Gentlemen, and welcome to the Devolver Digital investor presentation. Throughout today's recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time just using the Q&A tab situated on the right-hand corner of your screen. Please simply type in your questions at any time and press send. Before we begin, we'd like to submit the following poll. I'm sure the company will be most grateful for your participation. I'd now like to hand over to Founder and CEO Harry Miller. Good afternoon.
Good afternoon. Before I start, we do seem to have some technical difficulties, so if I'm cutting in and out, could someone let me know via the chat?
Yes, we will. Yes, we will, Harry. We can hear you, we can hear you.
Are we on?
Yes, Harry, we're on. We can hear you clearly.
Okay. Again, we are having technical difficulties. If I'm not coming through, if people could let me know via the chat, that would be helpful. We've prepared this slideshow. The first few slides are not our typical part of our deck for the investors, but it's more of an introduction of our company since many of you are probably new to Devolver. We'll go through that, and then we'll go through our standard deck of last year's results and what's coming forward. To begin, Devolver Digital was founded in 2009. We listed in 2021. Through our time as a publisher of indie games, we've released almost 150 games. The average payback period is about six months on those. We not only provide publishing services. Now since going public, we also acquired a few developers that we had been working with before.
Now we have internal development as well as publishing. Next. Through our history, we've basically kept about 15% CAGR on revenue year-over-year, and we plan to continue, if not expand upon that going forward. Again, we've had more or less 150 titles since the beginning. Of our 10 biggest franchises we've worked on during that time, seven of those we own within Devolver. Okay. Going to our 2025 results. The top line says a lot in that we're in line with the consensus. This is the sixth half in a row that we've hit consensus, so three full years. Something we're proud of. The big stories of this year are a strong EBITDA increase of 39%. What I think is really pointed as far as being a healthy company is our revenue from new releases has more than tripled the year before.
We're finally and happily to announce that the second half of last year, we were positive cash flow generative for the first time since 2022, when we had a big hit called Cult of the Lamb. Looking at the second half, we had told investors early last year that about 2/3 of our revenue would be coming from the second half, which there was some disbelief because that's quite a bit. We were confident we would do that for a few reasons. One, we have a Steam publisher sale, which is quite important to us, and we had chosen to move it to the second half to take advantage of title releases we'd had earlier in the year. We also had several platform deals with our platform partners with guaranteed revenue. The vast majority of that is coming in the second half.
Lastly, we were confident in our release schedule, the games we knew we were releasing in the second half, and that they would be successful. We were correct. We did hit about 2/3 of our year revenue in the second half, and it was a very good half for us. This is an overview again of the year. The bottom right, every year we win or we're nominated for and win awards. This is an example of 2025, and later on we'll go into just explaining that it actually makes more financial outcome and not just a pat on the back. Devolver, our operating leverage was kicking in at around $100 million in top line revenue. As we go past that meter, you can see how it affects our EBITDA.
Operating leverage was able to create a 39% increase in our EBITDA year-over-year, which we're happy about. Again, this is something for me, it's the best picture of health for our company in that our revenue from releases in 2025 tripled the year before, which is very important because not only is it bringing revenue for that year, it's good to gauge on how it will strengthen that catalog going forward. This is a further explanation of that phenomenon. 2021, we use that as a healthy year where about 50/50 new release revenue versus back catalog as far as our total revenue. In 2022, we had this big hit called Cult of the Lamb, so it made frontline revenue much higher than back catalog.
You can see the same effect, that game, because it kept being successful year -after -year, that in 2023 and 2024, it made an outsized difference for back catalog versus front catalog. Unfortunately, coupled with that, we didn't have as many releases in 2023 and 2024, and those that we did release did not find the success we had hoped for. The revenue from frontline was smaller than we wanted it to be. Unfortunately, it has a double effect because not only is it not helping in the year they're released, but those are the ones that feed the back catalog going forward. You see in 2025, we actually had a drop in back catalog revenue in total and as a percentage. Luckily, due to strategies we put in place since 2022, which now are taking effect, our frontline revenue, which greatly increased to 36%.
Not only was that great for the year 2025, but also it shows a picture of what will happen in subsequent years, 2026 and beyond. We know this is true, and we've already seen it in the first quarter of 2026, that strong performance from back catalog. I spoke about being nominated and winning awards. When we are nominated, and especially if we win an award, when that press goes out, either by the site that gives the award or the press that follows it, so spikes in revenue we have for the titles that receive those nominations and awards. Talking about strategy, one of our main strategies for the company since 2022 was to invest more in expandable games.
Expandable games are games that not only receive revenue when they release, but have subsequent content that we release later that we can also either charge for, or even if it's free, it brings people back to the game and increases word of mouth and continued sales. You can see that year-over-year, we've been increasing our investment in expandable games, and it's had a very good effect on our revenue. Do you want to go up? Okay. We mention, I've been introducing John Bartkiw, our CTO, but we talk here about what we've been doing over the last few years with technologies, both internal to the company to improve ourselves and also specific to working with third-party developers.
We have, over the last couple of years, been investing in our internal technology, internal data collection. We have started collecting a lot of data about the industry as a whole, as well as obviously diving deeper into our own sales data, et cetera, and building some systems and math around that to better drive some of our business decisions. We're starting to see the results of that. That comes in both the realm of looking at future titles and then also being able to analyze the results of our existing titles to add more value.
In addition, we had an acquisition a couple of years ago with System Era Softworks, developers of Astroneer, and they are working on a new title called STARSEEKER. As part of that title, they have built a suite of back-end services, so all the normal stuff that you'd think of with matchmaking, et cetera, for games. We're starting to leverage those across a number of our different titles so that we can use the same technology and therefore start kind of getting synergy between our titles of how we market, how we collect customers and whatnot. We're just starting to roll that out right now. STARSEEKER will be launching later this year, and that will be the premier launch of that.
Just moving over to the financials. This is Daniel Widdicombe, CFO. We've got some more detail. We'll drill down into the numbers a little bit. Also, our investor slides are on our investor website, investors.devolverdigital.com, if you need to take a look at some more detailed information. As we mentioned, we were very pleased to see a strong second half of 2025, nearly $70 million of revenue. We saw an improvement in our gross margin, principally because royalty outpayments as a % of total were slightly down, and that reflected the mix in the titles being released to new releases, because in our business model, typically when we release games and they are in recoup, where we're getting the money back that we initially invested into the title, we don't pay out royalties to our third-party developers in general.
There's a period with new releases, if we get more new release revenue in a year or more titles coming out, there's a period where it's high margin for us in the initial release period. You'll see here also, we had some impairments of games that didn't perform, and in the red box at the bottom, we've presented our EBITDA. Our underlying EBITDA before impairments rose to $11.3 million for the second half of 2025, which was almost the entirety of the year's EBITDA contribution. An impairment of $4.3 million for games that didn't perform, and that brought our adjusted EBITDA down to $7 million for the second half of 2025 and $7.1 million for the full year. The second half column clearly shows how our operating leverage kicks in. We kept our operating expenses on an adjusted basis down. They fell 1.1%.
You'll also notice that we've completed in the taxation row, we've completed the taking out of the balance sheet the cumulative losses that we had over the last few years that became deferred tax assets, tax loss carryforward credits, and we've released those from the balance sheet now through 2025. We no longer have deferred tax assets on the balance sheet. It's an accounting requirement that after three years of not using them, you take them out of the balance sheet. We don't lose the value of those credits on the local tax level in different jurisdictions. They can last between five and 10 years, so we do expect to be able to apply some of those tax loss carryforward credits in future years. Our balance sheet is very strong, and we're very pleased at the split between the different categories.
We've got $30 million of intellectual property that we've acquired, and that amortizes over five to 10 years. You'll notice we've got $75 million of capitalized development costs. That's expense that we've put into games for them that haven't been released is about $50 million. The balance is for games that are already released. They amortize over three years, 60%, 20%, 20% per year. That $50 million that we have in our future pipeline of about 30 titles represents about half of the overall spend that we'll make on those titles, and we spend about $30 million-$35 million a year in our future pipeline. You'll see that we've got $37 million in cash in bank. We have no debt, and we were free cash flow generative in the second half of last year.
One of the questions that we are asked is whether we expect to be free cash flow positive in 2026, and our expectation is we will be. However, the timing of whether it's for both halves or one half versus another really depends on the release schedule for some of our large significant games that are positioned around the summer months. We'll provide an update on that in July. On an annualized basis for 2026, we do expect to be free cash flow positive. There's the cash flow where you can see we spend $15 million-$20 million per half on software development for the games. We think we've peaked at around the level we saw in 2025, $36.5 million. We had one large project that concluded that year, which was being developed by an external party.
The range of about $30 million-$35 million is our current expectation going forward. We break down operating expenses here just to show there's a difference between the cash operating expenses, the adjusted OPEX, which you can see fell 1.1%. There are non-cash items, for example, stock compensation expense, which we do expect to fall next year. We had a one-time repricing of stock options in the second half of 2025 that led to $1.3 million additional non-cash expense for that period. There's the amortization of IP and depreciation of PPE. Mainly it's the amortization of IP, which we've acquired, which is about $5.3 million of the $5.7 million for the full year. Now we'll move over to a business update from Graeme.
Yeah. Hi, Graeme, COO of Devolver Digital, and also Co-Founder. As Dan said, the slides from the investor presentations are up on our corporate website. In those slides, there are quite a lot of details about games we released in 2025, but we didn't think we would go through those now, as it takes quite a bit of time. I just want to reference back to those games that were really successful in 2025, and to the point that Harry made, which is that they serve more than one purpose. There's a success, both creatively and commercially we enjoyed in 2025, but they recharge our back catalog. Another point that Harry mentioned I wanted to pick up on is that for many of the titles, at least six of those titles that we released in 2025, we will have new content releasing throughout 2026, both free and paid for.
Back to that point about expandability. Also titles we're releasing in 2026, the same thing will happen yet again. There's a constant refresh of the back catalog with more content coming. All that said, jumping to 2026, we're in month four. In the first month, January, we released Quarantine Zone. This is a title that we picked up quite late stage. This is something that we see as becoming a new feature, if you will, of our business where we see market validity from games that developers are announcing putting into various promotions prior to the game being released. Where we think there's an opportunity, we will be pushing into that space. Quarantine Zone, when we first got involved with that game, it already had nearly 700,000 wishlists on Steam, which is a powerful number. We got involved for a variety of reasons.
The developer was looking for a publisher. They were also looking for expertise when it came to publishing globally, so not just regionally, and also were looking for a partner who could bring them to an opportunity with a first party, which for us is Sony or Microsoft or Nintendo. We accomplished all of those things. We had a global launch. We achieved a first-party deal. The game has been an outstanding success and, yeah, we're very, very happy with Quarantine Zone: The Last Check. In addition to that, in January, we had paid-for downloadable content for Cult of the Lamb, which is one of our biggest games. The DLC was called Woolhaven. It launched against all platforms at day and date. Again, huge success. What it also did in promotion with the original game allowed us to have three games in the Steam global top 10 best-sellers list.
That's quite a mouthful. But yeah, three great successes kicking off 2026. And as we now cycle into 2026, we have a number of things coming that we have announced, so we can talk about. So, last week was the 10-year anniversary of "Enter the Gungeon." This is an owned IP. It is Devolver Digital's most successful owned IP at this juncture. And the initial kickoff to this year is celebrating that with store promotions and discounts, and that has been very, very successful in its own right. But also we have a sequel in the works with "Enter the Gungeon," and we also have one more announcement to make for another event happening this year with the IP, so stay tuned. STARSEEKER, I'm looking at John. You can't see John, he's off camera, but I'm now going to twist a little bit, so you've got us both.
So System Era was an acquisition we made back in-
2023
2023. The team behind Astroneer, which is in its 10th year of successful publishing. We were very excited to get involved with STARSEEKER, but I'm now going to let John talk because John is more acquainted, being from Seattle, as the devs are.
Yeah. As I mentioned before, they have their own backend services that they've built for this game. At this point, we've done a few private beta tests, as we've been testing out all of those systems. We've done all of the good scalability tests. We are building up to launch coming later this summer. We have a public test, I believe, it was just announced. That will be coming soon, and we're just starting to build the hype and excitement, and we're all behind it.
A sequel, we like sequels. Like everybody, they're possibly more predictable, certainly in this world. This is a game that we first published back in 2019, developed by two Parisian chaps. When they came to us with the sequel, we were obviously very excited about that, but the itch we wanted to scratch was could we take this game and make it into an online game, something that the team themselves could not envisage doing. We did a lot of due diligence on that. We did find a partner who could deliver that part of the game, and we're very pleased to say that that has been realized also. Another call-out here is that you're aware that Nintendo launched their new hardware last year, the Switch 2, which has proven to be a big success.
This is a game that we took to Nintendo, and they were pleased to work with us to announce the game to the public, which was back in March, and the announcement has been a huge success. We're very excited about what that means for the success of Hephaestus going forward. Serious Sam is another IP that Devolver owns. We worked with the developer of Serious Sam. Well, Harry and myself worked with the developer from their very early stages, which was back in 2000. Devolver acquired publishing rights to Serious Sam in 2009, and these are games that they have a very passionate and loyal fan base. They have an enduring appeal. Shatterverse is the next entry into the IP.
This has also been done in co-development with a team out of Montreal in Canada, who have a lot of expertise in providing very complex but also very compelling cooperative games. We're very excited. This is coming later in the year. We've been working on it for a long time. Again, recently announced in partnership with Microsoft, so again, helping us reach a larger audience is the objective there. Warhammer, I'm sure you're all familiar with the Warhammer behemoth. This is a sequel to a game that was released two and a half years ago, nearly three years ago, which is Boltgun, hugely successful. We partnered with the team to bring Boltgun 2 to market, and that will happen around Q3. Again, all signs point to success, and we're very excited about this particular one.
I'm going to say finally, but I'm not confident there's any more slides to follow. This is Shroom and Gloom, a small team down in Cape Town. We have a long partnership with Free Lives, who are a developer in Cape Town, very successful. They set up an incubator program to encourage local developers to come forward with their ideas. Free Lives saw this. We were happy to be in Cape Town around the same time. We met the developer. We were very excited. We got involved. The game has been validated as well by public demos, and we've just seen the wishlists growing throughout the year. Each time we announce anything about Shroom and Gloom, we get a nice spike in that activity, so set fair for launch later this year. Thank you.
All right. We had some really successful outcomes for 2025. Again, going back to profitability in the second half, which we expect to have a full-year profitability in 2026 and beyond. Increasing our new release revenue 3x of the year before is a clear sign that we're back to being healthy, and we'll continue that trend. Also, that trend of having successful new releases is good for back catalog, and we will expect to see that strength in 2026. We've already seen the result of that in the first quarter of this year, so that's going forward, and we're excited about the future. We think that our strategies that we've been enacting the last couple of years are taking root and proving out to be successful. That concludes our presentation. We'll go ahead and start answering some of these questions, and then feel free to ask more.
That's great. Thank you to Harry and the team for updating investors. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the right-hand corner of the screen. While the guys take a couple of moments to review these questions, I'd like to remind you, a recording of this presentation will be available via your Investor Meet Company dashboard. Harry, Daniel, guys, you've had a number of questions from investors. Thank you to everybody for your engagement this afternoon. If I may just hand back to you, if I could ask you just to read out the questions and then give a response where it's appropriate to do so. I'll pick up from you once again at the end.
All right. The first one's kind of a long one from Fabio. Fabio is asking about our back catalog. The revenue grew by basically 3x year-over-year, which reflects the strong results from recent investments. However, back catalog declined 24%. What are the key drivers behind this? More specifically, how dependent is back catalog performance on prior year release cadence? Thank you for your time. Okay. I think we had a slide that kind of demonstrated this, in that back catalog will naturally depreciate over time unless refilled, if you will. We saw a decline in 2025 due to weak new releases in both 2023 and 2024. We've recovered that in 2025, and we're already seeing success in back catalog growth in the first quarter of 2026. Yes, there is a correlation between the two. Hopefully, Fabio, I've answered that question. If not, please follow up.
From George S., "Should we expect continued positive free cash flow across both halves?" Yes. For annualized basis, we expect 2026 to be free cash flow, and we expect more of the same in the future. How scalable is our current pipeline strategy over the next few years? We feel it, o ne, we think our team is scalable for further growth in this current state we are in. The pipeline is also scalable, not only because of the investment in games with future content beyond just the original release, but also we have two other labels that publish their own games as well. We have Big Fan, who specialize in licensed games, and then we have Firefly, who self-publish their own games and will begin to publish third-party games in the future. We're well set for scaling future growth. Okay.
Asks how important platform deals are and subscriptions to our overall model. They are important. They make up about 10%-15% of our annual revenue, which it used to be a little bit higher than that, but it's sort of settled down to around that level. How do you feel the competitive landscape evolving, and does Devolver have a clear edge? Well, of course we have a clear edge. We feel that we are top of the game as an indie publisher, and we're very reactive to the market, and the strategies we've been placing in the company are proving successful, and we plan to continue that going forward. Do we have any more?
Yeah.
All right.
Not these ones.
You want me to cover the green line?
We're okay.
In the chat.
In chat.
You [audio distortion].
Question. Oh, you've got two of me now. That's terrible. How have we improved our green light? Well, I think we'll always be improving green light is the honest answer to that question because as we release games, we look back and see where we landed in terms of our reasons for signing it, in terms of the financial outcomes, and that will always cause us to reflect on what did we get right and what did we get wrong. When we look at bringing titles into the company, we have got, as you can imagine, an ever-increasing amount of data that we've amassed for ourselves from the titles we've released. That can be anything from how successful they were in terms of units. It can be how we priced them. It can be when did we first discount? What was the outcome of those discounts?
We've now got over 130+ titles to look at from a back catalog perspective to help us educate ourselves through what we do next. We also have been building tools for ourselves, where we are then able to import data about other games and genres, making lots of different calculations on what we would benchmark against, how successful those games been, the regionality of that success, whether they've been more successful in the East or the West, or whether it's America or Germany. You can imagine there's a lot of data that we use when we're doing these comps. All of that leads us to better information to base our decisions on. We are primarily a games company, so we are looking for innovation, interesting and exciting games, and then adding this layer on.
We're not using that layer first to help us find games. We're finding games and then applying that to the potential of the project to help us understand if it's something that we should actually take forward in greenlight. I hope that answers your question around greenlight. Just to emphasize, we will always be looking to improve it. It's never going to be something, "Here's the process that we're now going to follow ad infinitum." We're always going to go back to that and keep refining. I can't read that. I haven't got my glasses on.
All right. What are you going to do about liquidity? This is a question for you, Dan.
It's a good question. The two impediments to liquidity are the corporate structure of Devolver in the sense that we're quite tightly held by founders, subsidiary heads, strategics, and the institutional float isn't that large. It's about 16%-17%. Secondly, the AIM market has had challenges, as we all know. We have actually the capability to improve liquidity with improved performance because we have stock options across the group equivalent to around 9% of equity, and that can be released over time into the market with an improved performance, which we're seeing now. On top of new activities such as Investor Meet Company and others, we are looking to expand our footprint in terms of institutional exposure. We're looking at Europe and other areas.
We want to see all those things move in parallel, more equity being available to the market, improved performance, and talking to more institutions and high-end retail investors across different markets. We have some more questions here.
Okay. "Good afternoon. Let me start by saying I'm a big fan of Devolver and your games." Thank you. "I wish you all the best. From an investing standpoint, I wonder how you plan to compete in the gaming market in the long run. As I understand, as an outsider nowadays, technology enables everyone who wants to create a game to do it. Now I may be delusional for starting this, but couldn't theoretically even private person using their own funds create a game which sparks hype and thus attention away from games like Devolver does and other publishers? Basically, how does one compete in a market with so many suppliers and relatively unpredictable results in games development?" One thing we're ever asked about who our competition is, our first answer is self-publishing, because anyone can bring a game to market and release it.
That's not hard to do. Where we bring in is expertise, because oftentimes, like as you're saying, this is an example of a small team bringing a game to market. What we offer someone like this is multiple skills and services to help replace or add to areas that they lack. For example, our sales team, who constantly works on ensuring that we get into promotions, Devolver has its own Devolver sale on Steam and things like that, we can add between 20% and 60% revenue for a game in a given year. If you multiply that by two years, four years, eight years, 10, that makes a meaningful difference. We also have economies of scale working with PR and localization teams and other third parties that help this process, porting teams. Generally, on average, we produce very high-quality products, and this is meaningful.
We also, due to our brand and our social media, we have a lot of presence and a lot of eyeballs pointing in our direction. All these things help ensure a better result. Though self-publishing is a competitor, we have many examples of people who have self-published successfully before and have come to us afterwards not wanting to do that again. We feel very comfortable in our place in the market and look forward to the competition and challenges in front of us.
Last question at the bottom.
There's a Quarantine Zone on here too.
Okay.
We're just reading a long question.
Yeah.
Yeah. Okay. Basically, you're talking about we have Quarantine Zone, Cult of the Lamb, BALL x PIT, et cetera. It delivered about $30 million revenue this year, and we haven't had a published Steam sale yet. Why are brokers talking about revenues growing only slightly? Feels like $150 million revenue year. Well, Jack, we can't necessarily disagree with you, but we've learned our lesson, and we definitely are conservative in our projections because so far we've had a great year, but things can happen that are out of our control. We've been taught to forecast conservatively, and we will continue to do so. We hope that in the cases as you have explained, that we're wrong in our conservative forecast. We'd rather surprise with upside than the other way around.
Here. No, that moves the slides. It's two fingers on there. Two fingers.
Okay, the other way.
That's it.
Okay. I don't know who does this. Okay. What does success look like in a few years? Do you have margin or revenue targets? It doesn't feel like there's been a normal year since Devolver listed. That's a good point. When we listed, we were flying quite high, and we came tumbling down in 2022. We've steadily been improving, increasing that. I think we're a much better company than we were when we listed, and we think we'll have strong growth cadence moving forward. As we said earlier in the presentation, our CAGR over the last several years has been around 15%. We plan on keeping that rhythm and improving upon it, and we think the strategy we've had of curation, greenlight, control of cost will help ensure that we continue that growth. Dan, you want to add to that?
Sure. We are expecting double-digit revenue growth and EBITDA growth this year in 2026. The market consensus bears that out. We would like our gross margins to come back to 40%. We're currently in the mid-30%, so we think that we can establish a level over 40%. Similarly, EBITDA margins, we'd like to move into the mid-teens. That's our next 12-18-month target, is to reach those kinds of levels.
Thank you.
Did we talk about platform deals?
I think we did.
I think that's it.
I think, Dan, if I may just jump in there as well, Harry, I think you've taken a lot of the questions. I think those that are remaining probably are overlaps with those that you've probably already previously addressed. If I may just jump in and thank everybody for their engagement this afternoon and for all your questions, and if any further questions come in, guys, I'll make those available to you post today's meeting. Harry, I know investor feedback will be important to you. I will shortly redirect those on the call to give you their thoughts and expectations. If I may, Harry, just come back to you and ask you for a couple of closing comments, and then I'll redirect investors for their feedback.
Sure. Well, we really appreciate this opportunity. I think the reason why we're here now speaking to retail is because we feel confident in our growth going forward. We think it's really time to tell our story, and we also believe that this is one of the roads or inlets to better liquidity. We really hope that we've spoken to you in a way that gives you confidence, and we hope to see you on our cap table.
That's great.
Thank you.
That's great, Harry, and to the rest of the team, thank you very much indeed for updating investors. If I could please ask investors not to close this session, as we'll now automatically redirect you to the opportunity to provide your feedback in order that the company can really better understand your views and expectations. On behalf of the management team at Devolver Digital, we'd like to thank you for attending today's presentation. Thank you for your patience, and enjoy the rest of your day.