tinyBuild, Inc. (TBLD) Earnings Call Transcript

Good afternoon, and welcome to the tinyBuild H1 2026 Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to the management team of tinyBuild, Alex, Jaz. Good afternoon to you both.

Thank you. Good afternoon. Thanks, everyone, for joining. And I'm actually broadcasting from a very special place right now. This living room right behind me is where we started 15 years ago. We had 7 people crammed into a tiny space before we got our very first office. So happy to be here and it's been 15 years now, which is kind of crazy. So today, we have our traditional presentation structure. I just go over the disclaimer where -- hi, I'm Alex Nichiporchik. I'm Founder and CEO of tinyBuild, been in the business for 20-odd years now, everything from marketing to professional gaming to game journalism. And today, I get the honor of working on video games. And I'm joined by Jaz, would you like to make your intro?

Hi, guys. Jaz, CFO. I've joined tinyBuild just before the IPO in 2021. Before that, over 20 years in finance and been CFO for the past 3.5 years.

And what 3.5 years it has been. So today, I think -- so here is going to be our presentation structure. I'll do a brief operational intro, and then we'll dive into the finances with Jaz, and then we'll talk a few case studies and strategy. And I'm sure you will have a lot of questions about tinyBuild. So please feel free to submit those. Now the way to look at the first half year of this year is we're seeing the fruits of our strategy. Remember that games take a while to develop, while we are shortening the development time spans, it's still 2, 3, 4, 5 years for some of the titles. And with the recent launches, you are seeing that we have had very strong publishing performance. We have proven that we know how to select games, how to get involved in development because we are a developer at heart with a very strong publishing vision. Between launches like SAND, Graveyard Keeper 2, ReStory, Hozy and several more this year, we are demonstrating a track record that we know what we're doing. And by we, I mean the team. We have best-in-class people working and making decisions really fast. Creating campaigns that are really unique. And this directly feeds into our results. That said, there is still a lot of work being done on the back catalog. So the back catalog is everything that we have launched in the previous calendar year between games like The King is Watching, game DLC, and new platforms and continued work on our Hello Neighbor franchise, we are in quite a good place. Now we continue to invest. We do that in a very cost-cautious way. We are investing into a lot of new IP alongside our back catalog. And currently, we have 3 games in the Steam Top100 Wishlist, which we'll talk about at the end of the presentation. Speaking of the highlights, I think the main highlight for me is our direct-to-consumer game revenue, so our sales, how much money do we make by actually selling our games. And that is USD 20 million for the first half of the year, which is 18% up for -- compared to the previous half year. All of the other numbers, Jaz will talk more in depth with you, but I am quite happy that we are maintaining a very healthy balance of own-IP revenues, back catalog as well as our cash position. We are a multi-franchise company. This is something that I will probably be talking a lot more and more loudly because this year, we have clearly shown that it's not just about the one game. A lot of shareholders, analysts, et cetera, like to fixate on just the one game in the portfolio that looks really shiny. And half a year ago, when we did our full year results, I did mention that, hey, everyone should be looking at games like Cozy like ReStory. And yet everyone was focused on games like Kingmakers. And I'm sure there will be a lot of questions about Kingmakers in terms of when is it coming out, et cetera. We will not be talking about that here. What I said last time is that we're not going to reveal information that would skew our marketing. And for Kingmakers, there recently was a full 12-minute showcase demonstrating where the game is right now. If you want more information on Kingmakers, please go ahead and watch that. But getting back to multi-franchise. We have very diversified revenues, and most of our revenues come from our own intellectual property. As a reminder, the more I work with franchises and the more we're engaging with linear media, with cross media, the more important it is to have your own intellectual properties that you can control and steer into expansion. As a reminder, we are now seeing that some franchises will have their best year on its third or fourth decade. Case in point, the recently released Resident Evil has set records for that franchise. And just recently, a movie came out, which I'm yet to see, please don't spoil it in the comments here. Now our back catalog has actually grown compared to last half year. Specifically, this is due to a few launches that have happened in the last calendar year. And at the same time, with all of the new releases that we have, we are seeing quite significant revenue growth, as I mentioned, 18%. Right now, we're sitting at about 68% of back catalog revenues. And it doesn't mean that there is no work being done on the back catalog. There is a lot being done, but this gives you an idea of our new IP versus existing IP and how that gets split up. And I do believe it's quite a healthy split right now. And with that, let's dive into the finances with Jaz.

To just look at the financials, financials across H1 for net revenues on the left-hand side, up 18%, and this is all organic. As you can see from the chart, it's the third 6 months period in a row that we see positive growth after 3 years of decline. That reflects a slightly improved industry outlook, but mostly an organic drive, both combination of both back catalog doing well and new launches. In terms of adjusted EBITDA in the middle chart, $3.2 million positive in the first half of 2026, up from the first -- from the second half last year and slightly down from the first half last year, which benefited from an incredible flow-through of first-party title Deadside, which launched on console. And thirdly, on the right-hand side, software development at $6.4 million. That's broadly flat, has been broadly around the same level for the past 3, 6 months periods after a decline since 2022 peak. Delving into adjusted EBITDA and operating profit, starting from $20 million revenues, we subtract $6.8 million in cost of sales that includes royalties paid to development studios. So this is where you will see the difference between first, second and third-party studio flow through. $3.4 million of amortization of dev expenses. As a reminder, this is included in our adjusted EBITDA measure and then $6.6 million of SG&A where you see as one of the most important items, marketing and expensed development costs. From there, from $3.2 million adjusted EBITDA down to $1.1 million operating profit after depreciation and amortization and share-based compensation of $0.8 million. Looking at the P&L compared to H1 2025, revenue up 18%. In this half, we've had a 0 contribution from development services. Cost of sales increased 84%, mostly due, as we said, to the revenue mix. We had more second-party titles versus first-party title Deadside last year. SG&A was also up 20%, primarily due to higher marketing. We launched 3 games in H1 2026 versus only 1 game in 2025 and a higher share of development costs, which were expensed in the half. This is development costs that occur after version 1.0 launch, which are expensed rather than capitalized. It means basically, we're still working on some of our catalog titles as we see further upside. Zero impairments and no exceptional costs in the half. In terms of development costs, $6.4 million, you can see a longer time series of development costs starting from 2020, the peak in 2022 and then the resizing down to the recent level. At this point, we are at around 1/3 of revenues being reinvested in software development. We feel comfortable with this level. It's a sustainable level, and it is something that we are looking at preserving going forward. So as we see revenue grow, we'll probably tilt that pocket or that bucket of investments slightly upwards while maintaining a very diversified approach. So on the right-hand side, you can see over 30 projects we are investing in, including both catalog and pipeline. And you can also see that no projects typically account for more than 10% of the total. We have also 4 projects of a slightly larger size with an annual spend of over $0.5 million. Moving on to the cash flow. In the -- in terms of operating cash flow, $6.4 million, it's slightly down compared to last year, primarily due to the revenue mix, so lower -- slightly smaller flow-through and as a result of minor impact from net working capital changes. Below that, in terms of investment activities, we already mentioned the $6.4 million and nothing to report or any size in financial financing activities. As a result, cash increased slightly from the end of 2025, $4.6 million to $4.7 million at the end of H1 '26. In terms of cash utilization, from the beginning, $4.6 million cash, cash profit of $6.9 million. Pretty much all of that was reinvested in software developments. We see a number of very interesting investment opportunities. We are working both on the portfolio we already have, but also especially keen on creating new IP at this point. And we've had some notable successes, including SAND, ReStory and so on. Closing the half, as I mentioned, at $4.7 million, that's a level we feel comfortable with. $4 million to $5 million going forward is a very comfortable level for where we stand right now. If revenues grow further as we expect, we'll start accumulating a little bit more cash, but we will also start spending a little bit more on software development. In terms of balance sheet, nothing major to report on receivables and payables, no impairment in H1 2026. The only thing I'd like to flag it's the 26% increase in deferred revenues up to $2.4 million. That includes some small platform deals already signed for which we already received the cash, but for which we haven't booked revenues yet. And as we said, cash up 2% to $4.7 million. And back over to you, Alex, for the strategic review.

Thank you so much, Jaz. So I thought that for this one, we will do just a few showcases, 3 specifically because we always get a lot of questions about recent launches. And let's talk about that. So Graveyard Keeper 2, it launched 2 days ago, and I believe we are about to announce a sales milestone. Yes, it's going to go out during this call. So this is an example of -- I see one of the questions here in the chat is what would happen if tinyBuild goes on out of pilot similar to how The King is Watching plays, where if the king is not watching, then the work doesn't get done. I like the cheeky question, and it's relevant to this slide because if I was to step back or we were to like stop innovating and just do the same thing that worked for us this year, then we wouldn't have situations like Graveyard Keeper. Because what happened here? Well, the original launched 8 years ago. It was a runaway success for the company. We launched a few DLCs over the years for it. And as we were preparing to announce the sequel, the question was, well, how do we reactivate as many people as possible? How do we make sure that a lot of eyeballs are on the original? And how do we make sure that people get really engaged in the sequel and start anticipating it? So the idea was something that hasn't been done before to my knowledge, is to give away the original for free with a 100% discount on Steam, which means that every single person who wishlisted it and the game was saying on quite a big number of wishlists would get notification that the game is free. That immediately spiked the concurrent users for the original Graveyard Keeper. Within the game, there was a really convenient link to wishlist the upcoming just announced sequel. So pretty much overnight, we've had 0.5 million wishlists for the upcoming sequel and a very expanded audience that has just tried the game or remembered that they liked it 8 years ago that was really engaged and waiting for the sequel. Then we did another thing that everyone recommended not to is to do preorders for the game. Now the reason we did preorders is because leading up to the launch, we knew that a lot of players were still very warm on the original, and we wanted to do a demo. We thought it was going to be critical for players to try the game before it launches. And that's also something that for such high-profile releases during a demo, you usually do that for a new IP or to participate in a festival. We did neither of those. We essentially gave players the first between 4 and 6 hours of the game, the beginning of it and said that the save file will be transferable to the full game. So this worked like a charm despite everyone saying that it was a crazy series of ideas for marketing in this game because on launch, we have hit 50,000 concurrent users. We have had the Steam take over, the big banner on top and a very significant amount of engagement on this launch, which is actually the biggest launch for us in terms of concurrent users, and it might end up being the biggest launch month in company's history. We're only 2 days in, so it's a little bit too early to tell. So none of this would be possible if we were just sitting on a formula that works because the stuff I just mentioned, everyone is already trying to copy it and it doesn't work because you can do such things once. And we do these kind of marketing campaigns and go-to-market strategies pretty much every year, we have a title that benefits from it. We always try. It doesn't always work, which is why we do a portfolio approach, which is, again, why shareholders should not be focused on like the one specific title because sometimes things go really well. Other times, they go a little bit less well. But so far, our track record shows that doing things that are out of the norm is the way to go. Now the second title I want to talk about today is SAND. I know that there were a lot of questions in the Q&A here already about it. But here's the thing about SAND. It was probably the most difficult project of my career. It took us 7 years to develop it. If it wasn't for -- well, first, the pandemic and then the war in Ukraine, it would have been shorter. But we knew that we want to launch multiplayer, highly competitive and innovative shooters. We all love this genre, and we want to be in it. And doing it with external studios so far has not worked for us. We've tried and tried many times with some tiles. And this one, when it launched on June 22 after a series of open betas, closed betas, a big trailer at the game awards sorry, not the game was the Summer Game Fest in June. We finally launched it on June 22. And I'm happy to report that this is the most commercially successful launch we've ever had in the company's history. Caveat that for the first month, Graveyard Keeper 2 might overtake it, but we are very happy with this launch. We are right now working on a path towards the 1.0 release because the game did launch into early access and working on things like server stability, cheating, et cetera, which all come with a successful launch. And acute observers will know that the game currently sits at a mixed rating. And to me, this is less of an issue because some of the highest profitable games on Steam still sit at mixed ratings including a game I play every day called PUBG. That is not an indicator of success. It means that a lot of people care and really voice their opinions. Another aspect here is that we will be doing a console launch. We have said it publicly, we are working on it. And as Jaz mentioned, last year, we launched Deadside on consoles, which was one of the biggest game launches for us, even though it's a secondary launch technically. So SAND has a lot of potential still to unlock here, which I hope answers all of the questions that I see here pouring about SAND. Now let's talk about another example, ReStory. ReStory is a game where you manage a cozy Japanese repair shop. You fixed retro devices, which is definitely on the screen here, it's not a PlayStation Portable, it's a PMP. And there is a device called the Patento BS, which is definitely not a reference to Nintendo DS. But essentially, it's a cozy simulator that is narrative-driven that we were able to figure out how to make almost infinitely replayable. If anyone has played it, they know that there is the marketplace where you have a chance of specific items spawning. And this is a wonderful production test case or a case study where we were able to find a really enjoyable core loop, wrap it into a package that while it feels niche, it's actually quite mass market because we have shipped over 0.5 million copies on this one so far. And everything was tied together in like a really neat package. Now this is the second game that we have shipped with this developer with Mandragora Games. And the first one was called I Am Legend, which we shipped just a few years ago. And within that game, there was -- sorry, I Am Future that I mixed up with the movie. Now in that game, there was a micro mechanic about disassembling and fixing devices. And we saw that players will spend a lot of time within that mechanic. And by doing that game with this developer, we were able to stumble upon that mechanic and then figure out how to scale this into what it ended up becoming. And through countless play tests and a very concentrated marketing campaign, the game was announced just last December and launched in August. We've had one of the most successful commercial launches for us and the fastest wishlist progression in company history. And these are just 3 examples. We have launched many more games this year and which I will be happy to talk about. Now speaking of the pipeline, the obvious one, Kingmakers is still sitting comfortably in the top 10. I encourage everyone to watch the 12-minute showcase that we have revealed. But I do want to mention a newly announced game here that is sitting at the top 120 number in Steam top wishlist. That is called Last Harbor. There is a question about what some of our internal studios are working on? Are they still working on those games? Well, one of our internal studios that has previously shipped Duckside, which is a Deadside spin-off, is working on Last Harbor, which is gaining a lot of traction. I should also say that Probably Stolen has recently shown very good engagement in its demo. So we are excited about that launch. But when you look at the portfolio as a whole, if the game is in our portfolio, you should be looking at it. I would not single out specific titles at this point. And I hope that we have proven that, that is the right call to look at everything as a portfolio. Now closing remarks, I will just reemphasize that when you look at tinyBuild as a company in the publishing space, we are not necessarily a publisher. We are a developer. We get very involved both creatively, technically on the go-to-market strategy with the game development process. In fact, I've been trying to remember examples when what we started working on with an external or internal development studio initially is what ended up shipping. So we always go through a series of iterations. And when something works, we go full speed ahead on it. We will throw more marketing dollars, we'll throw more production resources to make whatever works, work even better. And when something doesn't work, we use that as a data point to pivot and make very swift action to make sure that we are allocating resources in the right direction. So with that said, the Board remains confident that we're doing the right decisions and that we're headed in the right direction. And I am happy to jump into Q&A. So Jaz, how do we want to do this?

I'll ask the questions. Let's start from the elephant in the room, that where are we with Kingmakers? And part of these questions have been partly answered, but just for fairness, I'll repeat some of them. Will it be launched? And why is it taking so long?

Games take a long time, especially in games, which is why games like Kingmakers are taking quite a while.

Yes. And we should also mention that when we get strong audience validation, we are not shy to go back and redraw our plan, our original plan. So in this case, Kingmakers had an exceptional reception, and that explains why we are taking longer than originally forecast. The game is definitely going to launch. We're definitely working on that, no two ways about it. Second question, is Last Harbor being developed by Duckside team and you answered that with Deadside engine? And is Bad Pixel helping with development?

I cannot talk about what Bad Pixel is working on right now. There's going to be a marketing beat at some point.

Okay. And there was another question on Bad Pixel, which is attached to this, whether it's going to be working only on Deadside or something else? I think you've answered that just now.

I can say that they will be working on something else.

How do you think about the balance between self-published titles and third-party publishing deals in 2026 slate?

I assume it's not about self-published, it's about like our own internal titles and first party. I feel like there is a delicate balance. So like we will still do third-party publishing where it makes strategic sense, be that is either a short hit or we really want to have a game in our portfolio or we really love working with that developer, so we know exactly what to expect. Obviously, the business rationale is better for us in terms of first party, and that is the strategy, but we're not excluding third-party publishing. It's just not a priority for us.

Okay. Next question is on SAND. I think, again, you partially answered, but let's go through that. Commercial potential of SAND might not have been fully realized due to technical matchmaking and cheaters issues resulting in mixed reviews. Are there any lessons to learn from in terms of the release, which could be applied to the upcoming launch of Kingmakers?

Well, actually, Kingmakers is irrelevant to the example of SAND because Kingmakers doesn't use dedicated servers. It's a peer-to-peer co-op, and it's also co-op. It's not player versus player. The challenges that SAND faces are similar to any multiplayer shooter. It's just that they are kind of bloated by the game's design. When you have a lot of dynamic objects, in the game with these giant mechs walking around. The technology infrastructure you need to have there is intense. And the lesson learned there is that we need to invest into anti-cheat solutions that are process-driven. So no anti-cheats, Easy Anti-Cheat or BattlEye will actually solve your cheating problems. What will solve them is a process built internally to catch, ban and prevent cheaters from coming back.

Okay. Next question is on multimedia. Can you provide an update on the Hello Neighbor movie and on Season 3 of the animated series?

On the movie, not yet, Season 3 of the animated series. I have spoken about this on Discord yesterday that we will be seeing a trailer for it quite soon.

Another question. Can you give an estimate of your percentage split of unannounced or released games you're working on versus unannounced? So I guess, it's...

I assume it's workload, right?

Workload or number of titles could be?

Well, I mean, number of titles, we have 100 launched in the portfolio, and we're working on 30 of them. But I mean, in terms of workload, there is less work being done on the back end, back catalog versus new titles because there's a lot more work to do on new titles.

Next question. Congrats on the amazing CCU numbers for new titles, including Graveyard Keeper 2. Which metrics or signals tell you when to double down on a game or scale back your investment?

It's about the time spent. That is what it comes down to me. Whenever we do an internal play test and we look at how much time players spend in that play test, if it's over a certain threshold or above what we expected, it's a very, very good sign for us. The rest of the science that we look at is more data-driven with a lot of surveys. And I will not dive into that too much because it's kind of commercially sensitive.