Entertainment Q4 2025-2026 Revenue Conference Call. For the first part of the conference call, the participant will be in listen-only mode. During the question and answer session, participants are able to ask questions by raising their hand or through the chat. Now, I will hand the conference over to Geoffroy Sardin, CEO, and Aurélien Briand, CFO. Please go ahead.
Hello, everyone. There are two dimensions to our performance this quarter. On one hand, back catalog again displayed robust trends above our expectations. Full-year back catalog revenue was up 53% year-on-year and almost three times higher than three years ago. Regarding new releases, our teams continue to demonstrate solid execution in delivering high-quality games, notably with Toxic Commando, which had a solid start. We therefore delivered in fiscal year 2026, by far, the strongest revenue ever for a year with no Space Marine release. On the other hand, as we said during our Q3 conference call, we had high expectations for Toxic Commando. They proved to be too elevated in a very competitive environment during the month of March. Additionally, Memories in Orbit and Starship Troopers disappointed despite positive ratings from players. As a consequence, Q4 ended up short of our internal targets.
We do not take this lightly, and we have conducted a full review of our sales projections, plannings, and portfolio for the coming years. With an even more selective approach in favor of games with the strongest differentiation appeal, our aim is to prioritize prudence and visibility in order to ensure that each of our investments contributes to healthy and profitable growth as well as solid cash flow generation. As a consequence, we are now expecting adjusted EBITs of between EUR 10 million and EUR 15 million for fiscal 2025/26. Aurélien will provide more granularity on these figures. Our strategy remains unchanged, and our model continues to demonstrate its relevance. The decisions we are making today are designed to build on our strengths and concentrate our resources where we create the most value. Our strength lies in the deep experience and skills of our teams.
We are positioned on one of the most dynamic segments of the market, AA and indie titles, notably for PC. Our games target highly engaged and passionate audiences and are recognized for their quality and the strength of their uncompromising gameplays. We have released 12 titles this year with an average player positive rating of 84% on Steam, and most of them are or will be profitable. Five of our new games have been ranked in Steam top 10 premium games by revenue at the time of their release. These five games are Absolum, MARVEL Cosmic Invasion, NINJA GAIDEN: Ragebound, Roadcraft, and John Carpenter's Toxic Commando. Roadcraft recently crossed the 1 million units sold, while MARVEL Cosmic Invasion is demonstrating nice legs and will definitively be a solid long-term seller.
Warhammer 40,000: Space Marine 2 has now reached over 12 million unique players and is delivering on its live service promise with a meaningful share of its revenue coming from extra content. With Absolum and Train Sim World 6, we continue building our capacity to successfully develop internally our own IPs. Dotemu announced recently that Absolum sold over 500,000 units. For the upcoming years, alongside our robust back catalog, we will release sizable new games. This includes Road Kings, Resonance: A Plague Tale Legacy, unannounced titles from Focus Entertainment, next iterations to Train Sim World, the Carpool Studio live game, and of course, Warhammer 40,000: Space Marine 3. Dotemu, which was ranked among Metacritic top 10 publishers for the year 2025, will continue to launch many new high-quality titles.
As a conclusion to my part, I want to remind you, we rely on a robust strategy and competitive positioning, on a solid balance sheet, and on the recurrence of our back catalog. Today, we are applying an even stricter cost and investment discipline, favoring visibility and cash flow generation.
These decisions will reinforce our long-term development. I now hand over the call to Aurélien.
Thank you, Geoffroy, and hello, everybody. Q4 was up 53% of last year. The quarter was mostly driven by a very strong back catalog of EUR 52 million, up 87% and above our expectations. It reflects our back catalog's inherent strengths as well as meaningful partnership that we flagged during our Q3 conference call with you. For the full year, back catalog ended up at EUR 189 million, up 53% year-on-year, and was almost three times higher than in fiscal year 2023. This demonstrates how far the group has progressed in developing recurrence within its model. Q4 new releases revenue of EUR 27 million were below our internal expectations. As mentioned during our Q3 call, Q4 was an important contributor to our full year guidance, and we had high expectations for Toxic Commando.
The demo our team set up did a great job at creating visibility and building player anticipation right before the game's release. Despite Toxic Commando's solid performance and the fact that it will be a profitable investment, our expectations ended up being too high, notably in the context of the month of March that was extremely competitive. At the same time, Memories in Orbit and Starship Troopers, which received strong player ratings, disappointed. Thomas & Friends, from our studio Dovetail Games, performed well in line with our expectations. As a consequence to this lower-than-expected new releases revenue in Q4 that mostly materialized during the last weeks of March, we now expect adjusted EBIT for fiscal 2025/26 to end up between EUR 10 million and EUR 15 million. This is to be compared with our prior expectation for adjusted EBIT higher than what we had achieved in fiscal year 2023.
This update also reflects accelerated depreciation for some release titles as well as for upcoming projects we decided to cancel. To a lower extent, it was also impacted by the postponement of Battlestar Galactica: Scattered Hopes to fiscal year 2027. On the balance sheet side, net debt is expected between EUR 85 million and EUR 90 million at the end of March, with cash at around EUR 50 million. As Geoffroy mentioned, we conducted a full review of our sales projections, planning, and upcoming portfolio for the coming years. Following this review, some games in development were canceled, as I just mentioned, and we have stress-tested our revenue assumptions to ensure greater prudence and visibility. Considering this, we are suspending our prior targets for fiscal 2027. More details on next fiscal year will be provided during our earnings communication in June.
Finally, we have also decided to be even more selective on the new projects we sign. We now expect video game CapEx for fiscal 2026 and the following years to be between EUR 70 million and EUR 80 million versus our prior larger range of EUR 70 million-EUR 100 million, demonstrating even more selectivity. We are now ready to answer your questions.
If you wish to ask a question, please raise your hand via the green button or submit a question through the chat.
We have a first written question. Can you detail the split why the adjusted EBIT is revised downward between, first, the March launches below expectations and, second, the projects that were canceled after the portfolio review?
More than half of the miss is due to March launches. If we include the accelerated depreciation that are implied by those misses, and the rest is indeed impact of the project that we decided to cancel after the portfolio review.
Okay, second question. Were the March games fully depreciated or only partially?
Generally speaking, the games are depreciated in light of the magnitude of the miss, and as Geoffroy said, and as we said during our presentation, is that for Starship Troopers, we have been very disappointed, so the depreciation will be very close to the entire value of the game. For Toxic Commando, for example, it will be much less, but still not zero.
Third question, is MARVEL Cosmic Invasion a long seller as much as you hoped? What was the impact of the physical version?
Yes. As I said in my speech, MARVEL Cosmic Invasion is demonstrating nice legs and will definitively be a solid long-term seller. Regarding the retail SKU, its contribution is marginal right now.
For the current year, will you wait for the confirmation of the release date of GTA 6 to plan your launches for H2?
Of course, we will be agile on that matter to adapt our release schedule depending on GTA 6 confirmation release date, which is, as of today, planned for next November.
Okay. With the updated projection, when do you think you could achieve positive free cash flow?
On the free cash flow, which is clearly an objective for the company, as we said, we are still assessing in detail and working on the sales projection. We will give you more granularity during our June earnings calls. However, as we said, we've reduced our CapEx range from EUR 70 million to EUR 80 million as a multi-year guidance, and it goes in the direction of securing a positive free cash flow.
What are your expectation for back catalog for fiscal year 2027 after this year's strong growth and taking into account the disappointing Q4 releases?
First of all, on that front, as Geoffroy said, we have a lot of success this year, so it contributes to build a strong back catalog for the next years. In addition to that, what was to be mentioned is that Space Marine 2 will remain a strong pillar of the back catalog, however, declining versus this year. In addition to that, we can sell Space Marine 2 on the back catalog that we are very happy with the progressive conversion to more live revenue. However, as I just said, Space Marine 2 next year back catalog will be lower than this year.
Regarding the games that came in below your expectations, notably Memories in Orbit and Toxic Commando, would you say the underperformance was mainly driven by visibility, by release timing, or does it point again to intensifying competition in the AA segment?
First of all, there are different layers in terms of disappointing numbers. Toxic Commando was solid but below ambitious expectations. Memories in Orbit is disappointing despite very good player ratings, and it was even worse on Starship Troopers. What we could say in terms of visibility, they had strong visibility before launch with demo, and we already noticed that during our last quarter conference call that Memories in Orbit, Starship Troopers and Toxic Commando benefited from very high expectations and high numbers on the demo we released. It wasn't the visibility. The main point was the very intense competition during the release date of those three titles.
Okay, coming back. Adjusted EBIT guidance revised to EUR 10 million-EUR 15 million. Which titles are concerned by impairments and accelerated depreciation?
The titles that are impacted are, first of all, the one that we mentioned for which we have been disappointed and the one that miss our internal targets, so mainly Starship Troopers, MIO, and Toxic Commando. In addition to that, we have depreciated a game named Metro Rivals in Dotemu.
On Space Marine 2, would you say engagement and monetization metrics are still holding up well? It's coming back to Space Marine 2 and live. Would you say engagement and monetization metrics are still holding up well, or are you starting to see any signs of fatigue?
On Space Marine 2, if you have a look today on the Steam ranking, it's still on the top 10 games by revenue on Steam. It demonstrate that it's got very long legs. Regarding the activity, the CCU per day is between 10K-25K. It is very active right now because we delivered recently a batch of new content. Regarding the contribution of this new content, what we call live content, right now, we could say that more than 30% of the revenue is coming from the live content. We are talking about a real and 100% live game.
Should we take the EUR 70 million-EUR 80 million range as a long-term guidance for the CapEx?
Yes. We aim to stay in that window for video games for the coming years, yes.
Okay. We have a question on deleveraging. What comment can you make on deleveraging?
Coming back on what we said, first priority is to generate free cash flow, and what we just said about CapEx is going in the same direction, which is to generate cash, out of which a meaningful amount will be for deleveraging. Not only we remain quite attentive and very attentive to new opportunities in terms of new game opportunity, but yes, deleveraging is part of the cash allocation that we'll make in the near future.
There are no more questions at this time, so I hand the conference back to the speaker for any closing comments.
Thank you very much, and have a good night.
Thank you very much. Bye-bye.