Remedy Q1 morning result: Developments in line with expectations early in the year

Translation: Original comment published in Finnish on 4/26/2023 at 9:25 am.

As expected, Remedy's Q1 results reported this morning were clearly in the red, with low development fees recorded in the early part of the year due to timing factors. The company is still clearly in the investment phase this year, with five game projects under development. The most important thing to hear at this point was that projects have been progressing since the beginning of the year and that the release of Alan Wake 2 later this year is getting very close. However, the multiplayer projects (Vanguard and Condor) still seem require a lot of work, and we consider their success the most uncertain aspect of Remedy's future years.

As expected, the early part of the year saw relatively few development fees

Remedy's Q1 revenue decreased by 45% to EUR 6.9 million and slightly exceeded our estimate of EUR 6.5 million. As expected, due to timing factors, the early part of the year saw few development fees. We think this is due to, among other things, Alan Wake 2, which has moved into the final stages of development during the first part of the year before the game's release. For the other projects, we estimate that development fees were also relatively low at the beginning of the year but will increase towards the end of the year as AW2 frees up resources. Royalty income for the quarter was EUR 0.5 million, above our estimate of EUR 0.3 million.

Result clearly in the red as expected

In Q1, Remedy's operating profit was EUR -5.6 million (Q1’22: 2.8 MEUR), and thus in line with our estimate of EUR -5.4 million. As expected, increased investments in game projects under development were reflected in a higher cost structure, while at the same time there was little revenue in the quarter

Outlook unchanged with game projects moving forward

As expected, Remedy's outlook is unchanged, and the company expects a decline in revenue and a loss for 2023 (our estimate: revenue -18% and EBIT -11.2 MEUR). As for the company's game projects, Alan Wake 2 is progressing steadily towards release and the game is on track for release later this year (we expect at the end of Q3). Development of Control 2 is well underway, and the game has been in proof-of-concept since January. The size of the team will gradually increase this year. Similarly, the Max Payne project is progressing well and the game has also entered the proof-of-concept phase early this year. As far as multiplayer projects are concerned, Condor has continued its steady development in the proof-of-concept phase, according to Remedy. Vanguard is also still in the proof-of-concept phase, but new key hires at the end of last year have given the project a boost.