JANUARY 2018-MARCH 2019, 15 MONTHS
SIGNIFICANT EVENTS AND CEO COMMENTS
We ended the extended financial year 2018-2019 with another stable growth quarter. Net sales increased 158% to SEK 1,630 million, primarily driven by the February release of Metro Exodus. Operational EBIT grew 217% to SEK 396 million, mainly driven by the performance of Metro Exodus and Satisfactory. We had solid cash flow from operating activities of SEK 777 million in the quarter and close to SEK 3 billion in cash at the end of the quarter. All three operative groups contributed to the Group's Operational EBIT in the quarter.
We are operating in a dynamic market with increasing competition between new and established digital distribution platforms, which will benefit content producers, including THQ Nordic Group. Since the beginning of 2019, the Group has signed multiple deals with notable value relating to our content on digital subscription, streaming and download services on various platforms. As we look ahead over the coming years, these deals will help us create compelling content for our players while also reducing financial risk to the company. Revenue recognition will not begin until the games are released.
SOLID PERFORMANCE IN ALL BUSINESS AREAS
Net sales of business area Deep Silver were SEK 794 million, largely driven by the release of Metro Exodus, the largest game launch so far in the history of the Group. Overall, the game has performed in line with management's expectations and has recouped all investments in development and marketing. Net sales in the Partner Publishing business were SEK 596 million, driven by several notable releases from our partners. Looking to the current quarter, ending in June, there will be fewer releases than in the past quarter.
Net sales of business area THQ Nordic increased 6% to SEK 143 million, despite no major releases to match last year's notable release of MX vs ATV All Out!.
Net sales of business area Coffee Stain were SEK 98 million. In the quarter we had a successful early access launch of Satisfactory on the Epic Games store. The game's launch performance exceeded management's expectations at the time of our acquisition of Coffee Stain.
We invested SEK 305.2 million in our growing development pipeline that will be driving the Group's growth and profitability in the coming years. During the period we signed multiple new projects, among them a new development agreement with 4A Games, the developers of the Metro franchise, for their upcoming, still undisclosed, AAA-project. By the end of the quarter, THQ Nordic, Deep Silver and Coffee Stain had 80 games in development, of which 48 titles are currently unannounced.
SHARE ISSUE AND ACQUISITIONS
In the quarter, we strengthened our M&A capacity by a new share issue, raising SEK 2.1 billion. I was pleased to see strong demand from both new and existing long-term shareholders. New investors included First National Pension Fund, Second National Pension Fund and Odin Fonder. Existing shareholders that participated included Swedbank Robur Fonder, Skandia Mutual Life Insurance Company, Skandia Funds, TIN Fonder, Olsson Family and Foundation, Lundström Family, RAM One, SEB Funds amongst many other highly regarded investors. I would like to thank you all, once again, for the trust you have put in us to build further shareholder value.
We continue to execute on our M&A strategy by carrying out extensive scouting, research and proactive engagement to find suitable companies to enhance the Group within all prioritized areas - intellectual properties, publishing, development and partner publishing. Our offering to entrepreneurs and talented developers - to retain a great deal of autonomy within our growing family - appeals to those who want to continue building their business for years to come. We currently have an extensive pipeline of potential partners and a lot of momentum. For us, it is important to find a common ground not only in business strategy and reasonable transaction terms for both parties, but also in mutual respect and understanding of each other's cultures and values.
During the period we proudly welcomed one of the leading game developers in Europe to the Group - Warhorse Studios, the creators of Kingdom Come: Deliverance. We also welcomed the publishing partner, 18POINT2, based in Australia. They bring us a strong local management and a platform to drive further growth.
During the quarter we finalized the purchase price allocation (PPA) for the Koch Media acquisition. In the final PPA SEK 479 m of the purchase price was allocated to IP-rights, which are amortized over five years from the acquisition date. This resulted in additional amortizations of SEK 108 million in the quarter ending March 2019 where SEK 84 m relates to previous quarters.
On April 5, Koch Media received a statement of objections from the European Commission regarding geo-blocking. The proceedings have previously been publicly announced and we consider this the next step in the process. We continue to monitor the process closely and are fully committed to complying with all rules and regulations.
We are looking forward to an exciting upcoming year. We have a well-positioned pipeline and many marketing activities ahead - including both E3 and Gamescom - that will be important events for the Group as we showcase our games to a global audience.
I would like to end by sending my true thanks to all of our customers, colleagues, and business partners that helped to make this past year our best ever. We are on a great journey to build something substantial and lasting together, and I'm confident the coming years will be even more exciting.
MAY 22, 2019, KARLSTAD, SWEDEN
- LARS WINGEFORS, FOUNDER & CEO
The full Extended Financial Year Report is available via link below and on www.thqnordic-investors.com
For additional information, please contact:
Lars Wingefors, Founder and CEO
Tel: +46 708 471 978
About THQ Nordic
THQ Nordic develops and publishes PC and console games for the global games market. The company has an extensive catalogue of over 100 owned franchises, such as Saints Row, Goat Simulator, Dead Island, Darksiders, Metro (license), MX vs ATV, Kingdoms of Amalur, Time Splitters, Satisfactory, Wreckfest amongst many others. The Group has a global presence, with its Group head office located in Karlstad, Sweden and with three divisions; Deep Silver/Koch Media, THQ Nordic and Coffee Stain. The Group has sixteen internal game development studios based in Germany, Czech, UK, Finland, USA and Sweden and engages more than 2,200 employees and contracted developers.
THQ Nordic's shares are publicly listed on Nasdaq First North Stockholm under the ticker THQN B with FNCA Sweden AB (e-mail: email@example.com: +46-8-528 00 399) as its Certified Adviser.
For more information, please visit: http://www.thqnordic-investors.com.
The Extended Financial Year Report is information that is mandatory for THQ Nordic to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 6:00 a.m. CET on 22 May 2019.
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