Remedy Q4'24 preview: FBC: Firebreak release sets the direction this year

Translation: Original published in Finnish on 2/5/2025 at 6:00 am EET.

Remedy will report its Q4 results on Wednesday February 12 at 9.00 am EET. In terms of results, we expect the quarter to be the weakest of the year and are already looking ahead to the growth prospects for the year. This year, the release of FBC: Firebreak and the royalties from Alan Wake 2 are key variables for growth and profitability development. We expect the Q4 report to confirm that AW2 finally recouped its production and marketing costs towards the end of the year, but it's unlikely that we'll get any substantial additional information on FBC: Firebreak until the game's release date is revealed to player, accompanied by marketing fanfares. This year marks the beginning of Remedy's 2025-2030 strategy period of regular game releases and strong growth, which we discussed in detail in our extensive report published in December.

Still a rather weak quarter in our expectations for revenue

We forecast Remedy's Q4 revenue to be 9.6 MEUR, a decrease of 7% year-on-year. Development fees (Q4'24e: 7.0 MEUR) make up the majority of our forecast, most of which we estimate to have come from the Max Payne subcontracting project in production. Control 2, which is in the production readiness phase, has also received some development fees.

In terms of royalties (Q4'24e: 2.6 MEUR), we expect a significant increase compared to previous quarters, as we expect Alan Wake 2 to generate royalties for the first time in Q4. In absolute terms, royalty levels are still low in our forecast. Remedy announced at its Capital Markets Days on November 19, 2024 that the game has sold over 1.8 million copies to date, but has not quite recouped its production and marketing budget (we estimate it will need around 2 million copies). The end of the year is the strongest seasonal sales period for games, and AW2 has also been supported by the release of a physical version and a second expansion pack, as well as increased discount campaigns and marketing activities. We expect to have sold around 2.2 million copies by the end of the year.

Low revenue negatively impacts our earnings forecasts

On the earnings side, we expect Q4 to be the weakest quarter of the year (EBITDA -3.2 MEUR), as development fees and AW2 royalties remain low. The year-ago period was impacted by write-offs related to the Vanguard project. The evolution of Remedy's cost structure calmed down in 2024, as the investments in the implementation of the multi-project model were largely completed. With a predominantly fixed cost structure, the increase in revenue will therefore have a strong impact on profitability in the future. As was the case last year, we expect Remedy to rightfully withhold its dividend and redirect all its capital to the development and self-publishing of future game projects.

FBC: Firebreak release and AW2 royalties will determine 2025 growth outlook

For 2025, we expect Remedy to guide for growing revenue and improving EBITDA. In our forecast for the current year (revenue 60.6 MEUR and EBITDA 3.0 MEUR), in addition to AW2 royalties, a key variable for growth is the reception of Remedy's first multiplayer project, FBC: Firebreak. We currently expect the game to be released in Q3, and it will also be Remedy's first self-published game project. At this point, it's very difficult to predict the reception of the game, which is why we don't think Remedy will be giving very specific guidance for this year. We anticipate that sales of the game will initially focus on selling copies of the game itself, with potential in-game purchases playing a more limited role. We expect the game to generate 18.3 MEUR in revenue for Remedy this year, which would require, in addition to 5 MEUR in B2B contracts, sales of around 0.4 million copies of the game at an average price of EUR 35. Due to Remedy’s cost structure, we expect continued moderate growth in personnel expenses and an increase in other expenses, primarily due to FBC: Firebreak's marketing and distribution costs. Remedy's move to self-publishing means that all sales of the company's own games will be reflected in the income statement, but the company will also bear the distribution and marketing costs associated with the release. For games published by partners (e.g. AW2), these costs are already netted out before any royalties accrue to Remedy.