Remedy Entertainment Plc: Financial Statements Release January-December 2023: Challenging year results in two established franchises after the successful Alan Wake 2 launch
Remedy Entertainment Plc | Stock exchange release | March 20, 2024, at 09:00 a.m. EET
Remedy Entertainment Plc | Financial Statements Release 2023
Challenging year results in two established franchises after the successful Alan Wake 2 launch
After the review period, Remedy acquired full rights for the Control franchise
Figures in parentheses refer to the comparison period in the previous year, unless otherwise stated.
Highlights from October–December 2023
• Revenue decreased by 24.4% to EUR 10.3 (13.6) million.
• EBITDA decreased to EUR -3.9 (2.8) million.
• Operating profit (EBIT) was EUR -12.8 (2.1) million, and the operating profit margin was -123.9% (15.6%) of revenue.
• Cash flow from operations was EUR 0.1 (-3.8) million.
• In September, the Board of Directors decided on a new option plan 2023.
• Alan Wake 2 launched October 27, 2023, with great critical and player reception.
• Alan Wake 2 won several awards including Best Game Direction, Best Narrative and Best Art Direction at The Game Awards on December 7, 2023.
• In November, Remedy made changes to its core leadership team. Markus Mäki assumed the role of Chief Product Officer and Mika Vehkala was appointed as Chief Technology Officer.
• Remedy recognized an impairment charge of EUR 7.2 million for Q4 and fiscal year 2023 results, comprising the total capitalized development costs for codename Vanguard.
Highlights from January–December 2023
• Revenue decreased by 22.2% to EUR 33.9 (43.6) million.
• EBITDA was EUR -17.0 (1.9) million.
• Operating profit (EBIT) was EUR -28.6 (-0.6) million, and the operating profit margin was -84.4% (-1.3%) of revenue.
• Cash flow from operations was EUR -16.0 (11.1) million.
• In September, The Board of Directors decided on a new option plan 2023.
• In November, Remedy made changes to its core leadership team. Markus Mäki assumed the role of Chief Product Officer and Mika Vehkala was appointed as Chief Technology Officer.
• Remedy recognized an impairment charge of EUR 7.2 million for Q4 and fiscal year 2023 results, comprising the total capitalized development costs for codename Vanguard.
• The Board of Directors proposes that no dividend will be paid for the year 2023.
• After the review period, in February 2024, Remedy signed a contract amendment with Tencent for codename Kestrel, resulting in the Kestrel project starting fresh.
• After the review period, in February 2024, Remedy announced that Alan Wake 2 had sold 1 million units by the end of December 2023, and 1.3 million units as of the beginning of February 2024.
• After the review period, in February 2024, Remedy acquired full rights to the Control franchise from 505 Games. Upon the transaction, all publishing, distribution, marketing and other rights to Control, codename Condor, Control 2, and all future Control products revert to Remedy.
Key Figures
|
MEUR, IFRS, Group, unaudited |
10–12/2023 |
10–12/2022 |
1–12/2023 |
1–12/2022 |
|
Revenue |
10.3 |
13.6 |
33.9 |
43.6 |
|
Growth in revenue, % |
-24.4% |
-31.2% |
-22.2% |
-2.5% |
|
EBITDA |
-3.9 |
2.8 |
-17.0 |
1.9 |
|
Operating profit (EBIT) |
-12.8 |
2.1 |
-28.6 |
-0.6 |
|
Operating profit, % of revenue |
-123.9% |
15.6% |
-84.4% |
-1.3% |
|
Result for review period |
-9.9 |
1.5 |
-22.7 |
-1.7 |
|
Result for review period, % of revenue |
-96.5% |
10.8% |
-66.8% |
-4.0% |
|
Balance sheet total |
79.0 |
99.6 |
79.0 |
99.6 |
|
Cash flow from operations |
0.1 |
-3.8 |
-16.0 |
11.1 |
|
Net cash |
23.8 |
49.9 |
23.8 |
49.9 |
|
Cash and cash equivalents |
20.1 |
49.0 |
20.1 |
49.0 |
|
Net gearing, % |
-35.1% |
-56.4% |
-35.1% |
-56.4% |
|
Equity ratio, % |
85.5% |
88.8% |
85.5% |
88.8% |
|
Capital expenditures |
1.5 |
2.5 |
10.0 |
10.6 |
|
Average number of personnel during review period (FTE) |
337 |
323 |
334 |
307 |
|
Headcount at the end of period |
352 |
334 |
352 |
334 |
|
Earnings per share, € |
-0.74 |
0.11 |
-1.68 |
-0.13 |
|
Earnings per share, € (diluted) |
-0.73 |
0.11 |
-1.66 |
-0.13 |
|
Number of shares at the end of period |
13,490,151 |
13,448,600 |
13,490,151 |
13,448,600 |
Comments by CEO Tero Virtala
The last quarter of 2023 was a special and memorable one for Remedy. Alan Wake returned after 13 years with the launch of Alan Wake 2 at the end of October 2023. Alan Wake 2 is the largest and most ambitious project undertaken by Remedy. Finalizing the game with a high quality was a priority and required more personnel during the year than originally planned, which in turn delayed our other projects moving to the next development stages. The successful launch of Alan Wake 2 freed up talents for other game projects, resulting in improved development velocity.
We at Remedy are grateful for Alan Wake 2’s positive reception from both critics and players. The game has a Metacritic score of 89 placing it among the very best game launches of 2023, and it has won several awards including Best Game Direction, Best Narrative, and Best Art Direction at The Game Awards. With Alan Wake and Control we now have two established franchises, and our ambition is to grow them into franchises that have high brand recognition, steadily growing user base, more regular cadence of sequels and an ability to generate revenues and profits at a high level.
The sales of Alan Wake 2 started well despite a competitive launch window and an overall exceptional number of great game launches throughout the year. Alan Wake 2, as a digital only release, had sold over 1 million units by the end of the fourth quarter of 2023 making it the fastest selling Remedy game. I want to thank the development team for their incredible effort in getting Alan Wake 2 done. As Control proved, a great quality game can have excellent longtail sales and we expect this to be the case with Alan Wake 2 as well. Alan Wake 2 has already recouped a significant part of the investments made by Epic Games Publishing, and we expect the game to be a meaningful revenue and profitability driver for the year.
In February 2024, we acquired full rights to the Control franchise from 505 Games. This is a significant positive step for us. While 505 Games was the right partner in 2017, the franchise and our ambitions have grown since. We see that the way to grow the Control franchise is with a different business model and a partner.
Our full year 2023 revenue and profitability were impacted by significantly increased investments in our own game projects, and the impairment charge related to codename Vanguard. Out of the five games we had in development during the year, we co-financed four that are based on Remedy-owned brands, whereas Max Payne1&2 remake is fully funded by the IP owner and publishing partner Rockstar Games. In the fourth quarter of 2023, revenue and profitability declined from the comparable period.
In November we announced a reboot to Codename Vanguard, renamed Codename Kestrel. The requirements for a successful new free-to-play game have clearly increased during the past years. Despite the promising progress during the first half of the year, we decided with Tencent that the potential was not there. Kestrel returned to a concept stage. As a result, we wrote off all the capitalized Vanguard development costs, impacting the profitability of the fourth quarter and full year 2023 by EUR -7.2 million.
Control 2 continued in the proof-of-concept stage. In the fourth quarter, the team worked particularly on world building and combat. Codename Condor continued in the production readiness stage and the team focused on combat and game mechanics. Both games have proven fun and engaging game play.
Max Payne 1&2 Remake also continued in the production readiness stage. The team made considerable progress throughout the year. Max Payne 1&2 remake is going to be a major new game with great potential, enabled by a similar development budget as Alan Wake 2.
We expect Condor, Control 2 and Max Payne 1&2 remake projects to advance to the next stages of development during the first half of 2024. With the refined multi-project model in place, increased focus on Remedy core strengths and the dedication of almost 400 Remedians, we are thrilled with a great lineup of upcoming game launches.
I want to thank all Remedians for their hard work and dedication throughout the year. 2023 was a challenging yet remarkable year for Remedy. Having acquired the full rights to Control, Condor and Control 2, we can now make the right product and business decisions focusing on long-term franchise growth for both Alan Wake and Control. We continue the year 2024 with great enthusiasm, more focus, and plenty of determination, and we expect this to be an exciting year of growth for Remedy.
Outlook 2024
Remedy expects its revenue to increase from the previous year and operating profit (EBIT) to improve.
The revenue growth rate and EBIT improvement are meaningfully dependent on the choice between self-publishing and/or choosing a new publishing partner for the games in the Control franchise (Codename Condor and Control 2).
We will specify the Outlook for 2024 when the decision for the business model and the potential agreements for Control 2 and Condor have been made.
Long-term business prospects
We have two established own franchises, Control and Alan Wake, which are linked through the Remedy Connected Universe. Growing and expanding these franchises will be a key part of our future. In addition, we work with a partner franchise Max Payne that was originally created by Remedy.
Dividend proposal
On December 31, 2023, Remedy Entertainment Plc’s non-restricted equity was 48 020 705,23 euros, and the profit for the financial year was -22 867 054,61 euros.
The Board of Directors proposes to the Annual General Meeting that no dividend be paid based on the balance sheet to be adopted for the financial year 2023.
Events after the end of the reporting period
On February 6, 2024, Remedy signed a contract amendment with Tencent for codename Kestrel, resulting in the Kestrel project starting fresh.
On February 16, 2024, Remedy announced that Alan Wake 2 had sold 1 million units by the end of December 2023, and 1.3 million units as of the beginning of February 2024.
On February 28, 2024, Remedy acquired full rights to the Control franchise from 505 Games. Upon the transaction, all publishing, distribution, marketing and other rights to Control, codename Condor, Control 2, and all future Control products will revert to Remedy.
Webcast and conference call
Remedy will host a webcast and conference call in English on its full year 2023 financial results for investors, analysts and media on March 20, 2024, at 4:00 p.m. (EET). Remedy’s financial results will be presented by CEO Tero Virtala and CFO Terhi Kauppi.
The Business review will be available after publication on Remedy’s Investor website: https://investors.remedygames.com/financials-and-reports/financial-reports/.
Webcast details:
Register in advance for the webcast:
https://remedy.zoom.us/j/89665290254?pwd=TjVNZmp6U0xtY3dXNnpLZFFPeHNaQT09
After registering, you will receive a confirmation email containing information about joining the webcast.
Conference call details:
Dial in by calling your local phone number a few minutes before the briefing begins. International numbers are available at: https://remedy.zoom.us/u/kbZXDFBZgc.
Finland: +358 9 7252 2471
Sweden: +46 850 539 728
United Kingdom: +44 330 088 5830
United States: +1 646 558 8656
Webinar ID: 896 6529 0254
Passcode: 487991
A recording of the webcast will be available afterwards on Remedy’s Investor website: https://investors.remedygames.com/financials-and-reports/webcasts-and-presentations/.
More information
Veli-Pekka Puolakanaho, Corporate Development Director
Phone: +358 50 430 0936
Email: [email protected]
Remedy in brief
Remedy Entertainment Plc is a pioneering, globally renowned video game company founded in 1995 and headquartered in Finland with an office in Stockholm, Sweden. Known for its story-driven and visually stunning action games, Remedy has created multiple successful, critically acclaimed franchises such as Alan Wake, Control, and Max Payne. Remedy also develops its own Northlight game engine and tools technology that powers many of its games. Remedy’s shares are listed on Nasdaq Helsinki’s official list. www.remedygames.com