Good day, everyone, welcome to this report presentation when Maximum Entertainment has published their books for the second quarter of 2023. Standing beside me is none other than CEO, Christina Seelye. Welcome.
Thank you. Thanks for having me.
How are you?
I'm great.
You'll be presenting, and after which, I'll come back to ask a few questions. Without further ado, go ahead.
Great. Thank you. Today, I'm here to talk a little bit about Maximum Entertainment and what we accomplished in Q2 of 2023. I'm gonna start, talk a little bit about the different games that we launched and the business, and the extremely great launches that we had in 2023, and then a little bit later, our brand-new CFO, Deborah Bellangé, is gonna join us to talk a little bit more about the financials, and then we'll delve into some questions. A little reminder about Maximum Entertainment and who we are. We are a global video game developer, publisher, and in some cases, distributor around the world. We have our own intellectual property that we develop, and then we work with third-party companies to bring their games to the market, and we do that with a really solid global infrastructure for publishing.
The structure, which has been really fine-tuned over the past year, is made up of studios and publishers. We have four publishing labels now, Just For Games, Merge Games, Maximum Games, and Modus. We are fine-tuning the focus of each one of those labels. Modus really works on Double-A level video games, as well as some live service games. Maximum Games does global sub-publishing for the group. Merge is really high-end indie games, and Just For Games, we're focusing on family and casual. We also have studios all around the world, from the U.S., Brazil, Sweden, Hungary, and then earlier this year, acquired the assets of a studio in Romania, which has been doing really great work developing content for the group to publish.
What we're accomplishing here at Maximum Entertainment is that we want to bring magic to the gamer and everyone, and we believe we're executing against that strategy. We already have some really great own IP that launched in Q2 that I'll talk more about a little bit later. We really want to be the global leader in indie to double-A video game creation and transmedia. Transmedia being what expands the universe of video games above and beyond just the normal video game platforms. Our strategic statement, what we've said that we're going to do, and then what we're working as a group to execute against right now, is to increase our owned IP to represent 30% of our revenue by the end of 2025. We're also expanding our transmedia reach to represent 20% of 2025 revenue.
Last quarter, we announced that we were rebranding to Maximum Entertainment. This past quarter, it actually became official. We are no longer Zordix, we are officially Maximum Entertainment, and our ticker symbol has changed to MAXENTAB, M-A-X-E-N-T-A-B, and that is official as of this quarter. We're very excited to officially be on our road as on the road for Maximum Entertainment. With Zordix, just a quick reminder, the end of 2021, very small company, less than 100 employees, less than 10 games, less than SEK 10 million revenue. Today, we did over SEK 1 billion revenue in 2022. We have over 230 employees today, and we have over 300 titles in the total catalog.
We've been working really hard on integrating the company to be one unified roadmap of games and to increase the own IP ownership, as I mentioned. A little bit more detail about Q2. Just in Q2, we did SEK 272.8 million revenue at a gross margin of over 28%. The EBITDA came in at SEK 22.7 million, and the margin at 8.3%. The important number that we want to talk about today is the 19% in own IP revenue, and that really comes from two key games: Smalland: Survive the Wilds and Bramble: The Mountain King. Bramble: The Mountain King actually being developed here in Sweden.
Both of these games had represented quite a bit of revenue in Q2 and really had phenomenal results in both critical and commercial success, which is what contributed from to the own IP revenue of 19%. Quick note that that doesn't mean it's 19% and growing forever. We do a lot of business with third party as well, so that percentage is gonna change year-over-year, quarter-over-quarter, but the goal is to have a stable over 30% of revenue by the end of 2025, as we have stated. As I mentioned, Bramble, Smalland, big, big news in Q2, 2023. Bramble released in April. It is still holding an overwhelmingly positive rating on Steam.
There's been 2.5 million hours of this game streamed online, and we're just really, really proud of the critical and commercial success of this game that was developed right here in Sweden. They are actively working on their next game right now, and there'll be more to come on what comes next from Modus Studios in Sweden in the quarters to come. Smalland: Survive the Wilds has achieved a very positive rating on Steam, and it's still in early access, but it has been doing well beyond our expectations. We have released post Q2, we've released a significant update in July that has been doing really, really well. This game continues to exceed our expectations.
The community is super excited about it, and, and we're excited to expand what we're doing with Smalland and driving towards the 1.0 release, coming out of early access. Some other exciting things that happened this quarter is that we had a annual general meeting, and we significantly changed a couple things within the organization, one being the new company name. We also added some new board members. We took care of some kind of administrative and corporate things that were needed for proper governance of the company, and so we're really excited to get the foundation of the company really strong and, and setting ourselves up for success moving forward.
We added a new member to the executive team, our new group CFO, Deborah Bélanger, who will be joining me in a few minutes, and Thierry Bonnefoy, who was acting CFO, has moved over to the role of COO. We talked a little bit about Bramble, and we're gonna show a quick little video to show you some of the accolades that we received on this game, but it received several significant award nominations and is included in Xbox Game Pass, and as I mentioned, 2.5 million hours of this game streamed online. We're, we're super excited about this success, and we're very excited about the next game that this really talented team is gonna be working on. More to come on that in the future quarters.
At this point, I'm gonna bring on Deborah Bélanger, who is our Group CFO, who just joined us. She's gonna take over and talk a little bit about the financials.
Yeah, nothing really surprising. Christina has really already explained a lot of what happened in Q2. We have net revenues for the quarter of SEK 273 million. That brings us to SEK 456 million year to date for the first half of the year. 14% of that SEK 456 million, which is comparable to prior year, is coming from owned IP, which is really the great story and really demonstrates the importance of the strategy that Christina has put into place. Because that SEK 456 million that we're able to deliver in the first half of the year comes despite some really significant headwinds on our sub-publishing business. We have a lot of titles that moved out of the quarter into later quarters or even into later fiscal years.
We also have some titles, sadly, that underperformed against what we were expecting, some major titles in Q2 that launched in the sub-publishing business that sadly did not perform as well as we thought they would. We were able to compensate that with, obviously the success of our own IP, also with some catalog sales. Those catalog sales come with margins that are lower than what we would have liked, that brings us to a gross margin at the end of the quarter of 28.3%. 28.5% for the half year. That's down about a point versus the gross margin from last year. We see that tendency going down to the EBITDA with 8.2% for the quarter versus 9.2% for last year. Our balance sheet is just a reflection of what we've just said.
We continue to invest in games and our future. We have close to SEK 50 million of investments over the quarter in new games. That brings total investments in games at the end of the quarter to SEK 266 million. Our assets are also made up of our goodwill for the cost of the structure that we've put together, and that's gonna be delivering on the success. Working capital is back to pretty much the same levels as last year. The consumption of working capital from Q1 due to some seasonality has been compensated and released in Q2. That's it for the numbers.
Great! Just some recap on the key takeaways that we hope that you hear from this presentation and some things we'd like you to remember about Maximum Entertainment is we are executing against the stated strategy of the company, which is to grow our own IP, as well as increase our revenue and create a really stable foundation for the company to grow over the next, over the coming years. Smalland: Survive the Wilds, Bramble: The Mountain King, really reinforces the own IP strategy. We're thrilled with both the critical and commercial success of both of those games. We also are, are very excited about the future launches and the continued optimization of the structure.
We know that it's been a difficult year, especially this year, for the video game industry. You can see around with our competitors, they're doing a lot of optimization of the structure. We are doing the same. As basically a brand-new company that has existed over the past 18 months, we've been doing a lot of work on integration, making sure that we have the proper, most efficient structure for growth moving forward. Big change this year was the increase of management and the capital that we have within the company. CEO and management, myself, and the rest of management, holds about 36.5% of the total shares. We're very committed to the company.
We re-upped this, this past quarter significantly, and so we're not just me, but the rest of the executive management team is very committed to the future success. Very excited to have Deborah join us and bring all of her expertise, not only in the industry, but also in entertainment industry, non-video games as well, bring that experience to bear for Maximum Entertainment as we continue our growth story. Now I'm open for some questions.
I'll actually begin with Deborah.
Uh-oh.
I'm curious about your background before joining Maximum Entertainment.
I have about over 25 years experience in media and entertainment. My career started after working at KPMG. I spent 10 years working at Disney in their consumer products division, so I got a lot of experience here in Europe working on IP, IP rights, licensing, legal structures, business models, everything you need to kind of understand the mechanics of what operates in the video game industry, as in other industries that are around the IP universe.
Mm.
Then, aside from some other smaller experiences in small businesses, I spent another 10 years at Focus Home Interactive, which is now Focus Entertainment, working as their CFO, bringing them their IPO in 2015, and helping grow that company. I'm really excited to be here at Maximum, because we are gonna have another growth story, and I'm excited to be part of it.
Indeed, and they're also pushing for their own IPs as well. Are you looking forward to working with that?
Working with our own IPs?
Mm-hmm.
Yes, definitely. I mean, as I said in the presentation, I'm committed to that strategy. I think we've already seen in Q2, just in Q2, how important that strategy is gonna be going forward. I think it's the right one. I'm very excited to be part of it.
Mm.
Deborah Bélanger and I met, because Maximum Games and Focus were partners, and so we worked together, you know, as colleagues in that relationship. Just remember who you're working with as partners- ... and customers and vendors, because, you know, you might end up working together in the same company in the future.
Indeed. let's talk a little bit about your own IPs then, because there's been a full quarter now with the, the release of Smalland, and it has had plenty of hot fixes. You talked a little bit about content update, and I believe you were referring to Forbidden Monuments. Could you tell us more about it?
Yeah. Smalland outperformed our expectations in early access, for sure, and it was really important to us to make sure that we had a lot of content to provide the community. So immediately after that launch, we actually reallocated development resources into doing more content for Smalland.
Mm.
We already had a full plan of content, but we kind of doubled down based on the success and the community excitement around Smalland. It was very good timing on the launch of the new content in July, and we were able to see a lot more interest from the community. We did it in combination with the Steam sale, and we were able to have three times the peak players that we had prior to the content update. We're really getting players in the community excited about the new content, and with the new team working on the development, we have a lot more content to come as we're driving for the 1.0 launch.
Some may think that launching early access may be slightly risky, but it seemed to have... Y- you seem happy with how it has turned out, and you even write in the report that you've learned the value of the model and that you will explore ways to use all of Steam's functionality. Could you please elaborate?
Yeah. It was, it was really interesting. You're right that it is a risky move to do early access in some cases, because you have to have a really solid foundational product that people can experience in order to learn anything from it. If you throw it out there as a beta, in many cases, it's not ready, you're not getting the information you need, you're not able to make the changes that you need to make in order to drive to a successful 1.0. We waited until we had a really strong foundational product in order to go into early access. What we are learning through that is game balancing, and cadence of content, and what the community is responding to and what they're not.
All of those things you can do in an early access environment, learning all of that stuff, tweaking the cadence of the content, tweaking, based on community feedback, the content that they like, and then, use that before you do a full court press on your 1.0. You know, in our case, we're also, really strong on console, so we want a cross-platform game. So all of those learnings that we have in early access-
Mm
... we can use prior to launching it across all platforms.
Indeed. What of games that isn't your own IP? Would you be open to publish them as early access as well?
Yeah, we've actually already done that. We did that with Super Animal Royale, as Maximum Games, prior to the transaction in our world as Maximum Entertainment. Super Animal Royale is a third-party live service game that we started working with them during early access period, then figured out what we were gonna do, lots of different testing in order to drive to 1.0 in order to move to console. Now that is a very successful... I think that we'll talk about it more in the next quarter's report, but we just launched Season Eight, we actually just hit 10 million players-
Mm
... on Super Animal Royale. Yes, we're very interested in continuing to use early access where it makes sense. It's not for every game. It's really for games where you need to do live service work, or you need to figure out cadence of content, or you need balancing within the game to make sure it's competitive and, and fun.
Wouldn't it also be a benefit to to development also, to get feedback from the player base?
Absolutely. Only if the game is far enough along, so it makes sense for that feedback to be quality.
Mm.
I think that we do a lot of play tests, both on our own IP side and on the third-party publishing, to make sure we're getting a lot of feedback from players prior-
Mm
... to even going into early access. Early access gives you a very large swath of feedback, though.
Mm. We'll return focus a little bit on the business side.
Yeah.
You, you and the CEO letter with explaining that management now holds 36.5% of the capital, and that this, this has been purchases supported by institutional investors. I'm curious if you could elaborate a little bit on how these purchases were made. Is it anything that affects cash flow?
Not really. Most of the increase in capital came from acquiring existing shares. We took out some existing investors who were interested in selling their shares. We brought in new investors who believe in the strategy and are long-term holds. Then some of it was just our own, in my case, my own capital that I invested into the company.
You also became Maximum Entertainment finally at the annual general meeting.
Yes.
Also three new board members. Tell us about them.
Yes, yes. We, you know, we took our time on adding the board members. If you last year in kind of our foundational year of integration and things like that, we really wanted to keep the team small and make sure that we had our feet under us before we added new board members. So that's what we did, and at this annual general meeting, we added three. One of them is me, so I was already part of the process before that. We added two additional independents, which we're really excited about, that are bringing different expertise to bear as part of the board. We have Carla Martin, who it comes to us leads the luxury consumer practice at Deloitte, and so she has a lot of global consumer experience, consumer marketing.
Really video games are both technology, entertainment, and a consumer good, and so we're really excited to have Carla join us. We also have Petter Hestad, who is joining us this year, who has Swedish, and he has financial experience that and specifically Swedish financial experience, that we're excited to have on the board.
Mm. Let's move forward to the present then.
Yeah.
We are currently in Q3, and you talk a little bit about your pipeline for Q3 in the report. One of the games has released, and it's Double Dragon Gaiden, released towards the end of July. Did the launch go as expected?
It really did. People love the Double Dragon franchise, we were really excited to, to give that fan base something new to play. There were many critics that said it's the best that has been released in the Double Dragon franchise, go check out those reviews yourself if you'd like to see the accolades on the critical result of that game. We're really excited with the-
Mm
... result of Double Dragon, and it has already, it has over 2,000 hours of Twitch streaming and just in the, the past couple weeks on that game.
Mm.
Our launch trailer on our own organic channels, were about eight times the normal views, and so we're, we're really excited about Double Dragon.
Mm.
It's really fun. All of the TikToks they've been doing with Double Dragon are pretty hilarious and fun, too.
Other titles that are coming out in Q3 are Paleo Pines and Hammerwatch 2.
Mm.
Both of these games had demos in during Steam Next Fest, and you write in the report that it made the top 20 demos during the 2-week event.
Mm-hmm.
How many participated?
Over 100 demos were part of Steam Next Fest. Hammerwatch was in the top 10. Paleo was, like, in the top 20, I think at number 16, something like that. Both of those did really well. We love the idea of a demo. We think it's a great way to get a community excited about the game that's coming. It's a great way to also get some feedback on a demo of the, the game prior to its launch. We, we love that. We're gonna keep doing that. For both Paleo Pines and for Hammer- and it's not just Hammerwatch 2, by the way. It's...
Hammerwatch 2 is the brand-new game. We also, in conjunction with that, did a full remaster of Hammerwatch 1. You are gonna be able to buy it in a bundle. You can buy the remastered version separately. Hammerwatch is gonna have a full wide release. So later in the year, you're gonna be able to experience it on console as well.
Christina and Deborah, thank you very much for the presentation and answering my questions.
Thank you for having us.
Thank you. Thanks for having us.