Remedy Entertainment Plc: Games roadmap fortified for future growth

Remedy Entertainment Plc | Financial Statements Release, February 10, 2023, at 09:00 a.m. (EET)
 

Remedy Entertainment Plc | Financial Statements Release 2022

Games roadmap fortified for future growth

Investments in game projects accelerated and new deals strengthened the portfolio with first of the major new game launches in sight for 2023

 

Figures in parentheses refer to the comparison period in the previous year, unless otherwise stated.

HIGHLIGHTS FROM OCTOBER–DECEMBER 2022

• Revenue decreased by 31.2% to EUR 13.6 (19.8) million.
• EBITDA decreased to EUR 2.8 (10.9) million, mainly due to a significantly lower level of revenue than in the comparison period.
• Operating profit (EBIT) was EUR 2.1 (10.3) million, and operating profit margin was 15.6% (52.2%) of revenue.
• Cash flow from operations was EUR -3.8 (-2.2) million.
• In November, Remedy signed a co-development and co-publishing agreement with 505 Games for Control 2.

HIGHLIGHTS FROM JANUARY–december 2022

• Revenue decreased by 2.5% to EUR 43.6 (44.7) million.
• EBITDA was EUR 1.9 (14.5) million.
• Operating profit (EBIT) was EUR -0.6 (11.4) million, and operating profit margin was -1.3% (25.5%) of revenue.
• Cash flow from operations was EUR 11.1 (6.1) million.
• In April, Remedy signed a development agreement with Rockstar Games for a remake of Max Payne and Max Payne 2: The Fall of Max Payne video games.
• In May, trading in Remedy’s shares was transferred from the First North Growth Market Finland marketplace to the official list of Nasdaq Helsinki.
• In August, Remedy lowered its revenue and operating result outlook for 2022.
• In November, Remedy signed a co-development and co-publishing agreement with 505 Games for Control 2.
• The Board of Directors proposes that a dividend of EUR 0.10 (0.17) per share be paid for the year 2022. 

KEY FIGURES

MEUR, IFRS, Group	10–12/2022	10–12/2021	1–12/2022	1–12/2021
Revenue	13.6	19.8	43.6	44.7
Growth in revenue, %	-31.2%	45.7%	-2.5%	8.9%
EBITDA	2.8	10.9	1.9	14.5
Operating profit (EBIT)	2.1	10.3	-0.6	11.4
Operating profit, % of revenue	15.6%	52.2%	-1.3%	25.5%
Result for review period	1.5	8.2	-1.7	8.8
Result for review period, % of revenue	10.8%	41.3%	-4.0%	19,7%
Balance sheet total	99.6	101.1	99.6	101.1
Cash flow from operations	-3.8	-2.2	11.1	6.1
Net cash	49.9	51.7	49.9	51.7
Cash position	49.0	51.4	49.0	51.4
Net gearing, %	-56.4%	-59.1%	-56.4%	-59.1%
Equity ratio, %	88.8%	86.4%	88.8%	86.4%
Capital expenditures	2.5	2.3	10.6	9.6
Average number of personnel during review period (FTE)	323	282	307	280
Headcount at the end of period	334	294	334	294
Earnings per share, €	0.11	0.61	-0.13	0.67
Earnings per share, € (diluted)	0.11	0.61	-0.13	0.65
Number of shares at the end of period	13,448,600	13,298,450	13,448,600	13,298,450

 

COMMENTS BY CEO TERO VIRTALA

The year 2022 started a stronger investment phase for Remedy, which is evident in the financial figures of the fiscal year. Out of the five games in development, we are co-financing four games that are based on Remedy-owned brands and one game is fully funded by a publishing partner. When the projects advance to their next phases of development in 2023, our own investments will also increase. Our cash position at the end of the year was EUR 49.0 million, which enables us to make appropriate capital allocation in the transition towards co-financing more projects and taking a larger role in game publishing.

In the fourth quarter of 2022, revenue declined from a strong comparable period. The fourth quarter of 2021 was exceptional, with individual revenue items, the agreement for codename Vanguard and the extended scope and budget related to the development of Alan Wake 2 contributing to both revenues and profitability significantly. Our full-year 2022 revenue and profitability were impacted by increased own investments in the game projects.

Alan Wake 2 is in full production. The game will soon have all content in place, and it is playable from start to finish. We will then move onto polishing the experience. Alan Wake is a unique brand that holds high value for the company today. Alan Wake Remastered has not yet generated royalties. However, we expect the sales to increase as the release of Alan Wake 2 becomes imminent and fans and new players want to experience the original story on new generation consoles.

In November, we announced the deal for Control 2 with 505 Games. This further strengthens our collaboration with 505 Games on the Control franchise and marks another big step for us towards game publishing. Control 2 expands the story and the world from the original Control. We now have detailed concepts on the game vision and all creative areas including the gameplay, narrative and art. We are pleased with the work the team has done and as of January 2023, the game has progressed into the proof-of-concept stage.

Codename Condor is a service-based game and as such a new type of game for Remedy. We are making sure the core gameplay is solid. We are building the right team and production model for the game and are patiently progressing with the development. Together with our partner 505 Games we have seen great potential in Condor. Condor remains in the proof-of-concept stage.

Codename Vanguard is also currently in the proof-of-concept stage. In the fall 2022, we chose to keep the game in the proof-of-concept phase longer and postpone the significant expansion of the development team until 2023. The Vanguard team has made progress and continues to work on core gameplay and meta game development as well as proving the application of Remedy-style narrative and world building. The development team has been strengthened by select key hires.

Max Payne 1&2 remake continues in the concept stage. The project has made good progress. We are looking forward to bringing this beloved character alive again to a new generation of consoles and to a new generation of fans.

In our outlook for 2023, we expect revenue to decline from the previous year and to have a negative operating result. As described above, we are co-financing most of the projects together with our partners and all these projects are based on Remedy-owned brands increasing the value of our company in the long run. A greater number of co-financed projects results in a smaller amount of development fees. This also impacts our profitability in the short term, as a greater proportion of development costs are covered by us. However, such investment will increase the royalty potential for the upcoming years. 

Since 2017, we have started the process to systematically develop our capabilities to be able to develop several high-quality games in parallel and to have successful game launches on a more frequent basis. We now have five AAA games in development, which has been our ambitious target. The move to this multi-project model has been going well, but we also have felt some growth pains with implementing our model, as was partially evidenced in summer 2022 with the additional time needed for the Vanguard project. Subsequently during 2022, we have taken our learnings and made changes: We have strengthened our game teams and adjusted their leadership roles, some outsourcing partnerships have been changed, there have been number of improvements how we plan and lead project-work, and we have developed the way company management oversees, supervises and supports our game projects.

We have made significant technology and tool developments for Northlight in 2022. These development steps support in further enhancing the quality of our games, opening new creative opportunities, and improving the efficiency of our game development. In 2022, we almost doubled the number of new Remedians compared to 2021 and we also succeeded in retaining and developing our people. Looking ahead, we see the opportunity to keep on investing in personnel by hiring experienced, passionate and creative, challenge-driven individuals to drive our game projects onward. Our studio in Stockholm also increases our presence and attractiveness as an employer in Sweden.

We have now gained a stronger position in the value chain in accordance with our strategic goals. Out of the five game projects, four of which are based on Remedy owned brand, Remedy is a co-publisher in three of these, giving us more influence on how the games will be commercialized. Our roadmap for the medium term is now set, and our full focus is on executing the projects in the current games pipeline. The investments in our teams, Northlight game engine and tool set, support functions and external development are the key enablers for our next growth leap during the coming years. We are planning to launch a new game per year starting from 2023, accompanied by additional free and paid content.

FUTURE OUTLOOK

Remedy expects its revenue to decline from the previous year and its operating result to be negative.

LONG-TERM BUSINESS PROSPECTS

We have several games in development, each with a world-class partner and agreed long-term development fees. These development fees form a strong and predictable revenue basis for many years. On top of these revenues, we have the less predictable but highly scalable revenue streams arising from game royalties.

Our assumptions for individual game royalties are inherently conservative, due to the amount and nature of the variables impacting game sales. However, each high-quality game that stands out in the market has the potential to succeed in a bigger way, which would drive significant revenue and operating profit growth. Our games and brands are transforming into longer-lasting experiences that typically continue to sell for years.

In relation to our longer-term game roadmap, we now have five game projects in development and will have major game launches starting from 2023. The timing of individual game launches and new game development agreements may cause variation from quarter to quarter and year to year. With several games out in the market accruing royalties and several new ones in development, this variation is expected to decrease in the coming years.

DIVIDEND PROPOSAL

Remedy Entertainment Plc had non-restricted equity of 61 280 970.55 euros on December 31, 2022, and profit for the financial year was -1 818 929.75 euros. The Board of Directors proposes to the Annual General Meeting, planned to be held on April 13, 2023, a dividend distribution of 0.10 euros per share, resulting in a total amount of 1 344 860.00 euros.

The ex-dividend date will be April 14, 2023. The dividend will be paid to a shareholder who is registered in the shareholders’ register of the company maintained by Euroclear Finland Ltd on the dividend record date April 17, 2023. The payment date proposed by the Board of Directors for the dividend is April 24, 2023.

webcast and conference call

Remedy will host a webcast and conference call in English on its full year 2022 financial results for investors, analysts and media on Friday February 10, 2023, at 2:00 p.m. (EET). Remedy’s financial results will be presented by CEO Tero Virtala and CFO Terhi Kauppi.

 

The Financial Statements Release 2022 will be available after publication on Remedy’s Investor Relations website: https://investors.remedygames.com/announcements-and-releases/

 

Webcast details:

Register in advance for the webcast:

https://remedy.zoom.us/webinar/register/WN_S7fImKPaQ_ykZSOhxTUuHg

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/kWQMBp9zC

Finland: +358 9 7252 2471

Sweden: +46 850 539 728

United Kingdom: +44 330 088 5830

United States: +1 646 558 8656

 

Webinar ID: 815 2631 0400

Passcode: 338475

A recording of the webcast will be available after the briefing at https://investors.remedygames.com/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 Control, Alan Wake and Max Payne. Remedy also develops its own Northlight® game engine and tools technology that powers many of its games.

The company employs over 330 game industry professionals from 34 different countries. Remedy’s shares are listed on Nasdaq Helsinki’s official list.

www.remedygames.com