Good day, and welcome to this broadcast. Standing beside me is Christina Seelye, who is CEO of Maximum Entertainment, formerly Zordix, who just published a report for the third quarter of 2023. Good day, Christina.
Thank you for having me.
You prepared a presentation for today. You'll have your opportunity here to present, then I'll come back to ask a few questions.
Great. Today, you're going to be hearing from me a little bit about what happened this past quarter, and then I'm going to throw it over to Deborah Bellangé, who is our new CFO, and she's going to talk a little bit more in detail about the numbers from this past quarter. Let's start by who Maximum Entertainment is. We are a full-service video game developer, publisher, life cycle manager of video games. We cover the entire value chain of video game development, publishing, and launching the game around the world. We have a phenomenal global infrastructure that allows us to do that, and we also sell product outside the traditional channels, and we call that area of the business transmedia, where we sell physical goods, merchandise, and all things related to video games.
This quarter, we had net revenue of SEK 295.7 million and an EBITDA of SEK 45.6 million. That's the result of our operations, and we did have some balance sheet adjustments that impacted EBITDA, and Deborah will talk a little bit more about that later in the presentation. But right now, we are going to focus on our operating results, and the operating results are the SEK 45.6 million of EBITDA. We've been talking a lot about our goals of increasing the revenue of our own IP. We have a stated goal of 30% of our revenue coming from own IP by the end of 2025.
This quarter, it's 9%, and we're going to talk a little bit later about year to date, but we're seeing really great growth of our own IP, and we're confident of our goal of hitting 30% coming from own IP by the end of 2025. We saw an increase in our gross margin percentage this quarter of 32.2% and our EBITDA margin. Also, by Q3, we have 241 employees worldwide. On a year-to-date basis, we have SEK 752 million of revenue and SEK 70.3 million of EBITDA, and for the whole year, our revenue from our own IP is 13%. And again, this is an important metric that we're tracking.
So some exciting things that happened this quarter, as far as the results of Q3, we had a lot of game launches. We have multiple game launches a quarter because we are a portfolio business. We have a wide variety of games that we launch each quarter. Some of them are own IP, some of them third-party publishing and sub-publishing. This quarter, we had a really great Super Animal Royale Season Eight launch with 10 million players, and so we're excited of hitting that, that very significant milestone of total players of Super Animal Royale. We also had a great content update for Smalland: Survive the Wilds. It was called Forbidden Monuments. We'll talk a little bit more about that later. Double Dragon Gaiden: Rise of the Dragons launched this quarter, Hammerwatch, Paleo Pines, and we'll get into this a little bit more in depth later.
We also had some great game announcements. We have Whisker Waters coming in 2024, and we have Smalland: Survive the Wilds coming to a full 1.0 release, and it's going to be expanded to console with PlayStation and Xbox next year. We also officially renamed the company with the ticker symbol and everything this past quarter, so MAXENT is our ticker now on Nasdaq, and the company is officially Maximum Entertainment this quarter. Then after the quarter, we had a couple new announcements, and Spirit of the North 2 is coming, which we're really excited about. We've launched Spells & Secrets, which is a really good timing in October and November during this season, and we also engaged a liquidity provider, Erik Penser Bank. So let's talk a little bit about Smalland: Survive the Wilds.
We had a major content update that happened in July, called Forbidden Monuments, and we had a new biome, new creatures, new leveling system, and player and creature count increased, and so we're really excited that we were able to bring a lot of the players back into the game with that big content update. The third content update, called Amber Valley, released after the quarter's end, and then 1.0 will come next year. We talked a little bit about Double Dragon Gaiden: Rise of the Dragons. This was a publishing title that launched during the third quarter with 82% positive reviews on Steam. Really great critical and commercial result for this game.
So gamers loved it, critics loved it, and it was up on New and Trending on Steam for over a week, and we have some announcements that are happening today, actually, about online co-op coming in Q1. So we're really excited about the future of this game. Paleo Pines was a surprise hit for us in Q3. It has 87% positive reviews on Steam. It was in the top 20 of the Steam Next Fest games. It reached the top 10 on Nintendo eShop, and we're over-indexing on Nintendo with this title, actually. And so we just have a really great community being built with Paleo Pines, and we sold over 100,000 units in the first month after launch. And so if you haven't checked out Paleo Pines, you should. It's very cute.
Right now, I'm going to throw it over to Deborah, and she is going to come talk a little bit about the financial performance for the quarter.
Thank you, Christina. This was a good quarter for us. As Christina said, we had sales for the quarter close to SEK 296 million, which is an increase of 14% compared to the corresponding period in prior year. What we saw, as Christina explained to us, was our own IP and our publishing titles that performed very well in this quarter. Something that's gonna happen, and you can expect to see this with our own IP and our publishing titles, once they launch in the quarter that follows that, we'll see a rise in digital revenue, which is what we saw here in Q3, which explains why our COGS goes down to 68% of net sales, compared to 71% for the same period in prior year.
So that's something that's giving us that lift on EBITDA that Christina mentioned. But you'll see in our EBITDA and in our EBIT, some other things that are in our income statement that are related to some balance sheet items that we took care of in this quarter. So, we took a look at the value of the earn-outs in our provisions line of our balance sheet. We'll look at that in just a moment. We also took a look at the goodwill valuations, and those things are gonna be impacting our P&L. In our other operating income, you're gonna see about SEK 104 million. That's related to a writedown of provisions related to earn-outs for the companies that came in to build the Maximum Entertainment brand and company that we know today.
We also see in depreciation, an impairment to goodwill, and that amount is SEK 123 million. We can look at that over on the balance sheet. You can see in our fixed assets that we have 1.179 billion SEK, and a lot of that is in our intangibles. So our intangibles are made up of two main things, mostly goodwill, and that's where you're gonna see, in addition to the normal amortization, you're gonna see that SEK 123 million write-down of goodwill. You'll also see that we continue to invest in our games and our future. So we have an increase of our capitalized expenditures, which is related to our investments in our games.
We also have cash of SEK 60 million at the end of the quarter, which is a good place for us to be right now. On the liability side, we have the provisions. That also goes down between the end of last year and this year, and that's related to the writedown of provisions. This is directly related to earn-outs or contingent compensation for owners of some of the entities that were purchased to make our group. And there was a writedown there of SEK 104 million. On the loan side, it's important to note, we mentioned earlier in the year that we've obtained a facility of $30 million. It's a loan agreement and a facility that was built in the U.S., so it's a U.S.-based loan.
There were no drawdowns on that loan during this quarter, so nothing to say there. I'm gonna pass it back to Christina, who's gonna talk to you about upcoming events.
Great. Thank you, Deborah. So really exciting stuff continuing to happen for Maximum Entertainment. We have some announcements that are happening today. We are announcing a brand-new game that is gonna be launched in 2024. It's called Squirrel with a Gun, and it is a game with a squirrel that has a gun, and it's a really fun shooter and campy, but yet really, really exciting to play, and we are really looking forward to a fun launch with this game in 2024. We also have new content for Double Dragon Gaiden: Rise of the Dragons, and one of the main things that the community was asking for, for this game is online co-op.
And so we have online co-op coming in Q1, and we are really glad to deliver the fans what they want with this game, which is being able to play with their friends. And so that's coming in Q1. We also have a brand-new fighter, competitive fighting game, and it's called Diesel Legacy: The Brazen Age, and we have a brand-new open playtest that is gonna be open for a while. It's gonna be open through the holidays, and so we hope to get a lot of people playing this game. It's starting December thirteenth, will go through January third. We would really love you guys to play it and, and give us feedback. Again, this isn't a demo or a beta or even an alpha.
This is just an open play test, to have people come in very early in development of a game and be able to check it out and, provide feedback. So we're excited about Diesel Legacy coming. So some key takeaways for the quarter. One is the EBITDA that was thrown off by operations was really strong this quarter, and that's due to our laser focus on the business, the structural business, making sure that we have a really strong portfolio that's delivering margin. We saw an increase in margin this quarter, and we're really pleased with that, and, that's really a result of the structural improvements of the group.
The second thing that's really important for you to take away is that the own IP is working, and we've had continued success for own IP with Smalland and Bramble, and we look forward to more of our own IP in 2024 with Diesel Legacy and Maximum Football and more. And then, the rest of our business, the strength of our publishing infrastructure and our ability to successfully launch critically and commercially strong games, such as Double Dragon and Paleo Pines and Hammerwatch II, which were all released this past quarter. So thank you.
Thank you very much, Christina. So, key takeaways from Q3 publishing, a lot of that, but I wanted to first talk about your own IPs for a little bit. Smalland continues to.
Mm-hmm.
Well, you're still satisfied with it, and it continues at 86% positive reviews on Steam. It's still in Early Access, however, you're planning for a 1.0 release here in Q1?
Exactly. Our 1.0 release is not only a 1.0 release for PC, but it's also expansion of the Smalland property to console.
Hmm.
And so the 1.0 release will have additional content for all of the PC players, but also the entire game and all of the content releases that have happened over the course of 2023 are gonna be included in the console versions coming in Q1. So we're really excited about that.
What sort of results can you expect from Smalland when having it both on PC and console?
Yeah, it's a good question. So normally we are very strong on console, so when we have a game where it's launching out the door across all of the platforms, depending on the genre, we can see anywhere from 30%-40% come on Steam, and then, you know, 60%-70% come for console. Smalland has had a really great community built on PC, so we believe that it's still going to have the majority of its players on PC. But even still, say it's 50%, we would see that coming from console over lifetime. Not day one, obviously, but as the game grows, we hope to reach a 50% of the community and player base be on console.
Is it challenging to expand IPs across different platforms?
Yeah. You, especially with games like this, where there's a lot of content, and in order to service that content and service the community, you have to have an infrastructure that allows you to port the game and port that content from PC to console, and then get that all out the door at the same time. That's one of the benefits of Maximum Entertainment, because our infrastructure allows us to utilize our full development teams to work on that content and make sure that the porting schedule and cadence is strong, so that we keep that community satisfied with new content. So difficult, but we got it.
All right. But, tell us about Amber Valley.
Amber Valley, yeah.
Yeah, precisely.
So that launched October sixteenth, and so it's already out, and PC players, Early Access players, are playing it. And then, 1.0, we will have even more content. And each time we do a major content update, that has really had a great result in bringing players back in, getting them excited again, and continuing to play that game and keeping that community strong.
Hmm. Have you had any thoughts on commercializing the content you're adding?
Yeah. So for Early Access, we made the decision to give all of the content to the Early Access players for free. And then as the game grew over this past year, the pricing went up incrementally over the past year. It'll have another price increase in Q1, and we're still figuring out exactly how we're gonna do that, but then future content updates will be a mix of paid and free.
All right, but let's talk about Bramble then. The reviews here are a little bit fewer, but they are, at the same time, better. Here, it's 96% positive, I believe. And you described it as it continued well during the Halloween season. You described good momentum for the title in Q4. Will this continue in 2024?
Yeah, we hope so. These type of games tend to have a very long tail, and so we believe that we're gonna be able to monetize this game for a very long time, and we really haven't had to discount it very much in order to continue to get a great commercial result. So as the game continues its life cycle, we will continue to be able to monetize it for a long time to come.
Hmm, this is without adding content?
This is without adding content, yes.
But, considering then the reviews you've gotten for Bramble, what's next in line for the IP?
Yeah. Yeah, it's a good question. We're going to continue to look at that team and games that that team can really create, and we're looking to expand that particular content into other platforms.
Hmm.
What you'll see in 2024 is maybe an expansion on new platforms of Bramble.
I see. But, tell us about your upcoming IPs then. For example, the Diesel Legacy.
Mm-hmm.
What's it all about?
Yeah, competitive fighting game. We love this game. We have a lot of fans of the genre in the company. We have some former national fighting game champions in the company. So we have a lot of institutional knowledge about this category, and so we're excited to deliver a game that's really strong. This is a engine that we own and that we built, of rollback netcode, and we believe that it is going to be the best in the industry, and that engine is ours. Diesel Legacy is gonna be the first kind of proof point of that engine, and then, and then we're looking to expand into this genre into the future, even past Diesel Legacy.
Hmm.
Diesel Legacy is kind of the first, the first one into this genre.
Considering that you're launching playtesting soon in December, how close are you to release?
Yeah, we're pretty confident of an early access release in 2024.
Hmm, all right.
Mm-hmm.
The Squirrel with a Gun then, is that also own IP?
It is not own IP. It is part of our publishing lineup, but that's kind of the benefit of Maximum Entertainment and our portfolio, is that we really have the ability to launch both our own IP, as well as third-party publishing. And Squirrel with a Gun is an example of that, and it's hilarious, and you guys are gonna love it.
All right. Let's move on to the publishing then. You mentioned in the reports that this quarter has demonstrated the power of your publishing capabilities. Could you elaborate on what you're taking with you here in Q3?
We have different areas of revenue, right? We have sub-publishing, publishing, and own IP. We publish our own IP, so it kind of fits into publishing. But those are, like, our main revenue categories, and what that allows us to do is basically come into a game at different times within a development cycle and be able to get a good commercial result for it. So our own IP, we're developing that from concept all the way through launch and life cycle. And then with publishing, we're coming in sometimes very early and funding that game to bring it to market, and then sometimes we're coming in much later, and that's the sub-publishing area of the business. So we're not necessarily investing in those games, but we're coming in very late stage when they're done, and we're creating a really strong commercial result.
What that allows us as a company to do is jump into different trends that are happening on, you know, within the industry, and we can come in late stage and still participate in that trend.
Mm.
It also gives us an enormous amount of data, because we get to see how all of these different genres are performing in the market, and then we can use that to help us with our own greenlight decisions and our own investment decisions.
But could you elaborate on why sub-publishing is the right choice sometimes?
So, one, because we only have so much money to invest, and so we are allocating those investment dollars into the publishing area of the business and the own IP area of the business. But sub-publishing allows us to partner with people to get a really good result for them, but not necessarily fully investing in that content.
One big title that you mentioned in your sub- publishing catalog is Five Nights at Freddy's, of course.
Yeah.
Could you elaborate on how this collaboration will work?
Yeah. We've been working with ScottGames and Steel Wool and the Five Nights at Freddy's franchise for many years now. We have a great relationship with those guys, and we love the property. It's having its moment right now with the movie that just came out. I think that we just read that it was the most streamed movie on Peacock ever, and it's just had a phenomenal result. That's a good indication about the power of video game IP across all areas of entertainment and how you can expand it. What that movie has done is really increased demand for the game in the market, and so we've been able to deliver a lot of collection editions of the different games.
There's multiple Five Nights at Freddy's video games, and we, and we publish all of them. And so, we're really excited and, and especially around the Halloween season and October, November, December, it's kind of going through the roof, so we're excited about that.
For shareholders curious about some of the highlights you expect from 2024, what would that list look like?
Yeah, that's... So Squirrel with a Gun, go check that out. That just got announced today. And then, also, we will have the 1.0 of Smalland, we will have early access of Maximum Football, early access of Diesel Legacy, and we have some other stuff up our sleeves that has not yet been announced. So more own IP next year is what you'll see from us, as well as continuing to execute against our portfolio strategy.
Mm. Christina Seelye, thank you very much for being here, presenting and answering my questions.
Thank you. Thanks for having me.