Remedy Entertainment Oyj - Interim report (Q1 and Q3)

Remedy Entertainment Plc: Business Review January-March 2024: Franchise strategy clarified by the Control publishing rights acquisition

Remedy Entertainment Plc | Stock exchange release | April 29, 2024, at 09:00
a.m. EEST

Remedy Entertainment Plc's Business Review January-March 2024

Franchise strategy clarified by the Control publishing rights acquisition


Higher revenue and improved profitability versus the comparison period

The Business Review is unaudited. Figures in parentheses refer to the comparison
period in the previous year, unless otherwise stated.

Highlights from January-March 2024

  · Revenue increased by 56.2% to EUR 10.8 (6.9) million.
  · EBITDA increased to EUR -1.2 (-4.9) million.
  · Operating profit (EBIT) was EUR -2.1 (-5.6) million, and the operating
profit margin was -19.3% (-81.0%) of revenue.
  · Cash flow from operations was EUR 3.3 (-3.9) million.
  · In February, Remedy acquired full rights to the Control franchise from 505
Games. Upon the transaction, all rights to Control, codename Condor, Control 2,
and all future Control products reverted to Remedy.

Key Figures

+---------------------------+----------+----------+----------+
|MEUR, IFRS, Group,         |1-3/2024  |1-3/2023  |1-12/2023 |
|unaudited                  |          |          |          |
+---------------------------+----------+----------+----------+
|Revenue                    |10.8      |6.9       |33.9      |
+---------------------------+----------+----------+----------+
|Growth in revenue, %       |56.2%     |-45.4%    |-22.2%    |
+---------------------------+----------+----------+----------+
|EBITDA                     |-1.2      |-4.9      |-17.0     |
+---------------------------+----------+----------+----------+
|Operating profit (EBIT)    |-2.1      |-5.6      |-28.6     |
+---------------------------+----------+----------+----------+
|Operating profit, % of     |-19.3%    |-81.0%    |-84.4%    |
|revenue                    |          |          |          |
+---------------------------+----------+----------+----------+
|Result for review period   |-2.0      |-5.6      |-22.7     |
+---------------------------+----------+----------+----------+
|Result for review period, %|-18.5%    |-81.6%    |-66.8%    |
|of revenue                 |          |          |          |
+---------------------------+----------+----------+----------+
|Balance sheet total        |90.4      |94.2      |79.0      |
+---------------------------+----------+----------+----------+
|Cash flow from operations  |3.3       |-3.9      |-16.0     |
+---------------------------+----------+----------+----------+
|Net cash                   |21.0      |43.9      |23.8      |
+---------------------------+----------+----------+----------+
|Cash and cash equivalents  |17.0      |39.8      |20.1      |
+---------------------------+----------+----------+----------+
|Net gearing, %             |-31.5%    |-52.3%    |-35.1%    |
+---------------------------+----------+----------+----------+
|Equity ratio, %            |73.7%     |89.1%     |85.5%     |
+---------------------------+----------+----------+----------+
|Capital expenditures       |19.6*     |2.1       |10.0      |
+---------------------------+----------+----------+----------+
|Average number of personnel|345       |328       |334       |
|during review period (FTE) |          |          |          |
+---------------------------+----------+----------+----------+
|Headcount at the end of    |360       |342       |352       |
|period                     |          |          |          |
+---------------------------+----------+----------+----------+
|Earnings per share, €      |-0.15     |-0.42     |-1.68     |
+---------------------------+----------+----------+----------+
|Earnings per share, €      |-0.14     |-0.41     |-1.66     |
|(diluted)                  |          |          |          |
+---------------------------+----------+----------+----------+
|Number of shares at the end|13,516,401|13,469,100|13,490,151|
|of period                  |          |          |          |
+---------------------------+----------+----------+----------+

*Contains 16.9 million invested in publishing rights of Control franchise

Comments by CEO Tero Virtala

In February, we took a significant strategic step by acquiring full rights to
the Control franchise from 505 Games for the maximum purchase price of
approximately EUR 17 million. At the same time, we made the first of three
payments, which had a 3.8 million negative impact on our cash position. The next
payments are expected to take place in the latter half of 2024 and early 2025.
Thanks to the Control acquisition, we can now freely decide on the future of our
two established franchises, Control and Alan Wake. We are currently weighing
self-publishing and related business models. Simultaneously, we are actively
looking into different partner publishing models and evaluating potential
partners.

In February 2024, Remedy announced that Alan Wake 2 had sold 1.3 million units
as of the beginning of February. Alan Wake 2 sales have continued with a high
average price. At the end of the first quarter, the game had recouped a
significant part of the development and marketing expenses. During the first
quarter, the team focused on working on the downloadable content (DLC) that will
extend Alan Wake 2.

In the first quarter of 2024 revenue was higher compared to a year ago.
Development fees increased from the comparison period, mainly due to higher
development fees from Max Payne 1&2 remake. Royalties grew year-on-year driven
by Control and Alan Wake Remastered. Alan Wake 2 did not yet generate royalty
revenue. In the first quarter our operating profit improved compared to a year
ago. The operating cash flow was positive and at the quarter end we had EUR 17.0
million in cash and cash equivalents, with an additional EUR 10.4 million
invested in financial instruments.

Codename Condor, a part of the Control franchise, moved to full production
meaning it has reached the final development stage before a game is launched.
Based on wide internal playtests, we can see that the core loop is engaging, and
the game brings a unique Remedy angle to the genre.

Control 2 team has focused on finalizing the proof-of-concept stage, in which
the game world, game mechanics and visual targets are proven. We expect the
project to advance to the production readiness stage during the second quarter
of 2024.

Max Payne 1&2 remake continued in the production readiness stage. The game is
expected to move into full production during the second quarter of 2024.

Codename Kestrel continued in the concept stage. The team works to refine the
game concept.

After the Control rights acquisition, we can freely choose the right model with
which to grow our two franchises and expand the Remedy Connected Universe. When
expanding high-quality franchises, each new game benefits from the success of
its predecessors and the existing fan base. We continue seeking further focus
and synergies across our games portfolio and operations. Soon we expect to have
two game projects simultaneously in full production and one in the production
readiness stage for the first time. We are confident that the good progress of
the beginning of the year carries over to the full production stages.

Outlook 2024 (unchanged)

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.

Events after the end of the reporting period

The Annual General Meeting was held on April 12, 2024. The Annual General
Meeting adopted the Financial Statements for 2023, discharged the members of the
Board of Directors and the CEO from liability, adopted the company's
Remuneration Policy and Remuneration Report and approved all proposals made to
the Annual General Meeting in the form included in the notice to the Annual
General Meeting. The Annual General Meeting resolved that no dividends shall be
distributed for the financial period ended on December 31, 2023. Markus Mäki,
Kaisa Salakka, Sonja Ängeslevä, Henri Österlund and Kai Tavakka were elected to
the Board of Directors. At its organizing meeting held after the Annual General
Meeting, the Board of Directors elected Markus Mäki to continue as the Chairman
of the Board of Directors.

Between January 1 and March 31, 2024, a total of 36,250 new shares of Remedy
were subscribed for with the company's stock options 2018 and 2019. The shares
subscribed for under the stock options were registered in the Trade Register on
April 11, 2024, after which the total number of shares is 13,552,651.

On April 25, 2024, Remedy announced changes to the core management team.
Remedy's Chief Operations Officer, Christopher Schmitz has resigned and will
leave Remedy on May 31, 2024. Mikael Kasurinen has been appointed Remedy's
Creative Director and will share the Creative Director responsibilities with
Sami Järvi. Kasurinen joins Remedy's Core Management Team.

Remedy received the following flagging notifications after the reporting period.
Tencent Holdings Limited's total holding increased above the 10% threshold on
April 24, 2024. Working Capital Advisors (UK) Ltd's total holding decreased
below the 5% threshold on April 24, 2024.

Webcast and conference call

Remedy will host a webcast and conference call in English on its Q1 2024
financial results for investors, analysts and media on April 29, 2024, at 2:00
p.m. (EEST). 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/webinar/register/WN_CadK4Ci9TcOE4gL113WnnQ

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: 857 1013 9504

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

Liisa Eloranta, Senior Investor Relations Specialist

Phone: +358 50 4334 992

Email: liisa.eloranta@remedygames.com (veli-pekka.puolakanaho@remedygames.com)

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. Remedy's shares are
listed on Nasdaq Helsinki's main list.

www.remedygames.com

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