Hello everyone, and thank you for joining this Remedy Entertainment webcast. My name is Liisa Eloranta, and I run the investor relations at Remedy. Today we will go through Remedy's financial statements for January-December 2024. With me here are Tero Virtala, Remedy CEO, and Santtu Kallionpää, Remedy CFO. There will be time for questions and answers after the presentations. Tero, the floor is yours.
Thank you, Liisa. Welcome everyone also on my behalf. All right, let's first have a look at the fourth quarter and after that our full year 2024. In the fourth quarter, our revenue increased by 13% to EUR 11.7 million. EBITDA and operating profit also both improved in comparison to last year. Santtu will in a moment go through the financials in more detail. In relation to key events in the fourth quarter, in October we announced FBC: Firebreak, a three-player cooperative multiplayer first-person shooter set in the world of Control. The game launches this year and will be self-published by Remedy. We also announced and launched the Alan Wake 2 Lake House expansion and the physical edition for the game. Big milestone, of course, in this last quarter was that Alan Wake 2 sales exceeded 2 million units and the game recouped its development fees and marketing investments.
On Alan Wake 2 in more detail, during the last quarter we had a lot of activity around the game with our partner Epic Games. The Lakehouse expansion was launched and well received. Physical retail edition was released. Alongside the launch of the PlayStation 5 Pro, we launched a Pro-specific update for the game and also updates that overall improved the quality of the game even further in all platforms. Naturally, there were also selective marketing and sales activities around the game. As a result of all that, Alan Wake 2 sold well, especially in the holiday period. At the end of the fourth quarter, Alan Wake 2 sales exceeded 2 million units, the game recouped the development fees and marketing investments, and therefore towards the end of the quarter we started to accrue royalty income from the game sales.
Looking at year 2024 overall, our revenue increased 49% to be over EUR 50 million. EBITDA was EUR 2.5 million positive, operating profit still negative by EUR 4.3 million. These are still clear improvements from the previous year, so steps into the right direction. On the commercial front, early 2024 we acquired full rights to the Control franchise from 505 Games. In August, we announced a strategic partnership agreement with Annapurna Pictures, and in September we made a EUR 15 million unsecured convertible loan agreement with Tencent. As said, in October we then announced FBC: Firebreak and that the game will launch in 2025, self-published by us. Overall, I can say that year 2024 was financially a clear step to the right direction towards growth and profitability. Behind the hood of all that, the steps that we took strategically, commercially, and operationally were very successful.
What we managed to do, we are in a strong position for this year and for the coming years. Overall, we had big and successful developments in 2024. On the commercial fronts, as I said, we acquired back full commercial rights for Control, we formed a new partnership with Annapurna Pictures, and we made an additional financing arrangement, convertible loan with Tencent. Why are these so significant? We have for years step by step strengthened our position in the industry value chain. We have built our publishing capabilities over the years, and now these strategic and commercial agreements we made this last year enable our transition to self-publishing our own future games. At the same time, operationally, we have systematically improved the ways we work.
We continue to develop our Northlight technology and tools, and very importantly in 2024, we took into wider use technology and tools that had been in the making for a long time. These are providing us clear benefits in our game projects. People and team-wise, we continue to have good retention with our top talents while making very targeted additional recruitments. Our teams are now more stable as talents have been with us longer and worked together previously, which shows in how our projects progress. With all this, we now have games in development with significant potential. We are able to advance these game projects with clearly better development velocity than ever before. We have an outlook of steady release of good games for the upcoming years. Let's discuss the transition to self-publishing.
As a background, we have since 2017 step by step strengthened our position in the value chain. During the past years, we had advanced to a state in which our games were either published by a partner or would be co-published by us and the partner. Self-publishing had for years been a potential long-term goal as it would allow higher value creation and provide other benefits. It would also require us to be able to take full responsibility of the commercial activities and an ability to finance both the development and publishing operations. When we early last year got back all the rights to Control, including FBC: Firebreak and Control 2, we started to evaluate and discuss with potential partners on what the available future routes could be for us.
Looking at the future value creation potential, our aim was to find a way to get partnerships and financing to move to self-publishing. However, early 2024, the economic climate was still difficult in the gaming industry. It was definitely not easy to get big financing that would allow self-publishing and get that with good terms. Fortunately for us, there was good interest from potential partners towards Remedy and Control, and in the end, we closed good agreements with great partners that enabled our transition to self-publishing. In relation to these partnerships and financing, with Annapurna Pictures, we formed a true strategic cross-media partnership. Annapurna will finance 50% of the development budget for the upcoming Control 2. Remedy will publish the game.
Annapurna will also focus on expanding Control and Alan Wake into film, television, and other audiovisual mediums, and this is a clear opportunity to expand and grow our franchises, Control and Alan Wake. Out of this collaboration, Remedy gets a greater revenue share from Control 2 sales and Annapurna from TV and film sales. It's a very balanced win-win arrangement that builds on both parties' strengths. In September, we made a EUR 15 million convertible loan agreement with Tencent. This financing supports us in making the games we have in development and successfully carrying out the publishing activities of our next self-published games. These partnerships and agreements are very good ones and support our strategy overall and especially our transition to self-publishing.
Self-publishing, as a summary, provides us higher financial upside, freedom to decide on how our games are commercialized, and the possibility for us to do all the actions that best serve that game and Remedy's needs overall. Of course, at the same time, moving into self-publishing is not the model that suits all game companies. To be able to execute publishing successfully, sufficient funding is needed, and self-publishing requires the right capabilities, people, and correct partnerships. It is therefore good to highlight that we are not moving from being a pure game development studio to self-publishing overnight. We have been involved in the publishing of our games since 2016. With each of our past games, we have had a role in planning and implementing some of the publishing operations. We have been learning, building the team step by step.
This is the table that we presented in November in our capital market day. It's not the full list of all the publishing responsibilities, but it does show some important areas and how at Remedy we have been building our capabilities and taken bigger publishing responsibilities over time. We are ready to successfully publish FBC: Firebreak this year. Let's have a look at our game and project portfolio. First of all, we now have three main games out in the market, continuing to sell and generate royalties, or now, in the case of Control, direct sales revenue for us. Control has now sold over 4.5 million units, and still, in year 2024, for a game that is over five years old, it sold 600,000 units. This shows that in today's digital world, good quality games do sell for a long time.
Of course, we do not just wait for the game to sell by itself. We are still doing selected support activities for the game, its community, and also seeking good ways to promote the game to new players. As I earlier said, we had a lot of activity around Alan Wake 2 during quarter four with our partner Epic Games. Alan Wake 2 sold well, especially around the holiday period. By the end of the year, the sales exceeded 2 million units, and the game recouped the development fees and marketing investments. With that, we started to accrue royalty income from the game sales. This is definitely a good milestone. We have seen already in Control, good quality games have long-term sales potential, and Alan Wake 2 definitely is a great game. To our games in development, simply said, they made good progress throughout 2024.
Many developments to our teams, ways of working, technology, and tools are iterative in nature, and over time, they pile up into bigger positive changes. They take time to show the benefits, but when they do, the good thing is that the developments and benefits are robust, sustainable, that will carry on also to the future. In 2024, we still continued to make these production developments, and we also took into use some long-in-the-making technology and tool developments. Many improvements in our ways of working and teams also now then finally started to bear very concrete fruit and showed positively in how our projects were progressing at an accelerating velocity. When we look at ourselves and the project status at the moment, at the moment, FBC: Firebreak continues in full production and has been advancing well.
End of 2024, Control 2 was finalizing its production readiness phase, verifying the velocity of the asset creation, establishing production pipelines, overall readying for full production. With Control 2 in January this year, we had our internal stage gate evaluation, and the team and the game were ready to move into production. Just last week, early February, Control 2 entered full production. Max Payne 1 & 2 Remake is making steady progress in full production. On top of these, we also have a smaller team working on a new project. It's early phases, and we won't yet share any more info on that. A few words specifically on FBC: Firebreak, which launches this year, 2025. In October last year, we announced the game in the Xbox Partner Preview Digital Event. A gameplay teaser trailer showcased this co-op multiplayer game.
The game and its announcement got a good reception, which is a good start. Development-wise, in December, our team successfully conducted a closed technical test with external players. We successfully tested the game's matchmaking and backpacking services, collected data and experiences that help in shaping the final product. FBC: Firebreak will be self-published and, as said, it's coming out this year. In summary, we are in good place both for 2025 and the following years. We have the ability to create and launch excellent games more regularly, expand our franchises to new games and mediums, and grow our audiences. Great games in development, games that advance better than ever before. On top of that, we now have the organization, teams, and people to ensure that this good progress continues and just keeps on improving. We have now transitioned into self-publishing and have the capabilities, partners, and financing to do that.
We are in a very good position for the next years. This year, 2025, starts an era of sustainable, profitable growth for Remedy. We presented our new strategy in Capital Market Day in November last year, and as stated, by 2027, we aim to double our 2024 revenue with an EBITDA margin of 30%. We have all the means to do that, and I'm confident that we will reach these targets. At this point, I'll hand over to Santtu to go through our financials in more detail.
All right, good afternoon. Let's move to the financial update. In the fourth quarter of 2024, our revenue was EUR 11.7 million and grew 13% compared to the previous year. Royalties were EUR 1.5 million, and they decreased EUR 1.2 million from the comparison period. Development fees were EUR 10.2 million, which is 34% more than in the comparison period.
The development fees were from Max Payne 1 & 2 Remake and Control 2. When looking back at our historical revenues, the revenue levels have been on a higher year-on-year level throughout this year. At the end of the fourth quarter of 2024, Alan Wake 2 filled its recoup and started to accrue royalties for us, but the impact was still small. The main part of the queue for royalty accrual was generated by Control and older Alan Wake titles. In the comparison period 2023, a big part of royalties was generated by Alan Wake Remastered, which had sales boost from the launch of Alan Wake 2 during the same quarter. As an additional highlight, when looking at the other quarters of 2024, the development fees on the third quarter included a one-time payment regarding previously done development of Control 2 as we entered into a strategic partnership with Annapurna.
The operating profit of the fourth quarter was EUR 1.4 million negative, which means EUR 11.4 million improvement compared to Q4 2023. The comparison period EBIT was burdened by EUR 7.2 million impairment loss related to Project Vanguard, which explains also the difference between EBIT and EBITDA in the Q4 2023. Fourth quarter operating profit improvement was additionally driven by higher revenue and lower cost level. EBITDA of the fourth quarter was negative, EUR 0.6 million, and it improved EUR 3.3 million from the comparison period. Looking at the full year 2024, Remedy's revenue grew significantly compared to 2023. Full year revenues increased by 49%, ending up to EUR 50.7 million. Revenue increase was driven by development fees increase, and they consisted of Max Payne 1 & 2 Remake and Control 2 related development fees.
Royalty income was mainly from the back catalog sales, and as said earlier, also a small amount of Alan Wake 2 royalties. Looking at the full year operating profit, our EBIT was EUR 4.3 million negative and minus 8.4% of revenue. EBIT was improving EUR 24.3 million compared to the previous year, and this was driven by the revenue growth. Additionally, in 2023, we had also EUR 7.2 million impairment loss recognized from code name Vanguard and also expenses related to Alan Wake 2 development. Full year 2024 EBITDA was EUR 2.5 million positive, and EBITDA margin was 5%. Here we can see the analysis of unnetted amounts of expenses and capitalization, which provide transparency in our costs. In the fourth quarter, external work expenses were EUR 4.5 million and on a 21% lower level than in the comparison period when they were EUR 5.7 million.
As the external service usage level on our current projects remained on nearly the same level as last year, the comparison period had over EUR 1 million more external development expenses related to code name Kestrel and Alan Wake 2. Personnel expenses increased year on year by 5.3%, while the increase in our employee amount was 4.3% from 352 to 367. The difference in personnel expenses in relation to the employee amount growth was mainly by annual differences on work time and holiday accruals. Capitalized development expenses were on a clearly higher level than in the comparison period. The growth is visible already from the first quarter of this year, and it is due to a higher share of capitalized expenses related to FBC: Firebreak and Control 2 game projects. The capitalization percentages were raised as we purchased the publishing rights for Control franchise during the first quarter 2024.
Regarding Control 2, the percentage was recalculated again as we entered into agreement with Annapurna. In the fourth quarter and over time, the depreciations have mainly remained on a stable level. In the fourth quarter, we started depreciating capitalized development expenses related to Alan Wake 2. We have said earlier that the main part of Alan Wake 2 related expenses paid by Remedy were booked as an expense in 2023. This means that we have only a modest amount of Alan Wake 2 on our balance sheet, and the depreciations are currently scheduled to be made before the game turns three years old. Looking at the other quarters in the graph, in the third quarter 2024, we depreciated EUR 3.4 million expenses capitalized related to Control franchise products. As said already earlier in Q4 2023, there was an impairment loss related to code name Vanguard.
The rest of the variation in game depreciations and impairments has been from Alan Wake Remastered, which became fully depreciated by the third quarter of 2024. Otherwise, looking at the intangible assets on our balance sheet, it has grown from EUR 19.3 million to EUR 39.8 million during 2024. A major part of the growth is from acquisition of publishing rights of Control franchise. The rest of the total growth is from activated game development costs related to Control 2 and FBC: Firebreak. Cash flow, looking at the fourth quarter year on year, the operating cash flow was lower based on cash flow of development fee revenues. The payments of milestones are agreement-based, and outgoing operating cash flow was EUR 1 million less than in the comparison period Q4 2023. Overall, the operating cash flow was EUR 12 million positive in 2024, when in 2023 it was EUR 16 million negative.
The main reason was a higher amount of incoming payments, including also the one-time payment from Annapurna regarding previously done development work for Control 2. Also, outgoing payments of operating expenses were less than in the comparison period. In the fourth quarter, our total cash level was EUR 41.1 million, increasing nearly EUR 10 million from the previous quarter. The main reason for the growth from the previous quarter was the convertible loan of EUR 15 million. At the end of the year 2024, we had EUR 20 million in cash management investments and EUR 21 million in cash. Let's end the finance part by looking still at the longer time period. The year 2024 profitability level was still impacted by our own investments to game development, which have increased during the last years.
At the same time, compared to the previous year, profitability has moved to the correct direction and improved, and EBITDA is again positive. The Remedy Board of Directors proposes that no dividend will be paid for the year 2024. Now Tero will continue with Outlook.
Thank you. As I said in my part, we are in a very good position both for this year and the following years. 2025 starts an era of sustainable, profitable growth for us. With that, our outlook is that we expect our revenue and operating profit to increase from the previous year and operating profit this year to be positive.
That's all from our part. Now it's time for the Q&A. Speakers will now take questions from the investors, analysts, and media representatives. Please type in your questions. Let's begin.
In 2024, Remedy had two, and now in early 2025, a total of three games in full production. In this unprecedented situation with three games in full production without any announced release dates, does Remedy see increased project development or other risks?
That does not build risks for us. It is, of course, as the question states, it is unprecedented considering our history that we have not previously had three games in full production at the same time. At the same time, when Control 2, in a way, was evaluated in our stage gate evaluation a couple of weeks back, it is evident from that game and from our other games that overall our development capabilities have improved. The teams are more stable. They are stronger than before. Our technology and tools, production pipelines that support our game development are better. We have a lot of improvements in the ways we work.
We can also see that not just in how our games are progressing, but also in the plans they have and in a way how the plans represent the work that is upcoming in the production phases. With all that, we were confident in allowing Control 2 to enter into production. When we look at the other games, Max Payne 1 & 2 Remake, FBC: Firebreak, the plans clearly show that the teams know what they are doing. They are able to progress according to these plans. We showed in our capital market day how our portfolio management team is overseeing our projects. Is running all this easy? No, it's not. There are always certain things to be aligned in a way. When something new comes along in a project, in a way, some feature doesn't seem to be actually in the correct way.
It might need an individual developer that the company needs to provide. We have all the processes to do that. That is in a way a normal life of a professional game developer. I think overall we have seen that our projects progress well. We were confident in allowing one more project to move into full production. It is also good to see that these projects share synergies. They are built on top of the same technology. They are able to utilize the same asset basis, but they are not competing on the same exact resources. FBC: Firebreak is a multiplayer game. Some of the developers that we have there, they have been able to focus for a long time on that game. They do not need to jump from project to project. In a way, Control is a specific type of game.
Max Payne is a specific type of game. They have had these core teams in place for a long enough time. In a way, building the rest of the team around that also has given a lot of stability for that. Of course, FBC: Firebreak overall is a smaller team than the others. I'd say that with these three projects, we are in a good position to take them further in the production phases. When it comes to what was asked on the schedules, we do not speculate on that kind of like publicly. When the time is right, we will come out with the schedules in more detail. We see that we are very well aligned for the upcoming games with our game portfolio.
Thank you. Then about the expected sales of Alan Wake 2 this year.
We haven't said them out in a way what they are exactly. But as said, as we have seen with Control for five years, Control has continued to sell well year on year. We do see the same trend with good quality games. Alan Wake 2 definitely is that. We do expect that the game will continue to sell nicely.
Then related to the development fees from Max Payne and Control 2, was there any milestone payments in Q4? Should we assume that dev fee run rate is somewhat on a similar level in coming quarters?
Yeah, we have said that during Q4, our development fees basically consisted of Max Payne remake and Control 2 related development fees. What comes to cash flow, there might be differences on how the actual payments come in relationship to what we are agreeing as a sales.
The question about should we assume that dev fees run rate is somewhat on a similar level in the coming quarter? We cannot say directly that they would be on the same level. There might be variation based on the contract terms on how the payments are made and what level of payments there will be. We will continue to have milestone payments from these two games also going forward.
Yes, let's continue with the financial side. How do you expect your capitalized development costs to develop this year?
Going forward, I think you can expect that the capitalizations will remain on a higher level than in 2023, as Remedy has taken more responsibility on funding the projects in development.
Receivables decreased a lot compared to the end of 2023. Is there going to be high variation in working capital levels also in the future depending on the timing of development fees and royalties?
Yes, there is a timing difference between contract-based timing of cash payments and revenue recognition. Most likely there will be variation also going forward.
Thank you. Will you recognize some interest cost from convertible loan in your income statement in coming years, even though there is no real annual cash flow effect?
Yes, the annual interest and one-time transaction expenses of the loan will be affecting our financing expenses during the five-year loan term. The majority of the loan and the transaction cost is recognized as liability, and a smaller portion of the amount is shown as equity.
The equity part will be allocated to liability over time, and interest expense is shown as financing cost, and it's increasing liability on the balance sheet in the balance sheet side.
Thank you. Do you expect your operating expense level to increase as you are still ramping up your publishing operations?
I would say that, as we have said also in the CMD, that we don't see significant increase needs in our current cost structure. Most likely there will be some extra costs related to publishing activities during 2025.
Let's continue with the financial objectives. Remedy states to double the 2024 revenue by 2027 with continued growth beyond this milestone. To clarify the wording, is your objective to reach these targets during financial year 2026 or financial year 2027?
It's financial year 2027.
Related to FBC: Firebreak, it was stated that the closed technical test in December was successful. How do you define success here?
Always these tests, they serve a certain production goal that we have. These tests always have preset targets in a way. There are certain questions to which we want to have answers. Of course, it's not black and white answers, but we are following based on both the data, how users are playing the game, how well does it function. We are also asking qualitative questions, typically with the scale from 1 to 10, how did users perceive the experience. Now, when it's a question of technical test, it's understandable that targets are more related to the technical feasibility, in a way, functionality of the game. It's a multiplayer game.
How well does the basis function? When we say then successful, it's understandable that the test went well. In a way, we had positive results overall. In a way, it worked well. We got some good learnings that we need to then emphasize when we go into even larger audiences. Overall, there was nothing in a way negatively surprising. On top of that, when everything technically worked well, also the qualitative results from the player base, they were good. In that sense, we are saying that it was a success. Of course, in a way, this technical test, we always need to bear in mind that the qualitative ones, they are typically focused on certain parts of the game.
Therefore, they have promising signs that the direction is good rather than yet implying kind of like conclusive things on the full game.
Thank you. It's a little bit early for this question, but would you continue merge partnerships in the future like you did with Alan Wake 2?
Yeah, yeah, the merge partnerships so far, they have been in a way a fan service. They have been part of the brand building. Therefore, it's more related to our future publishing operations. I wouldn't yet speculate what we are doing, but we have been doing this with our past games. Definitely, we would consider them.
Related to the Annapurna partnership, do you have a financial goal with them, or is it just for increasing visibility?
Partnership with the financial goal. Definitely internally, we have, of course, both for our game, but also for our franchises, we have our goals. We have a good partnership with them. We are sharing kind of our targets and discussing with our partners. If this then refers to TV and film, they are long projects. Definitely, Annapurna is making business out of those. There will be financial goals, or there are financial goals. I think it's still way too early to start speculating on them publicly.
Yeah, then related to the guidance, so assumptions behind it. What's the impact of FBC: Firebreak launch and Alan Wake 2's royalties to reach the positive EBIT?
I would say that naturally, they do play a role. When we consider our this year, we have our back catalog games. We do expect that they continue to sell. We have our games in development. There are development fees. We have a new game launch coming, FBC: Firebreak. In a good way, yes, we do have more revenue streams than we have ever had in the past. We do not yet have a numerous amount of them. All of these, like the ones mentioned, they definitely do play an important role.
Okay. I think that's it for the questions. Thank you for the call. We will be back with the next earnings webcast, which is our business review, January-March 2025, on April 30, 2025. That's all for now. Have a great rest of the week, everyone.