Remedy Entertainment Oyj : Vuosikertomus 2023

REMEDY ENTERTAINMENT PLC

ANNUAL REPORT 2023

REMEDY 2023	STRATEGY & OPERATING ENVIRONMENT	GAMES	PEOPLE	SUSTAINABILITY	GOVERNANCE	FINANCIALS

CONTENT

Remedy 2023		3
Remedy in brief		3
Highlights 2023		4
CEO review 2023		5
Why invest in Remedy		7
Strategy & operating environment	8
Business model			9
Strategy			11
Operating environment		13
Games		16
People		32
Sustainability		38
Governance				47
Financials		50

REMEDY ANNUAL REPORT 2023

Financial Statement and Board

of Directors' Report 2023

Corporate Governance

Statement 2023

Welcome to our world

Remuneration Report 2023

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REMEDY 2023	STRATEGY & OPERATING ENVIRONMENT	GAMES	PEOPLE	SUSTAINABILITY	GOVERNANCE	FINANCIALS

REMEDY

IN BRIEF

Creator of category-defining games with immersive worlds, unique characters, memorable stories, and polished action gameplay.

Remedy Entertainment is a pioneering, globally renowned video game company. Known for its story-driven and visually stunning action games, Remedy has created multiple successful, critically acclaimed franchises such as Alan Wake, Control and Max Payne. Remedy develops its own Northlight game engine and tools technology that powers many of its games.

The company was founded in 1995 and is headquartered in Espoo, Finland, with an office in Stockholm, Sweden. At the end of 2023, Remedy employed 352 game industry professionals from 33 different countries. Remedy's shares are listed on Nasdaq Helsinki's official list with the trading code REMEDY.

REMEDY ANNUAL REPORT 2023

Headcount	Revenue
352	33.9M€
(334 in 2022)	(43.6 M€ in 2022)

Revenue breakdown 2023	Historical revenue breakdown
	2021-2023
	M€	44.7	43.6
	40	8.7	4.3
5.2				33.9
	30			5.2
33.9M€
20	36.0	39.3	28.7
28.7	10
	0	2021	2022	2023
Development fees	Royalties	Development fees	Royalties

Men | Women | Other

76% 23% 1%

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HIGHLIGHTS 2023

Building a well-functioningmulti-project model has been one of Remedy's key goals for years. In 2023, Remedy had the capability to develop five major games simultaneously, and the year culminated with the successful release of Alan Wake 2.

Alan Wake 2 was completed and	Alan Wake 2 received amazing critic and player	Control 2, Condor and Max Payne	Codename Vanguard (renamed
launched on October 27.	reviews and won a number of awards, providing	1&2 remake made steady, good	codename Kestrel) was restarted to
	the game with a strong basis for long-term	progress throughout the year.	give the project a fresh start.
	sales. By the end of the year, Alan Wake 2 had
	sold 1 million units.
The core teams of our game projects were	Several new developments were	We continued our investment phase
successfully strengthened during the year,	made and taken into use by our	to reach our strategic objectives and
and meaningful improvements were made	Northlight technology, tools and	get towards long-term profitable
in how we plan and manage our game	services team.	growth.
roadmap, development personnel and its
interdependencies.

Remedy continued its investment phase to advance its long-term strategic objectives.

REMEDY ANNUAL REPORT 2023

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REMEDY 2023	STRATEGY & OPERATING ENVIRONMENT	GAMES	PEOPLE	SUSTAINABILITY	GOVERNANCE	FINANCIALS

CEO REVIEW 2023

The year 2023 was a very special one for Remedy. Alan Wake returned after 13 years as we launched Alan Wake 2 at the end of October 2023. This is the first new game launch based on our original intellectual property from the multi-project model that we have systematically been building since the launch of Control back in 2019. The critical reception of the game was phenomenal.

A Metacritic score of 89 is an amazing accomplishment. Alan Wake 2 won the Best Direction, Best Narrative and Best Art Direction at The Game Awards along with numerous awards and accolades across the industry. This is a true testimony to Remedy's dedication and ability to create unique games that stand out in the market and are based on creative, artistic, and technical excellence. Despite an extremely competitive launch window and an overall exceptional amount of great game launches throughout the year, Alan Wake 2 sold over 1 million units by the end of 2023, making it the fastest- selling Remedy game. Alan Wake has had an enthusiastic fan base thrilled to see how the story continues.

A year of investments

In 2023, our investment phase continued to enable sustainable and profitable long-term growth. Higher own investments in game projects and a relatively low amount of royalty revenue took a toll on our profitability and cash flow in 2023. However, we expect these investments to materialize through steady high-quality game launches over the next years. This is the right strategic direction for Remedy, and we have just scraped the surface of the possibilities that lay ahead. We have made several updates and improvements to the Northlight game engine technology and tool set. Our multi- project model is running better than before, and the games roadmap is a promising one. On top of that, we have exceptionally talented and passionate personnel who are devoted to making amazing games for an expanding fan base of Remedy games.

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REMEDY 2023	STRATEGY & OPERATING ENVIRONMENT	GAMES	PEOPLE	SUSTAINABILITY	GOVERNANCE	FINANCIALS

Steady progress across the game portfolio

2023 has been an eventful year for our game projects. Control 2 progressed from the concept stage to the proof-of-concept stage. The game team is experienced and dedicated to making Control 2 a worthy sequel to the original award-winning game. The plans are ambitious, and fans have every reason to be excited to see what the future holds for this beloved franchise. Codename Condor, a co-operative multiplayer spin-off game of Control, is our first step towards service-based games. During the year, we learned a great deal about developing such games, and the game team envisioned and successfully proved a strong game concept. The project moved into the production readiness stage, and we are looking forward to moving on with full production in 2024.

The development team behind Max Payne 1&2 remake performed at a high level throughout the year. The project quickly advanced first from the concept to the proof-of-concept stage and then to the production readiness stage. Developing a remake of this cult classic is a fantastic opportunity for Remedy, and we are dedicated to bringing Max Payne back in a high-quality form for new and existing fans alike.

In late 2023, we made the decision to reboot codename Vanguard, now renamed codename Kestrel, and the project was returned to the concept stage. In early 2024, we decided to give codename Kestrel a fresh start to better align the project with our core strengths and the creative vision of the Remedy Connected Universe.

Beginning of the next chapter

We start the year 2024 with great enthusiasm and determination. In addition to continuing to serve Alan Wake 2's fan base and develop two DLCs for the game, we focus on advancing the other four game projects we have in our games roadmap. The successful launch of Alan Wake 2 highlights our capability to create remarkable games. We now have two established franchises, Control and Alan Wake, which are linked through the Remedy Connected Universe. Growing and expanding these franchises will be a key part of our future. In addition, making world-class games at this level requires excellent people, teams, technology, ways of working and partners, and most of these we have in place. However, there is still room to improve, and we will continue to work hard to be better and enable even bigger successes in the years to come. It is very fair to say that this year has been merely the beginning of the next chapter in our story.

TERO VIRTALA

Chief Executive Officer

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REMEDY 2023	STRATEGY & OPERATING ENVIRONMENT	GAMES	PEOPLE	SUSTAINABILITY	GOVERNANCE	FINANCIALS

WHY INVEST IN REMEDY

1	Operating in a massive and steadily growing gaming market with
a total market size of almost USD 200 billion. Remedy's target
		market PC & console games is approximately half of that.
2	One of the most highly regarded independent game studios,
		capable of creating the highest production value AAA games. In
		this segment the barriers to entry are high and out of the approx.
		150 AAA capable game studios only approx. 30 are independent
		and able to freely decide what to create and with whom to partner.
3	A consistent track record and a rare capability to create new game
		IPs, and to develop excellent games that stand out in the market
		and that players engage with for years.
4	Two established franchises, Control and Alan Wake, which are
		linked through the Remedy Connected Universe. Growing and

expanding these franchises will be a key part of our future. Additionally, Remedy has a strong foundation to work with partner IPs.

5	Proprietary Northlight game engine technology and tool set,
		development team and ways of working. All this has been
		systematically built for over two decades for the specific needs of
		Remedy games, with synergetic benefits across the games roadmap.
6	Multi-project model as a backbone for steady future game
		launches and a games roadmap with a balanced risk-reward
		profile combining different business models and types of games,
		all based on Remedy's proven core strengths.
7	Well-established and connected player in the games industry
		with a network of high-quality publishing partners supporting in
		developing masterpiece games.
8	Games made by world-class passionate and talented individuals
		operating in well-functioning teams. Remedy is seen as an

exceptionally attractive employer in the recruitment market.

REMEDY ANNUAL REPORT 2023

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REMEDY 2023	STRATEGY & OPERATING ENVIRONMENT	GAMES	PEOPLE	SUSTAINABILITY	GOVERNANCE	FINANCIALS

STRATEGY &

OPERATING

ENVIRONMENT

Creating distinctive, long-engaging games, while evolving towards a higher-margin, more scalable consumer business with the right partners and a diversified basis for revenues.

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REMEDY 2023	STRATEGY & OPERATING ENVIRONMENT	GAMES	PEOPLE	SUSTAINABILITY	GOVERNANCE	FINANCIALS

BUSINESS MODEL

In partner IP projects, Remedy's partner funds the development of the game and Remedy develops it according to agreed specifications. Remedy receives development fees, typically with a margin, as the game development reaches the jointly agreed milestones. Remedy or the partner originates the game concept. In this model, the partner retains control of the intellectual property rights to the game and publishes, distributes, and markets the game. The project can include a royalty opportunity, typically after recouping development and marketing investments, for Remedy that is tied to the game's success. Partner IP projects carry a lower financial risk for Remedy, but participation in the game's success is also limited.

In own IP projects with a publishing partner, Remedy's partner typically funds the game development, partially or in full. Remedy creates and retains the intellectual property rights of the game and is responsible for the development of the game. The partner publishes, distributes, and markets the game. As the game development progresses, Remedy receives development fees upon reaching the agreed milestones. Unlike in partner IP projects, these development fees are typically without margin, as they are intended to only cover Remedy's development expenses to the level agreed with the publisher. Once the game is launched, these development expenses, the partner's marketing costs, and other costs may be recouped against game sales. After the development, marketing, and other agreed costs are covered, Remedy starts receiving royalties from game sales. Own IP projects carry a higher financial risk but also a greater royalty potential for Remedy.

In co-publishingprojects, Remedy and its partner co-fund the development of the game. Remedy carries the main responsibility for the development, while publishing, distributing, and marketing responsibilities are distributed between the two companies as per agreed terms. For Remedy, co-publishing projects carry a relatively high financial risk but also a greater royalty potential. In these projects Remedy is also more involved in the commercialization of the game. Typically, the royalty potential reflects the split in the project financing.

Development phase

Self-publishing**

Co-publishing

DEVELOPMENT FEES

Own IP with

publishing DEVELOPMENT FEES partner

Partner IP		DEVELOPMENT FEES
Concept		Proof-of-concept		Production
				readiness

- -

-

• +

+

Full production

Live stage

ROYALTIES	+ + +

ROYALTIES*	+ +

ROYALTIES*+

ROYALTIES* ?

Self-publishing is a potential future publishing model for Remedy. It has the highest financial risk but also the greatest revenue potential through game royalties. In self-publishing projects, Remedy fully funds the game development and marketing. As Remedy also acts as the game publisher, all royalties are directly realized as revenues after deducting fees related to, e.g., store fees, value added taxes, quality assurance, and localization. At the end of 2023, Remedy did not yet have self-publishing projects in development.

REMEDY ANNUAL REPORT 2023

Impact on EBIT:

- Negative

+ Positive

? Positive through royalty opportunity

• Possible recoupment has an impact on the timing of royalties.
• At the end of 2023, Remedy did not yet have self-publishing projects in development.

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REMEDY 2023	STRATEGY & OPERATING ENVIRONMENT	GAMES	PEOPLE	SUSTAINABILITY	GOVERNANCE	FINANCIALS

TWO COMMERCIAL MODELS

AS A SOURCE OF POTENTIAL

GAME ROYALTIES

Remedy has two commercial models for its games in development:

1. Premium fixed price games with additional payable downloadable content (DLC) and
2. service-basedfixed price games with additional payable downloadable content with live operations.

Revenue generated by selling games to consumers is shared between Remedy's publishing partner and

Remedy. The share received by Remedy is referred to as royalties.

1	Premium fixed price games		2	Service-based fixed price games

Premium fixed price games with additional payable downloadable content is the model used in all of Remedy's existing games. Games such as Control and Alan Wake 2, as well as some of the games in the development pipeline, such as Control 2, are in this category. These games are AAA titles, and they are either published and distributed by a publishing partner or, in a co-publishing model, co-published and distributed by Remedy and a publishing partner.

Service-based fixed price games with additional payable downloadable content can become an increasingly important commercial model for Remedy in the future. These are premium games that may have a lower initial price point but a long tail of revenue through updates, game expansions and potentially microtransactions. For these games, a key differentiator is the post-launch live operations phase meant to keep players engaged for years. This model will be used for example in codename Condor, a multiplayer spin-off game of Control.

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