mystery attached to these things as well. But overall, we're really excited about second half when it comes to our projects. So we have Nerf launch coming up. We have several stuff cooking with the instant gaming side of the business. We are working with bigger, larger projects on the service side. So everything is taking us towards our vision, but also helping us to drive ourselves towards profitability and the breakeven going in the future. Then speaking of which, let's have a look/see at the financials. So like we discussed earlier, we did deliver revenue growth again. If you look at the percentage, it's really significant in that sense, but still we are on a really moderate levels in terms of the amount of euros that we bring in. And most of the good stuff that we've been working on, we expect to materialize moving forward now after the summer and so on. So not yet everything we've done is visible in our financials. But regardless of that, the revenues for the first half of the year are almost as big as the whole last year, so -- but having a good run so far. Our EBITDA is still on the rate, which is a result of us doing all the planned investments for the upcoming game launches, everything to do with the soft launches and testing and are getting everything ready, which is exactly as planned. Yes. So end of last year, we, I would say, reserved a lot of cash for the first half of the year so that we would now spend it to prepare for the second half. So that's all going as planned. And if we look at our performance with revenue and EBITDA quarter by quarter, we can see the same thing. So we've been increasing our revenue step by step. And now during the first half, we've been pretty active on the spending side. And moving forward, we expect to keep, obviously, growing our revenues and working on our EBITDA to credit the half towards profitability. So that's obviously the plan moving forward. Then and then to conclude with the so-called a big picture. Let's have a look/see at our road map. This is a...
Nothing new on the road map.
Nothing new here, yes, yes. It's almost boring when things go like you plan. So this is the same slide we've been looking at the whole year. That's what we're saying. And no reason to change everything. This year is all about game launches and B2B projects, and we are very much...
Very much on plan, executing the well-designed plan.
Exactly. Exactly. So this year, we are very much intending to deliver what we were set out to deliver this year. And then moving forward to next year and beyond, we believe that, that will help us reach our vision and also deliver shareholder value to you guys and to ourselves as well. So overall, very happy times in Nitro, great year in the making. Thanks for tuning in, and we're happy to take any questions if there is any.
Thank you.
[Operator Instructions]
And while we wait for that, we can check out some stuff from the e-mail. There's questions about the expectations for the Q4 2022. Well, obviously, the expectations for this year are positive. And like I said, we are super excited about things to come. We don't do any financial guidance or anything like that in Nitro, but I think things that you can expect from Nitro is that we intend to deliver on the game launches and we intend to deliver growth on the B2B service business. That's what we've been up to. We've been already signing announcing several new deals, which most of the good stuff is only materialized moving forward.
[indiscernible]
Yes. Yes. And then there was questions about the instant gaming side. And like we said, it's something where we are definitely -- we're making some money. It's not a huge part of the business yet. It's something where we are investigating and exploring future opportunities together with the leading players and...
We are in the same stage as the whole industry in...
Yes. Exactly.
Exploration phase and nobody knows which of the platforms will [indiscernible], nobody knows which of the models even, whether they've been at [ funded ] or is there some kind of averages, points or that's still like very early in evolution of the instant games.
Spot on. Yes. And like anybody else, people wouldn't be looking into it, unless a lot of these big players saw a big potential there. But how it materializes, we will see. But we make sure that we are on that track. Was there anything on the phone line?
At this time, there are no questions on the telephone conference. So I'll hand the word back to you, speakers.
Okay. Okay. So there was nothing on the phone line. Then there was a question about NERF: Superblast and about the exact timing with the launch. So we get a lot of that, by the way. Everybody is trying to figure out when are we actually pushing it out. We are busy working on it, but we don't announce any dates beforehand. I think that's the...
The preregistration in general is a pretty good sign.
Yes, yes. It's -- something might happen...
Something might happen.
Yes. Sounds to me like we are done. And me and Antti, we will now go and do some packing. We're heading to Germany this week when it's gamescom in Cologne. I think...
Biggest in Europe, at least.
Yes, I think it's the biggest industry event in Europe. And we have a great team of Nitro people going there, meeting partners old and new. We're also going ourselves to meet with some of the most important people we need to meet with, and we're looking forward to a very hot and busy week.
Exactly. So I think a combination.
Thank you all for tuning in, and have a freaking -- fantastic rest of the day. Bye-bye.
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