Translation: Original published in Finnish on 04/30/2025 at 09:25 am EEST

Remedy reported clearly better-than-expected Q1 earnings this morning. There were more development fees than we expected in Q1, and the company's cost structure was also lighter than we expected. Alan Wake 2’s royalties evolved in line with our expectations, and the game continues to generate stable sales, according to the company. All game projects have progressed at a good pace in Q1 according to the compay and FBC: Firebreak's release (June 17) is already around the corner. Overall, the Q1 report was an encouraging start to the year, as our earnings expectations have focused on the end of the year for 2025.

Revenue exceeded our expectations in terms of development fees

Remedy’s Q1 revenue grew by 24% to 13.4 MEUR which exceeded our 11.6 MEUR estimate. As expected, development fees (Q1'25: 10.7 MEUR) accounted for most of revenue, but more of them were recognized as revenue in Q1 than we had expected. We believe most development fees came from the Max Payne subcontracting project that was in production. Control 2, which entered full production in February, has apparently also generated more development fees than we expected (Annapurna finances 50% of the estimated production budget of around 50 MEUR).

Royalties in Q1 were 2.6 MEUR, which was exactly what we expected. According to Remedy, most of these were related to Alan Wake 2 royalties, which was what we expected. According to the company, Alan Wake 2 continues to sell steadily and accumulate royalties. At the turn of last year, the game's sales exceeded 2 million copies, but the figure was not updated at this point.

Q1 earnings clearly better than our estimates

In Q1, Remedy’s EBITDA was 2.6 MEUR (Q1’24 -1.2 MEUR), exceeding our forecast of -0.9 MEUR clearly. Due to the fixed cost structure, the revenue overshoot is reflected directly in earnings lines, and the cost structure was overall lighter than we predicted in Q1. In particular, outsourcing costs were lower than expected in Q1. In our estimates, Remedy’s earnings expectations are focused on H2 this year, as  FBC: Firebreak to be released on June 17, starts to generate revenue for the company. Relative to this, the development in Q1 was promising.

As expected, outlook remains unchanged at this point of the year

In its guidance, Remedy estimates revenue (2024: 50.7 MEUR) and EBIT (-4.3 MEUR) to increase compared to the previous year and that EBIT will be positive. The focus for growth is naturally on the release of FBC: Firebreak, but in addition, the royalties from Alan Wake 2 and other older games create a base for revenue. Remedy has strengthened its self-publishing team to best support sales of already released older games in digital channels. The Max Payne project and Control 2 will continue to generate significant development fees this year. Our forecast before the report expected revenue of 65.8 MEUR (+30%) and EBIT of 1.7 MEUR for this year. With the earnings overshoot in Q1, there is some upside pressure in the estimates. In the big picture, medium-term performance expectations are weighted towards 2027, when Control 2 is very likely to be released.

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