Maximum Entertainment have reported for the second quarter of 2024 . We will get a presentation by CEO, Christina Seelye, and CFO, Deborah Bellangé. So, this will also be followed by a Q&A. Hello, and welcome, Christina.
Thank you. Thank you for having me.
Good to have you, and how would you describe the quarter in brief?
We had a very strong quarter in Q2 of 2024 . We were up against a difficult one in Q2, 2023 , where we had a lot of major releases, but this quarter performed really well and above our expectations as it relates to gross margin. So we'll talk a little bit more about it in a little bit.
Great. Thank you. And so please go ahead with your presentation of the quarter, and I'll be back for the Q&A.
Great. So as I said, I'm Christina Seelye. I am the CEO of Maximum Entertainment, and Maximum Entertainment is a global video game developer and publisher. We cover the entire value chain of video game creation, including development, publishing, sub-publishing of a wide portfolio of games. So this is our second report under IFRS, and we hope this new format will help you understand what has been achieved so far in 2024 . A clear takeaway is that our integration is starting to bear fruit this first half of 2024, as Maximum Entertainment reaches cruising speed in delivering our portfolio on schedule with more streamlined resources. For the second quarter of 2024, we achieved net sales of over EUR 17 million, down from around EUR 24 million in the same three-month period in 2023. This is due to a different launch calendar, as I had mentioned.
Q2 2023 benefited from major own IP title releases, such as Bramble: The Mountain King and Smalland: Survive the Wilds. Adjusted EBITDA for Q2 2024 was almost EUR 1.5 million, compared to about EUR 2.3 million in the second quarter of 2023. While those strong releases last year meant that we had a challenging base from which to drive growth this year in 2024, but we are pleased to announce that our year-to-date adjusted EBITDA remains up 15% against the first six months of last year. So this is driven largely by improvements in our gross margin, which rose to 34% in Q2 2024, from 29% last year.
So this is due to the shift in a more balanced portfolio of owned and published IPs, which continue to drive this margin growth, while we manage within our cash constraints through cost reductions and optimization of our operational cash flow. Owned IP represents 14% of total revenue this quarter, down from 19% during the owned IP launch window of Q2 2023, which shows that this own IP portion of our catalog continues to drive revenue, significant percentage of our revenue in Q2 2024. The total numbers of employees at the end of this period was 192, which represents a 19% year-on-year reduction. This aligns with our strategy to streamline operations and focus on profitability. These efforts continued during Q2, most notably on focusing on inventory reductions, which benefits our working capital.
Q2, 2024, was characterized by steady portfolio performance and disciplined cost management as we prepare for a very busy release schedule in the latter half of this year. Our diversified catalog continues to generate revenue, strengthened by a wide, varied amount of launches, including the Souls-like slasher, Morbid: The Lords of Ire, the cozy, fishy RPG, Whisker Waters, along with SunnySide, a life and farm sim title now out on PC and consoles. Additionally, Q2 featured the launch of new DLC for Double Dragon Gaiden: Rise of the Dragons. This once again propelled this title into Steam's bestseller list. Another title that exceeded expectations in Q2 is Until Then, which was a beautiful narrative adventure game that launched in June, and it received an overwhelmingly positive rating on Steam within a week. This achievement is a rare occurrence on the platform, and this is a first in MaxEnt's history.
We also had a very strong presence at Steam's Next Fest event, where we showcased four of our upcoming titles, and Maximum Football's beta ranked among the top 50 most downloaded demos. This validates our community-focused development approach to this title and our ability to deliver high-quality indie titles across a wide variety of genres. After the quarter, we further expanded our portfolio with an announcement to publish Overthrown. This is a very highly anticipated mashup of hot genres, including city building, farming, and survival, all within a cozy atmosphere. We will also be sub-publishing Poppy Playtime's Triple Pack bundle on PlayStation 5.
Gamescom was also a chance for us to showcase some of our upcoming titles, including Diesel Legacy: The Brazen Age, our competitive fighting game, plus Spirit of the North 2 and Selfloss, and also Project Z, which won Best Game Made with Unity at the event's Indie Arena Awards. And last but not least, we have just released the PC version of Squirrel with a Gun, a zany shooter that has generated over 30 million trailer views over its development cycle. This game is off to an excellent start and generating a lot of very funny social content and very positive reviews on Steam. Thanks for listening, and now I'd like to turn it over to Deborah Bellangé, who will go into a little deeper look at the numbers.
Thank you, Christina. Hi, I'm Deborah Bellangé. I'm the CFO here at Maximum Entertainment, and I'm pleased to present to you our Q2 results for this 2024 Q2 year. This is our second report in IFRS, and we're very pleased and excited to be able to offer you a lot of detail, a lot of robust numbers in this report. I hope you take the time to read it. But in the meantime, I can provide you with some highlights. This quarter, we realized a little over EUR 17 million in revenue. This is down from last year, but we knew that this quarter would be down from a very strong 2023. We've got a lot accomplished in this quarter, and even though sales were down, margins were up. We're at 34% for Q2, 33% for our year-to-date numbers.
That's up from a 29% margin from last year, and that's reflective of a lot of things. It's reflective of a lot of work that's been doing in improving pricing, because that margin growth comes across our entire catalog. We're looking at own IP, licensed publishing, and sub-publishing growth in margins, and that comes from a lot of hard work with the sales teams and driving and getting the best price for every sale that we make. We're very, very proud of that number. That comes while we're strengthening our balance sheet and delivering a reduction in inventories and increase in the generation of cash flow from our operations. So all in all, the metrics are looking very good in this quarter. One of the other big highlights of this quarter is some work that we've done on the balance sheet.
We've taken a look at earn-outs and taken a smart look at what we need to provide there. That's led to other operating income in this quarter of about 2.7 million. You'll see that reflected in our income statement, and that's where the adjustment comes to get to our Adjusted EBITDA. We're at over 3.2 million of Adjusted EBITDA year-to-date. That's a 15% improvement from this time last year. That's the numbers for the income statement. And some of the other things that you can see on our balance sheet, on the asset side of our balance sheet, is that we're continuing to increase our capitalized expenditure on our games. This is our investment in future games. We're up a little over 4 million from last year.
That is, including about seven million of investment in games and then the impact from depreciation and impairment that is part of the normal operations of what we do. That seven million is really paying into our future, and a lot of that future we're gonna be seeing in the second half of this year as we deliver some of these own IP games and a lot of the licensed publishing games that Christina mentioned earlier. We're very excited about these numbers, and we're very excited to talk to you about what's coming next in our pipeline.
Thanks, Deborah, so some key takeaways for the quarter is that we had no major significant releases, but still a very strong quarter, with increased margin due to the streamlining of operations, our focus on margin, and our focus on cost reduction so that we could keep that margin growing with our diversified portfolio. The other important thing to take away is the continued strengthening of our balance sheet, reevaluating our liabilities related to some earn-outs, and then also, that our year-to-date Adjusted EBITDA is up 15% over the previous year, so this is showing the benefit of our work on improving working capital, improving profitability, and improving the ability of the company's cash generation so that we can continue to grow this company even during times of cash constraint, so now I'd like to open it up for some Q&A.
Thank you so much, Christina and Deborah, for the presentation. It's time for the Q&A. Everyone is talking about Squirrel with a Gun. Love the name, by the way. But what exactly do you expect, or what are your expectations of the title?
Already it has exceeded our expectations with reaching very positive review status within the first day of launch. We are overwhelmingly confident of our recoupment status on this game, and it's going to overachieve our internal forecast for sure. We hope that it continues to have the success that we've had in this first day. It's only been a day, so when we're recording this. I don't have more data than that, but we're looking forward to a really long run with this game. There's a big roadmap ahead for this game as well.
Okay, thanks. And if we turn to your portfolio, have there been any surprises, for better or for worse, or has it just delivered as you expected?
Yeah, our portfolio has delivered as expected with a few fun surprises, and one of those was the critical and commercial success of Until Then, so Until Then was launched in Q2. It's a beautiful pixel art narrative game that has a very heartwarming and important story to tell, and we have had just amazing feedback. I mentioned earlier in the presentation that it's the first game in the history of Maximum Entertainment and all the subsidiaries that has reached an overwhelmingly positive rating on Steam within its first week, and the critical success continues to come as well as the commercial success, and so we're really proud of the quality of this title and what it meant to so many people around the world.
Your gross margins improved to 34% at the end of the quarter versus 29% the prior year. What is driving this improvement?
Really, it's the execution of the strategy that we laid out a couple of years ago, which is shifting our portfolio to have more of our revenue come from own IP and published titles versus sub-published titles. We also have rolled out a strategy of full integration so that we could take advantage of this publishing engine that we have built as a company in order to drive more profit and more streamlined and efficient game launches. What that margin is showing us is that even in a quarter where we have slower own IP as a percentage of our total revenue than we did last year at the same time, we were still able to increase the gross margin. That comes from the shift of the total portfolio.
It comes from our ability to really work the catalog to make sure that we're extending that own IP revenue for a very long period of time. And it also shows the benefits of integration and how streamlining our publishing services and business and studios has resulted in our ability to increase the gross margin for the company.
Okay, thank you. And how have your sub-publishing developed during the quarter?
You know, it's one of those things when we first looked at sub-publishing, we were kind of looking for this area of our business to decline over time because it's primarily physical retail, and as the industry continues to shift more towards digital, that we were going to see more of a decline, but we haven't seen it. We already have a really robust infrastructure for physical game sales and game merchandise sales throughout the world, and we've really been able to efficiently exploit that with continuing to drive that high margin by making sure that we're paying attention to pricing, that we're paying attention to inventory, that we're paying attention to all of the under the sheets, not sexy stuff that is important in order to continue to have a really high margin business within the physical retail.
We were able to continue to deliver really strong margins with the sub-publishing business and are continuing to benefit from consolidation. This is played out by our ability to sign new games that are really exciting, like Poppy Playtime.
Okay, and this was also the second quarter since you changed the reporting format to IFRS. Are you up to speed now, Deborah?
Yeah, I think we are up to speed. It's not an easy lift for the teams to move to IFRS, but I think we're there. We're very, very pleased with it, and we're very proud that we are able to offer a lot of transparency to investors, a lot of information. It's a very long report. It's quite a deck that we sent out for this quarter, and we hope that you take the time to read it and go through it. There's a lot of information in there.
When it comes to growth, Christina, besides the organic, are you looking at any acquisitions during 2024?
We're really focused on organic growth and working capital generation and margin improvement, and so we are looking at content acquisition, new games to bring into the portfolio, new content that can be launched in 2025 and 2026 and beyond, and so we're continuing to invest in the engine that we've built, but we're not necessarily looking for external acquisitions at this time.
Okay, that was all for today. Thank you, Christina and Deborah at Maximum Entertainment for your presentation and all the answers in the Q&A.
Thank you.
Thank you.
Thank you.