Digital Bros H1 FY25 presentation: Profitability improves despite revenue decline

Introduction & Market Context

Digital Bros (BIT:DIB), a global video game developer and publisher listed on Euronext (EPA:ENX) STAR Milan, presented its H1 FY25 results highlighting improved profitability despite revenue challenges in what the company described as a "post-pandemic perfect storm" for the gaming industry. With 35+ years of experience and operations across 9 countries, Digital Bros is navigating industry headwinds through strategic repositioning and cost optimization.

The company acknowledged the broader gaming market challenges, including escalating development budgets and pricing pressures. According to data presented, the global gaming market is expected to recover from recent stagnation, growing from €184 billion in 2023 to a projected €212 billion by 2026.

As shown in the following chart of global gaming revenue trends and market adjustments:

Strategic Initiatives

Digital Bros has implemented a significant strategic shift, focusing on owned intellectual properties and specific gaming verticals where it can establish market leadership. The company has substantially downsized its workforce by approximately 35% (from 435 to 284 full-time employees) and reduced its game pipeline from 23 titles to 12, prioritizing quality over quantity.

The new strategy centers on four key verticals: Single-Player Adventure RPG (34% of revenue), Sim Racing (32%), Match-Three (17%), and Heist (4%). The company emphasized that these segments are "not so heavily contested by blockbuster titles" and feature "strong relationships with specific gaming communities" that are "more loyal and more engaged."

The company’s competitive positioning strategy is illustrated in this breakdown of key verticals:

Digital Bros has also increased its focus on owned intellectual properties, which now generate 59% of revenue. This shift aims to create long-term value and improve revenue predictability in a challenging market environment.

The portfolio evolution showing the increased focus on owned IPs is presented below:

Financial Performance

Digital Bros reported €43 million in revenue for H1 FY25 (ending December 31, 2024), representing an 8.7% decline compared to the same period last year. Despite lower revenue, the company achieved significant profitability improvements, with EBITDA increasing by 35.3% to €13.1 million.

The net loss was substantially reduced to €3.5 million, a 45.6% improvement from the €6.4 million loss reported in H1 FY24. This performance improvement was primarily driven by lower payroll costs (€9.6 million reduction) resulting from the company’s reorganization efforts.

The company’s revenue mix for H1 FY25 consisted of Premium Games (80%), Free to Play (17%), and Distribution (3%), showing the continued dominance of the premium segment despite industry-wide shifts toward free-to-play models.

The financial performance overview is illustrated in the following chart:

Assetto Corsa Success Story

Digital Bros highlighted the Assetto Corsa franchise as a key success story and growth driver. The racing simulation franchise, developed by wholly-owned studio Kunos Simulazioni (acquired in 2017 for €4.3 million), generated €28 million in revenue during FY24 and €13.1 million in H1 FY25.

The franchise has shown consistent growth since acquisition, with revenue increasing from €7 million in FY18 to €28.6 million in FY24. The latest installment, Assetto Corsa EVO, launched in Early Access on Steam on January 16, 2025, reaching #1 on Steam’s best-selling chart at launch and achieving over 25,000 concurrent users.

The impressive growth trajectory of the Assetto Corsa franchise is shown below:

The latest release, Assetto Corsa EVO, features a new proprietary engine and will include an open world feature covering 1,600 km² around Germany’s Nürburgring circuit. The full 1.0 version is scheduled for Fall 2025 and will include 15 tracks and over 100 cars.

As shown in the following product overview:

Pipeline & Outlook

Digital Bros confirmed its guidance for FY25, expecting lower full-year revenue compared to FY24 but projecting EBIT to remain in line with the previous year due to reorganization benefits. The company anticipates H2 FY25 revenue to increase compared to H1, with a substantial improvement in net financial debt expected.

Key upcoming releases include Blades of Fire (May 22, 2025), a single-player weapon RPG developed by Spanish studio MercurySteam; Wuchang: Fallen Feathers (Q1 FY26), a Soulslike action RPG set in China during the late Ming Dynasty; and the full 1.0 version of Assetto Corsa EVO (Fall 2025).

The company’s business outlook and upcoming releases are summarized below:

Wuchang: Fallen Feathers, described by industry press as "the next Black Myth: Wukong," is currently ranked #18 in Steam’s most followed upcoming games with over 95,000 followers. The game will be available on Xbox Series X|S, Windows PC, PlayStation 5, and through Xbox Game Pass.

The following image showcases Wuchang: Fallen Feathers:

Conclusion

Digital Bros is executing a strategic pivot to navigate challenging market conditions, focusing on owned IPs and specific gaming verticals where it can establish leadership. While revenue declined in H1 FY25, the company demonstrated improved profitability through cost optimization and reorganization efforts.

The success of the Assetto Corsa franchise and a focused pipeline of upcoming releases provide potential growth drivers, though management remains cautious about short-term revenue expectations. The company’s key strategic priorities are summarized as follows:

With shares trading at €16.86 as of July 8, 2025, Digital Bros continues to implement its transformation strategy in a gaming market that is expected to return to growth in the coming years.

Full presentation:

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