Hello and welcome to the PulluP Entertainment First Half Earnings 2025-2026 call. For the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing the blue icon to request to speak or by typing in the chat box. I will now hand the conference over to your host, Geoffroy Sardin, CEO, and Aurélien Briand, CFO. Please go ahead.
Hello everyone. I will first start with a review of the recent comments from Newzoo on the state of the video game market. Newzoo revised sharply up their expectations for both 2025 and the coming years. They now expect a growth of 7.5% for the overall market versus 3.4% previously and a CAGR rate of 4.9% up to 2028 versus 3.0% previously. While part of this is related to dynamism in Asia, South America, and MENA, it globally reflects a much more dynamic market than expected on the PC segment, while consoles are expected to pick up in the coming years after a few slow years. Newzoo now expects PC to grow 10.4% in 2025, a significant eiight percentage point upward revision. Likewise, they doubled their 2025 to 2028 CAGR estimates to a sizable 6.6% rate to reflect the tailwinds that PC gaming is currently experiencing globally.
The underlying trends are particularly positive for new releases of premium games, notably for the mid-priced games whose collective performance has been strong since the beginning of the year. Why is it happening? First, there is currently a remarkable level of quality and innovation in the AA and indie segment. Second, these games are not trying to please everyone but are targeting specific audiences with uncompromising gameplays, and third, as I just mentioned earlier, mid-price games are appealing to price-sensitive gamers. This momentum is reflected on the charts below from Video Game Insights. Since late 2023, we have observed a profound transformation in the market, particularly on Steam. The AA indie segment is undergoing structural acceleration. Historically, AA indie titles generated between $0.8 and $1.0 billion per quarter on Steam. Now they consistently reach $1.5 billion-$2.0 billion per quarter, nearly a twofold increase.
PulluP Entertainment is well positioned to benefit from these trends. Our focus is indeed on medium-priced AA and indie games with a bias towards PC. We also have a track record of consistently releasing high-quality games with uncompromising gameplays. This is what players want. Most importantly, we create experiences for highly engaged and passionate audiences. We like this quote from Doug Shapiro, a media industry expert: "While the industry at one point will get closer to maximizing the reach of potential new audiences, player engagement is unbounded and represents immense potential." We see that every day with our fans, whether they enjoy being a space marine, a train manager, a truck driver, or fighting fantasy enemies with their fists and swords, their level of passion and commitment to the games and brands they love is uplifting.
As I just said, our goal has always been to deliver amazing value to our players. With this guiding principle in mind, we have a proven track record of consistently releasing high-quality games. We take this track record seriously, as it is a cornerstone of our publishing label's reputation with gamers and of our capacity to differentiate in a competitive market. Before I let Aurélien review our H1 performance, I would like to quickly remind you of our three-pillar strategy. We leverage the strength, stability, and strong execution of our publishing business to invest into our model transformation towards IP ownership, internal development, and increased recurrence, notably through live. With Train Sim World and Absolum, you are seeing the first signs of our progress in creating internally high-quality and successful games. Next is Memories in Orbit to demonstrate we are on the right path. This will lead, in the medium term, to enhanced profitability and cash flow generation. I now hand over the call to Aurélien.
Thank you, Geoffroy, and hello, everybody. We already covered the revenue part during our Q2 communication. As a reminder, we generated EUR 133 million, which was the second-best first half in PulluP's history. Obviously, numbers were down versus last year, which benefited from the exceptional release of Space Marine 2. Our first half was driven by solid new releases performance, with RoadCraft and Abyssus leading the way. We also delivered a record back catalog supported by our live games. We generated an adjusted EBIT of EUR 14.2 million in line with our expectation, while net debt ended at EUR 85 million. I will now review this in more detail. First, our P&L for the first half of the year. Our gross margin was down 48% versus last year, which had seen the record launch of Space Marine 2.
In percentage, our gross margin stands at 6%, in line with historical trends and with our expectations for the full year. Below this line, we had a decrease in our marketing cost. Indeed, despite several releases over the first semester, variable marketing costs remained below investment in the SM2 campaign last year. As expected, G&E has stabilized and is now at the right size to deliver our ambitions after investing in the organization over the past two years. Adjusted EBIT reached EUR 14.2 million and is in line with our expectation. Below adjusted EBIT, we had our 10-year goodwill amortization policy impact of EUR 6 million, financial expenses for EUR 4 million, and income taxes for EUR 2.5 million, leading to a group share net income of EUR 2.1 million. Let's now move to the cash flow statement. First, CapEx amounted to EUR 36.3 million.
That reflects strict control of our investment and some timing effects, which will reverse in the second part of the year. For the full fiscal year, we expect video game CapEx to be below the midpoint of our EUR 70-EUR 100 million range. Changing working capital reflects impacts from Space Marine 2 Season Pass deferred revenue and deferred cost recognition over the first half, and to a lesser extent, UK tax credit, which will be collected in Q4. Excluding this working cap effect, operating cash flow was breakeven. Financing flows included notably financial interest and fees related to the renegotiation of our senior debt. Overall, cash decreased from EUR 62 million as of March 2025 to EUR 45 million at the end of the first half. Finally, our balance sheet.
Working capital is almost stable as it includes the EUR 7.9 million dividend to be paid, which does not appear in the cash flow statement. This compounds set the working capital change I detailed in the prior slide. As a reminder, this dividend was paid on October 6. Tangible and intangible assets are up by EUR 12 million, reflecting the EUR 36 million CapEx and EUR 25 million D&A we saw earlier. Gross debt is almost stable at EUR 143 million, but with maturity extended by four years to 2032 and with increased flexibility. Net debt increased from EUR 70 million to EUR 85 million, mainly due to the working cap changes and the financing flows I detailed earlier. At the end of March 2026, net debt will notably reflect the EUR 7.9 million dividend payment, as well as the impact from our late fiscal Q4 releases, whose cash will be collected in Q1 FY 2027.
Today, we are happy to share as well that we have increased recently our share in Carpool Studio from 35% to 58.9%, demonstrating our commitment to internalize talented development team. Carpool will be fully consolidated in our books starting in H2. As a reminder, Carpool is developing an ambitious live game based on a new IP. Finally, we have confirmed our fiscal 2026 targets, namely top line and adjusted EBIT above FY 2023 level, which was our prior record year performance. I now hand over the call back to Geoffroy.
Thank you, Aurélien. This year's performance is supported by a rich lineup of new releases, notably from Dotemu and by a strong back catalog. The Train Sim World franchise continues to deliver a solid performance. The teams at Dovetail are experts in creating live experiences, and they are sharing that expertise internally with our other studios to build live skills across the group. Absolum is confirming a successful release with great momentum coming into the last weeks of the year. The game's vision comes from a small development team inside Dotemu, who was also in charge of creating its gameplay, which is the core of the experience, as you know. Praised by critics and loved by gamers, Absolum is nominated in the Game Awards category for Best Independent Game. MARVEL Cosmic Invasion was released on December 1.
It benefits from robust Metacritic reviews at 81% and 85% positive player reviews on Steam. Its solid early performance means it has already well covered its development and marketing costs. We supported its release with a comprehensive marketing plan and a strong support from the first-party platforms. On the back catalog front, we continue to grow the value of our existing portfolio of games, both through our live operations to drive engagement and through effective and well-targeted sales promotion. We notably had a successful Thanksgiving week, in particular for Space Marine 2, which was regularly ranked among Steam's top 10 best premium sellers. The game generated more than 20% of its revenue from digital extra content.
Looking at Q4, we have an intense slate of upcoming titles with, by alphabetic order, Battlestar Galactica: Scattered Hopes, Memories in Orbit, Starship Troopers, Ultimate Bug War , and Toxic Commando, whose releases will be staggered between January and end of March. This concludes our presentation. We are now ready to answer your questions.
Thank you. As a reminder, if you wish to ask a question, please press the blue hand icon to request to speak or send a question in the chat. We have a couple of written questions, so I give the floor to speakers. Thank you.
So first question is, what will be the expected gross margin in to... Sorry, the line is moving. What will be the expected gross margin into the following years? Should we say that it should stay at 30%, or is there an upside for higher in-house content?
So we will see in the midterm and in the future an improvement in the gross margin. Indeed, it will be linked, as said, by the fact that we will deliver in-house development. But for the next year, for example, we will still have a significant portion of publishing business. Dotemu will support the growth year after year. So we can say that we will see that not meaningfully next year, but it will progress as we will deliver those projects developed internally.
Okay. According to your guidance, Adjusted EBIT should be higher in H2 versus H1. Is it linked to better gross margin on Dotemu games, or is there another element at play here?
The main element to be noted for H2 is that we have a very strong lineup in H2 with, as we said, several games already released and still to come in Q4 fiscal 2026, so the main driver will be our intense release slate in Q3 and Q4.
Okay. Could you give us an idea of the CapEx budget and why it should be superior to EUR 36 million in H2?
The CapEx in H1 reflects the fact that we have been very strict in milestone validation. So we are very strict with our studio in order to deliver high-quality games and high-quality milestones. There is some timing effect, so you will see that in H2. So some cutoff effect in H1 will be reversed in H2.
Okay. Next question online. Could you comment on the launch of MARVEL Cosmic Invasion? Is it performing according to your expectation?
Yes, its release was solid, and the game is already covering its marketing and production costs. As you know, we have very important weeks in front of us. So in terms of numbers, we will provide more color in January. What I could tell you regarding the extra characters and long-term monetization, you know that, and maybe not, there is a lot of characters within the Marvel Universe, more than 200. So you could expect to get more characters in extra content later on.
I think we have a question in the line for all questions, so.
Indeed. Our next question comes from the line of Corentin Marty at Midcap. Your line is open. Please go ahead.
Hello, guys. Can you hear me?
Yea.
Thanks for the presentation. Just a quick question on my side. Going back to the CapEx, you mentioned a guidance for the end of the year. Can you repeat it? Because I'm not sure I understood it.
Yeah. We say that we expect to be below the midpoint of our guidance of EUR 70-EUR 100 million for video game CapEx. So midpoint is EUR 85. We expect to be slightly below that.
Okay. Okay. Thank you very much.
Okay. Coming back to the online question. Currently, CapEx is still higher than depreciation and amortization. How will this look like in the next 12 months-24 months?
Yes, indeed. We have a D&A of EUR 25 million for the first half and a CapEx of 36. So indeed, there is a bit more than EUR 10 million gap. We still see that we'll continue to be in that position for the rest of the year and for next year. As we said, we are investing in our internal studio and in-house IP development, and those CapEx will deliver beyond FY 2027. So that's why, indeed, CapEx will be above the D&A for the next 18 months.
So, next question. Should we understand from your working capital requirement need in full year that Toxic Commando should be released at the end of the quarter? And if so, what about the risk of delay?
First of all, you have to be aware, and you have to be a little bit patient to get the color of the release date. It will be announced soon. That's...
Regarding the working cap, as we said, depending on the release date of our title in Q4, we may have payment from the platform coming in April FY 2027.
On top of that, yeah, I need to mention that in Q4, we will get an intense release date plan with upcoming titles like Memories in Orbit, which will be released the 20th of January. We recently announced two more titles from the Dotemu portfolio with Battlestar Galactica Starship Troopers. then you will get very soon the release dates of Toxic Commando.
So just to repeat the question, the question was precisely, is there a risk of delay of the game outside of the fourth quarter for Toxic Commando?
There is. You will get soon the release date on the quarter confirmed.
What do you see in terms of wish list for Memories in Orbit?
Memories in Orbit is doing quite well, and we just announced with a very high-quality asset the release dates last week. Right now, the wish list is going up, and we can't wait, in fact, to deliver more asset before the release date. There is a very high engagement level to the trailer that was released last week with a very high percentage. That means that the gamers are quite hooked on the game itself, and just to add something, we announced two more games during this slot of the PC Gaming Show, Battlestar Galactica Starship Troopers, and it is too early to provide an indication as we are building the promotional campaign for this for early 2026.
What is the CapEx? So for Carpool, what is the CapEx dedicated for the full game? And when do you plan to release it?
What we could say, we are still on the range of AA. And as we say regularly that for us, AA, it's a range of CapEx between EUR 5-EUR 20 million. And it's not announced yet, so it will be in the next coming fiscal years.
Okay. We saw that the cash position decreased by EUR 16 million this semester. How do you expect the cash position to evolve for the next semester? And if you expect another decrease, how do you plan on facing a small cash position at the end of next year?
So, indeed, the cash position decreased by EUR 16 million, EUR 17 million over the first, sorry, the first semester. This is mainly linked to changing working capital effect and financing costs. Something that need to mention, and we said it during our explanation, is that the dividend has been paid on 6th of October. So we will see that as well impacting net debt and cash for the second semester. And as well, we may have some timing effect on working capital by year-end, depending on the release slate and the date of release of our games.
Okay. Sorry, long question. So you expect CapEx to be below the lower end of the EUR 70-EUR 100 million range spot while you initially closer to the upper end, if I'm right? Why will you be spending less than expected? Should we expect a catch-up next year?
So as I explained, we plan to be below the midpoint, so below EUR 85 million for the year. And you're right. We said in the past that we could be in the EUR 80-EUR 100 million range. We are still in that range. The catch-up, we don't see significant catch-up for next year. So we continue to say that for video game, our CapEx will be between EUR 70 million and EUR 100 million for the year, for the current year and the years to come.
Okay. Another question. So consensus forecast is for adjusted EBIT of around EUR 34 million. Adjusted EBIT of EUR 34 million for the current fiscal year. Does that seem achievable to you given H1 performance?
What we deliver in H1, namely the EUR 14 million EBIT, as we said, we're on the right track to be on par with our expectation for the full year. H2 will be quite dense in terms of lineup. You can see an H2 that will be above H1. We are still in line with our guidance, being above what we deliver in FY 2023 in terms of adjusted EBIT and revenue.
Question on buybacks. Do you plan further buybacks?
We still have the opportunity to do so. We have the authorization. So we will remain opportunistic on that front.
Okay. What can you share around expectation for Toxic Commando?
With Toxic Commando, we believe that we've got another potential hit. The recipe of this game is a mix of what was the benefits of SnowRunner plus what was the benefits of World War Z. So it's a résumé and definition of the core experience. And we have strong assumptions for the game, and we believe it will reach our expectations in its release window. Again, you will get soon the release dates. We strongly believe that Saber will again deliver an amazing experience, and we can't wait to show more to gamers. So be patient.
Okay. Do you have any information about the development of the film business?
As we said regularly, we've got strong interest from a big platform on co-own IP, A Plague Tale. We still continue to work on this project. And for the other project, nothing could be revealed today.
Okay. I need to translate that from French to English. Sorry. Can you tell us what are the different revenues related to Space Marine 2 Season Pass in your balance sheet?
Yeah, so as we explained many times, when we are selling the Season Pass, there is a portion of the content that is still not delivered to the players, so it generates different revenue at the balance sheet, as mentioned. We continue to do so. There is a year two for Space Marine 2, which has been a success, but obviously, we are not at the same level as last year, so if we compare to last year, the amount deferred at the balance sheet is far below what we saw last year at the same price.
Okay. What's your average cost of debt after your refinancing?
What we can say is that what you see as financial expense for H1 is a good proxy of a full year for financial income. So all in all, what we achieve with renegotiation is extended maturity, more flexibility. It comes with some incremental cost. It comes from some incremental cost. But all in all, the EUR 4 million that you see for the first six months is very close to a run rate for the financing extent.
Okay. Question regarding CapEx associated with Toxic Commando. The game has been in development for quite some time.
We are on the same track as we said previously regarding the range. Focus is a publisher and supporting CapEx maximum at EUR 20 million. So Toxic is on this range.
Last question for the time being. Could you give estimates of sales figures for Absolum?
We won't give some sales today. What I could say right now, there is a very intense traction from the target audience on this game. The reviews are really great, especially on Steam. Its release was solid. And we've got very important weeks in front of us. Have in mind that the game is nominated as the best indie games for the upcoming Game Awards the 11th of December. What I could say, finally, we've got an ongoing own IP. And this is a big step for the company right now.
So it appears we have no further questions.
Thank you. This concludes today's conference. You can now disconnect.