Hello everyone, and thank you for joining this Remedy Entertainment webcast. My name is Sanna Kantelinen. I'm from the Remedy Communications team. Today we will go through Remedy's business review for January-March 2025. With me here, I have Remedy CEO Tero Virtala and CFO Santtu Kallionpää. Tero and Santtu will present the Q1 business review, financial results, and outlook, and then we will have a Q&A after the presentation. Tero, the floor is yours.
Thank you. Welcome everyone, also on my behalf. Let's have a look at our first quarter highlights. Our revenue, EUR 13.4 million, which increased by 24% from a year ago. The quarter overall was profitable, EBIT being EUR 1.3 million, EBITDA EUR 2.6 million. Cash flow from operations was EUR 6.6 million negative. Santtu will soon talk a bit more on that, but that was mainly due to payment timings. During the first quarter, the acquisition of the publishing rights to Control franchise was finalized, and with that, we got back all the remaining Control rights. In practice, this means that practicalities like access to different game stores where Control is, were transferred to us. Due to this ongoing transfer, in the first quarter, we could not do all the sales activities, and the quarter was sales-wise a bit slower for Control.
Now, despite this, having now also Alan Wake 2 bringing us royalties, and overall seeing our royalties grow quarter by quarter, is a good sign for the future. Now, when Control is fully in our hands, we can again fully drive its sales as well. In March, we also announced that FBC: Firebreak will launch in summer. Last week, we gave more detailed info for our players, and launch is on June 17. Overall, I'm personally very happy on our first quarter. This is the start of our new strategy phase, and we returned to profitability. Also, we have now become a self-publisher. Self-publishing is now in full operation. As we have said before, this is not a completely new territory to us. We have been involved in publishing our games since Quantum Break ten years ago in 2016.
All the games after that, we have been collaborating with our publishing partners, learning, and also building our own publishing team step by step. We have still made a few team additions during the first quarter, and we now have a publishing team of 25 professionals. The main focus of the team has naturally been on the successful launch or preparations for a successful launch of FBC: Firebreak, and also preparing for the games' post-launch phase. In addition, the publishing team works with our already launched games to drive their sales and to support the player communities of these games. Importantly, the publishing team also works with our development teams, preparing the basis for successful future games as well.
Now, our development team naturally has been busy publishing FBC: Firebreak, and at the same time, our publishing team has had a big focus on the game, driving its marketing and making preparations for the launch. This is going to be our first self-published game, launching in less than two months' time, June 17. As a reminder, let's at this point see what the game is.
Teri!
Someone get those lights off!
We've had reports of rogue sticky notes replicating across this sector. If you don't cut back their numbers, this whole place will yell upon more. This crisis ain't over. Now get through the containment door to the next zone. Safe room dead ahead. Might contain something useful, but it'll probably attract a lot of... Oh, Yari, opened it. Never mind. You sure kicked the nest. There's hits all over you.
Stand back! Piggy's coming out!
What the...
I've asked the containment doors open. Go, go!
I think I heard something.
Stop, Teri! [audio distortion]
Hi, crew. Time to clean house.
All right, so that's FBC: Firebreak. Now, last week, in our very first FBC: Firebreak developer updates live stream, we sold the game to players in more detail and also revealed a lot of additional info. At day one, June 17, the game will be available for PC, both Steam and Epic Games Store, Xbox Series X and S, and PlayStation 5. The game will also be available on Xbox Game Pass Ultimate and PlayStation Plus Extra and Premium. We are expecting that there will be a good amount of enthusiastic players from day one. The game will be priced $39.99 in USD and EUR , and we will also offer a deluxe edition for $49.99, which includes cosmetics and voice packs then to personalize players' gear and the squad identity.
Also, the players who then, in addition to that, want more additional customization options, we will also sell premium cosmetic items. Overall, based on the gameplay test, based on the development phase, we can already see that the game is fun to play, and I'm personally very excited on it. This is a game we are also very committed to, and we have already announced plans for ongoing support post-launch, including two new jobs, some might say missions, coming in 2025, and more updates will then arrive in 2026. Publishing-wise, we kicked off a marketing campaign in March. In today's market, battle for audience attention is tough. We estimated that for a game like Firebreak, it's best to do a shorter but more intense and impactful campaign. Alongside the trailer, in campaign kickoff, we had a series of preview events with media and influencers.
Early reception for the game was very good. The game was said to look exciting, interesting, and in a positive way, have the Remedy look and feel. It definitely stands out from the other games in the market. The player tests we have done confirm the same. We have a fun and promising game in the making. There is still one and a half months to go, and we keep on polishing and bug fixing the game, as the case always is when launch is coming closer. Of course, the marketing campaign continues with many activities. Our publishing team has also been active on Alan Wake 2. Late last year, end of December, we announced that Alan Wake 2 had reached a milestone of two million sold units, and the game precooked the development phase and its marketing investments made by our partner, Epic Games.
With that, we started to accrue royalty income from the game sales. This, of course, was a good milestone. As we have seen with Control, good quality games have long-term sales potential. After a very good holiday sales period during Christmas time, early year is typically a bit slower period in relation to game sales. Alan Wake 2 in the first quarter has continued to sell in line with our expectations, and our publishing team continues to support, promote, and sell the game actively with our partner, Epic Games. As part of the publishing team, we also now have a group focused on supporting our existing portfolio of already launched games, a group we call Back Catalog Support. Their work includes, for example, releasing limited updates for older games. An example game they work on is Control.
Control had sold over 4.5 million units by the end of 2024, and still, in that year 2024, sold 600,000 units. As I said, in today's digital world, good quality games do sell for a long time, and we see Control still has good potential. Control rights now fully returned to us during the first quarter, and because of that, as I just previously said, we couldn't do all the promotions we would have otherwise done. Back catalog management for us is now just kicking off, but despite it not being yet in full speed during the early year, we still saw good development in our royalties with Control and Alan Wake 2. I would say this is very positive to us. Tells us that by active back catalog support, there are good opportunities ahead of us.
To support our games, we are actively considering what sales activities, marketing, and partnership opportunities there still are, and also serving the players, releasing limited updates for older titles and adapting them to new platforms. A good recent example is Control Ultimate Edition for Mac, developed in collaboration with Apple that was released during the first quarter. A few words of our games in development. As I have said in previous updates, many of the developments we did in the past years for strengthening the development teams and our organization overall, developing our technology and tools, ways of working, how we manage our portfolio of projects, all these together started bearing fruits in early 2024, and since that, the good project progress has just been accelerating. We have had a good development velocity, and that has continued also in the first quarter of 2025.
This then naturally builds a strong basis for steady release of great games also for the next years. FBC: Firebreak currently is in full production, and the game will launch on June 17, 2025. Control 2 moved to full production in February and is tracking well towards its next milestones. Max Payne 1 and 2 Remake has made great progress and remains in full production. We have the unannounced fourth project in its early phases, and we have not yet commented more on that. With all this, we have very promising games in development with significant future potential. These projects are advancing with good development velocity. We will have a steady release of great games also for the upcoming years.
Overall, having great games in development that advance well, having organization and skills to ensure that this good progress just keeps on improving, we have now self-publishing for the games we own, and we have all the capabilities to do it successfully. We are in a very good position for the next years. In quarter one 2025, we have now started an era of sustainable profitable growth for Remedy. The steps we have now taken in this first quarter, they have worked exactly as we have aimed at. We will continue on that path, and by 2027, we aim to double our 2024 revenue with an EBITDA margin of 30%. I'm confident we will reach these targets. I'll now hand over to Santtu to go through our financials.
Thank you, Tero, and good afternoon. Let's start the financials part from revenue development. In the first quarter of 2025, our revenues were EUR 13.4 million and grew by 24.1% compared to previous year, Q1. Development fees were EUR 10.7 million and higher than in the comparison period. Besides receiving development fees from Max Payne 1 and 2 Remake in Q1 2025, we also received development fees for Control 2 as per the agreement that we entered with Annapurna in autumn 2024. Royalties and Remedy game sales were EUR 2.6 million, being also higher than in the comparison period. The main source for growth in royalties and game sales were the Alan Wake 2 related royalties. Additionally, this was also the first quarter when we received the full sales regarding Control following the publishing rights returning to Remedy from 505 Games.
When looking back at our historical revenues, the revenue levels have continued to be on a higher year-on-year levels. As said, the main part of the Q1 2025 royalties were generated by Alan Wake 2. In the comparison period Q1 2024, the main part of royalties were generated by Control and older Alan Wake titles. As a reminder, the development fees on the third quarter of 2024 included a one-time payment regarding Control 2 developments done before we entered into a strategic partnership with Annapurna. The operating profit of the first quarter 2025 was EUR 1.3 million positive, which means a EUR 3.4 million improvement compared to Q1 2024. The operating profit improvement was driven by higher revenue and lower cost level. EBITDA of the first quarter was EUR 2.6 million positive, and it improved EUR 3.8 million from the comparison period.
Here we can see the analysis of unnetted amounts of expenses and capitalization, which provided transparency in our costs. In the first quarter of 2025, external work expenses were EUR 3.6 million and on a 22% lower level than in the comparison period, when they were EUR 4.6 million. In the comparison period, we still had external development expenses related to Codename Kestrel and Alan Wake 2. Personnel expenses increased year-on-year by 5.9%, while the increase in our employee amount was 3.6% from 360 to 373. The difference in personnel expenses in relation to the employee amount growth was mainly by annual differences on work time and holiday accruals, as well as a slightly higher salary level in overall compared to the comparison period. Capitalized development expenses were on a higher level than in the comparison period.
The growth is due to a higher share of capitalized expenses related to FBC: Firebreak and Control 2 game projects. End of Q1, also Control 2 was in production phase, which increases the amount capitalized expenses. 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 third quarter 2024. The depreciations, they remain on a stable level. On the fourth quarter 2024, we started depreciating capitalized development expenses related to Alan Wake 2, and as this continued on the first quarter 2025 for the full quarter, it is reflected in our total depreciations that were higher than in the comparison period and previous quarter.
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, and in Q4 2023, there was an impairment loss related to codename [Mankart]. 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. Looking at cash flow, looking at the first quarter's year-on-year, the operating cash flow was now lower due to revenue-related cash flows. This is also reflected in our networking capital. Compared to year-end 2024, our trade receivables are EUR 9.3 million higher in the end of Q1 2025 compared to year-end 2024. This is related to revenue streams where the actual cash payments will follow later.
The timing of development fee payments, as well as some royalty fees, are agreement-based, and there are differences in the timing of revenue accruals and the actual cash flow impacts. Outgoing operating cash flow was EUR 0.6 million less than in the comparison period Q1 2024. In the first quarter, our total cash level was EUR 28 million, decreasing by EUR 13.1 million from the previous quarter. Besides the timing of incoming revenue cash flows, our cash position was affected by final installments of EUR 3.2 million to 505 Games related to the Control franchise rights acquisition. Additionally, we liquidated EUR 3 million of cash management investments, which was transferred from financial instruments to cash and cash equivalents. At the end of the first quarter of 2025, we had EUR 17.3 million in cash management investments and EUR 10.7 million in cash. Let's still look at the longer time period.
After 2023, our operating profit margin and EBITDA margins have been improving, and now in the first quarter of 2025, EBIT and EBITDA margins were both positive. Still briefly about the business environment. Recently, there has been a lot of discussion regarding the tariffs and how they impact the economy. Impacts from these could be split to direct, shorter-term impacts and more longer-term indirect impacts. Potential tariffs could have a direct impact on sales of physical copies of games. The share of physical copies of our total revenue is small, and we do not currently expect a notable impact on our game sales, even if there would be new tariffs. In relation to longer-term impacts, there could be potential impacts on the economy and consumer behavior, like our consumers purchasing new consoles and hardware needed for gaming and how the consumer spending on games is impacted.
Though, by Remedy being successful in our current game projects, we have good prerequisites for profitable growth despite a potentially more gloomy view on the world economy. Following the tariff discussions, we have seen a weakening development in the USD currency rate. In relation to consumer sales, what Remedy has in the USD, a weaker USD rate will have an effect also on us. However, the majority of our sales happens in other currencies than USD. Additionally, our current development fee contracts are in EUR, and based on this, they are protected from the USD currency movements. As a note, for the first quarter of the year, we did not have notable negative effect impacts in our revenue and P&L. Tero will continue with our outlook.
Thank you. Sorry. As has been said, we are in a strong position both for this year and the following years. The era of sustainable profitable growth has now started, and for the full year 2025, our outlook is unchanged. We expect our revenue and operating profit to increase from the previous year and operating profit to be positive.
Thank you. That was all from our part, and it's now time for the Q&A. Please type in your questions to the open field. There are a couple of questions already that I'll pick up regarding expectations for FBC: Firebreak. How have your expectations for FBC: Firebreak developed since the beginning of the year after seeing feedback from players and the media on the trailer and other marketing material?
It's been, of course, very positive to see the reception that the game has had. We have known for a while that we have a good game in development, but getting the confirmation from outsiders who are first time seeing the game, it's always inspiring, it's motivating, it just validates what we have been doing, and in that sense, removes some of the uncertainty that there always is during the development.
Continuing with FBC: Firebreak, how do you see the publishing window in June? What games are the main competitors, in your point of view, possibly taking attention away from FBC: Firebreak?
I think it's a good window that we have for the game. The gaming market overall is very competitive, and there is no, in a way, wide window ever available for a game that we expect to reach a notable audience. There are, in a way, both certain co-op games that are coming out now in May that may take the attention, but on June 17, I think we have a good window because typically what also happens is that even though there would be a bigger launch, it's not that long period that the audience is fully focused on that game. At the same time, from the past, we have seen that typically June is a fairly good month overall to launch new games.
The longer we go into the summer, some games do it also there, but then there comes the holiday periods and others, different types of discounting periods, why companies normally do not have that many launches in later July or early August. Overall, I think we are quite well positioned also timing-wise with our launch.
A clarifying question, unless I misread, the Q1 webcast presentation did not mention Firebreak launching on PC Game Pass, which has been previously announced. Has the game been redacted from PC Game Pass?
No, no, no. The game is coming to PC Game Pass, so when I refer to Game Pass on Xbox, that also for us includes the PC Game Pass.
Will we have a first trailer or teaser for Max Payne 1 and 2 Remake this year?
Max Payne Remake will be published by Rockstar Games, and all the communications marketing is in their hands, and we are not commenting on that.
Some financials-related questions then towards Santtu. Development fees in Q1, was there some extra related to Control 2 moving into full production?
On a general level, it can be said that the stage in which the game development is, it's impacting also on the level of development fees. We haven't usually been commenting on this detailed level, what is included in certain quarters' development fees.
External development costs decreased a lot in Q1. Have you made some permanent savings, or is this just related to the development phase of different projects?
I would say that also the external development costs, they reflect the kind of needs of the game projects. If we are, for example, comparing to Q1 2024 external development fees, then we had there still some Alan Wake 2-related external development costs and also some Kestrel-related development fees. Now, during Q1 2025, all the external development is related to game projects that we have currently in development.
Do you see any needs to increase your OPEX in coming quarters?
What comes to our organization, I would say that we do not have significant increased needs in our permanent organization. We can currently see the benefits of our multi-project model so that we are able to develop several game projects with our existing organization. Now, when we are moving to self-publishing, of course, there might be some self-publishing-related costs like additional marketing costs that will come in the coming quarters.
Back to FBC: Firebreak. Will FBC: Firebreak support keyboard and mouse on console?
The more detailed info on FBC: Firebreak can be found on our webpage and the communication that we are doing in relation to that. If some info is not yet visible, that is based on the communication and marketing plan that we have for the game. In a way, if some info like this is not yet available, there is a communications reason and all the, in a way, more detailed information is coming later.
What is the business rationale of FBC: Firebreak not being available for pre-purchase with an announced price and release date? From my understanding, the April development update mentioned that Deluxe Edition would only be available for purchase on launch.
We have not yet commented on the pre-purchasing. What I just said previously, we have a well-thought marketing and sales plan, and that is how we are progressing.
How have you made sure that FBC: Firebreak will work technically in launch and not, for example, crash due to high influx of players?
In this type of game, that's one key part of the development that we have been developing and also doing then both QA and also different types of tests to ensure that. It is a standard routine for this type of games that we are also following.
How large is the team currently working on FBC: Firebreak, and how large will the team be on the game after launch?
We have said previously that the, in a way, direct team size that we have had in the FBC: Firebreak has been approximately 60 people. Now, when we come towards the launch, the power of the multi-project organization is that if there are additional needs, we have the possibility to allocate certain specialists to support in the launch of the game. That is also what we, of course, with every game we are finalizing, are doing. FBC: Firebreak is also taking advantage of that. We have not said exactly what the team size is going to be after launch, but we have already announced that we will be supporting the game with additional content also post-launch. That then means that we have a good focus on the game also after that.
There is a question, how do you intend to expand your marketing strategy and extend your reach? I believe this relates to the back catalog. Is that something you want to discuss?
That is something that we cannot publicly discuss. Now, when we have our own publishing team, we have our own games that we are self-publishing, of course, the questions of, in a way, first of all, that we have a clear focus with our games, we have clear target audiences that we are intending to reach with these games, we have plans how we are doing that. As we move in the back catalog, we see that the games also have these secondary opportunities that are not necessarily the highest priority in the early phases, and we have plans how we aim to reach those. I cannot reveal in detail how we are planning to do that.
Regarding development costs, do you see lower external development costs in Q1 compared to comparison periods staying at this level or increase in the short and midterm future?
Yeah, as I said earlier, these external development costs, they depend on the needs of the game projects. It is also good to note that we are activating these costs. Now, when we are self-publishing games, we are able to activate also more costs, for example, compared to earlier years' levels.
I believe that's it for the questions. Thank you, everyone, for joining the call. You see our contact information there if there's anything further you'd like to ask, and we will be back with the next earnings webcast for January-June in August. That's all for now. Thank you and have a great day.