Starbreeze AB (publ) interim report January-September 2023

PAYDAY™ 3 launched and has reached recoup

Third quarter 2023

• Net sales amounted to SEK 494.4 million (38.7). PAYDAY 2 accounted for SEK 51.6 million (36.1).
• PAYDAY 3 accounted for SEK 440.8 million, of which:
  • SEK 193.7 million in revenue sharing after parties’ running costs and Starbreeze invoiced running cost as well as,
  • SEK 247.1 million of debt for game financing is recognized as revenue, as Starbreeze’ commitment regarding development of the base game is considered fulfilled. This part has no cash flow effect in the quarter.
• EBITDA* amounted to SEK 441.8 million (24.4).
• Depreciation, amortization, and impairment amounted to
  SEK 142.0 million (15.4).
• Profit/loss before taxes amounted to SEK 299.8 million (-7.5).
• Basic and diluted earnings per share amounted to
  SEK 0.21 (-0.01).

January-September 2023

• Net sales amounted to SEK 564.3 million (94.0). PAYDAY 3 accounted for SEK 440.8 million.
• EBITDA* amounted to SEK 460.0 million (47.0).
• Depreciation, amortization, and impairment amounted to
  SEK 174.7 million (44.6).
• Profit/loss before taxes amounted to SEK 299.2 million (-42.1).
• Basic and diluted earnings per share amounted to
  SEK 0.31 (-0.06).
• Cash and cash equivalents amounted to SEK 312.9 million (119.6).

Significant events during and after the quarter

• July 19, Digital Bros initiated the conversion of its convertible loan of SEK 215 million at a conversion rate of SEK 1.45.
• August 10, Starbreeze announced that it will publish Roboquest by RyseUp Studios, version 1.0 to be released on November 7, 2023
• September 22, worldwide launch of PAYDAY 3, Starbreeze has recouped initial investment as of September 30th.
• September 27, Jon Gillard and Juergen Goeldner elected as new Board members at an extraordinary general meeting.
• October 26, launch of Turtle vs Turtle, a Fortnite island, developed by Torus Games.
• November 3, Starbreeze announced that it will publish GodsTV by Melbot Studios for release in 2026.
• November 10, Starbreeze’ Chairman Torgny Hellström announced that he declines re-election at the 2024 AGM.

CEO’s message

PAYDAY™ 3 launched and has reached recoup

On September 21st PAYDAY 3 was finally launched, a milestone for Starbreeze and a reason for the team to be proud and celebrate. Both interest in the game and initial sales exceeded our expectations, it was clear that many people have been waiting a long time to play PAYDAY 3. Unfortunately, it quickly became evident that the infrastructure on which the game rests was not holding up - this despite extensive internal and external tests carried out leading up to launch. The consequence is that sales after the period are somewhat lower, but we are convinced that what we have in store will increase sales over time. I myself have often said that "you are never better than your next game", and the events of September and October have given reason for extensive analysis, investigation and action. The team's focus is, and will continue to be, building PAYDAY 3 according to plan and repairing the short-term drop in confidence that the launch entailed. That PAYDAY 3, at September 30 based on preliminary total revenue, had recouped the investment Starbreeze made in the game up until launch shows both the strength of the brand and the trust placed in us from our players. One of our most important tasks is to manage and nurture this trust in us. We have a clear vision for what PAYDAY 3 will be with our Games as a Service model, and we continue according to our plan where the goal is to always deliver maximum value for our players over time and results for Starbreeze.

RESULTS & POSITION

Starbreeze’ net sales amounted to close to half a billion SEK during the quarter, of which PAYDAY 3 accounted for SEK 441 million. The revenue includes digital and physical sales on Steam, Xbox X|S, PlayStation 5, Epic Games Store, initial one-time revenue from platform owners as well as an accounting reversal of debt for game financing received. PAYDAY 2’s sales amounted to SEK 51.6 million, which includes sales via Steam and the Epic Games Store as well non-recurring income from platform owners. In July, the debt Starbreeze had to an owner was amortized according to plan, and later in the summer the convertible loan that had been issued to the same owner was also converted to a share price of SEK 1.45. All in all, this reduced Starbreeze’ debt by SEK 380 million. We now have limited indebtedness, and SEK 313 million in cash at the end of the quarter.

PAYDAY 3

With the launch completed, PAYDAY 3 now enters its next phase; live service. This means that the team focuses on continued development of both new features as well as improvements requested by our players, and frequent deliveries of new content. We know the potential we have within our existing PAYDAY community and it is our job to deliver a product that attracts new players as well as our PAYDAY 2 players. In November, two new free heists will be launched for PAYDAY 3. These are two community favorites that have been refreshed and adapted to take advantage of the possibilities in PAYDAY 3. Along with them comes new first person animations,weapons, skins and a host of improvements based on feedback from our players. Production on next year's content is already underway, with our already announced four DLCs being just a subset of what we plan to release.

PROJECT ”BAXTER”

As we now scale up the development team for Baxter, primarily with employees who previously worked on the development of the base game PAYDAY 3, we ensure that we make the best use of our resources going forward. The pre-production work is proceeding according to plan, recruitment to strengthen the team with specific skills is constantly ongoing and we are of course looking forward to telling you more about the project together with our license partner. There is no intrinsic value in keeping things secret, as soon as the timing is right for us and our licensing partner, we look forward to telling – and showing more – of Project Baxter. It is, as previously mentioned, one iconic brand whose DNA is characterized by collaborative experiences and storytelling in an expansive world – in a completely new environment compared to PAYDAY but with the DNA that Starbreeze has excelled in over the past decade; cooperative multiplayer games.

THIRD PARTY PUBLISHING

During the quarter, there was a lot of focus, both internally and externally, on PAYDAY 3. Part of the publishing organization was simultaneously working on several projects that, over the short and long term, will contribute to increasing the size and breadth of our community and creating more revenue streams for Starbreeze. At the end of October, we launched an exciting albeit smaller project together with our partner Torus Games; an island in the Epic Games game Fortnite. A perfect opportunity for Torus to realize its game concept and for Starbreeze to test the waters of the rapidly growing economy that Epic is building with Fortnite Islands. At the beginning of November, it was announced that Melbot Studios will develop “GodsTV”, a multiplayer action game with an expected release in 2026. Last but not least, we successfully published RyseUp Studios' 1.0 version of Roboquest which in its launch week increased its daily active users (DAU) by over 1,000 percent to close to 100,000 users on Steam® and Xbox.

ORGANIZATION

Game development is very much an industry of human capital. As a company, it is our task to ensure that we have the right skills and that the organization is appropriate for the projects we are to deliver. During the quarter, the number of employees increased by 9 people, primarily new recruitment of specific skills for development of Project Baxter. Since the end of last year, we also have operations in the UK, which has proven successful in further increasing our recruitment base and ability to attract top talent.

In accordance with our strategy, we look at our game releases over long cycles, where a supporting pillar is to consistently deliver added value to our customers and generate ongoing revenue. While we are of course pleased with the reception and sales PAYDAY 3 had before and during launch, and the fact that we recouped our investment in the game early on, we are also humbled by the fact that we have a lot of hard work ahead of us. To make existing players happy, to attract new players and to deliver on the vision for PAYDAY 3 in parallel with Project Baxter and our ventures into third-party publishing. There are no shortcuts in the gaming industry, only hard and consistent work.

TOBIAS SJÖGREN, VD

Webcast

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For more information, please contact:

Tobias Sjögren, CEO
Mats Juhl, CFO
Tel: +46 0(8) - 209 229
Email: [email protected]

This information is information that Starbreeze AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, via the contact persons set out above, at 6:45 am CET on November 16, 2023.

About Starbreeze
Starbreeze is an independent developer, publisher, and distributor of PC and consoles targeting the global market, with studios in Stockholm, Barcelona, Paris and London. Housing the smash hit IP PAYDAYTM, Starbreeze develops games based on proprietary and third-party rights, both in- house and in partnership with external game developers. Starbreeze shares are listed on Nasdaq Stockholm under the tickers STAR A and STAR B.

Read more at www.starbreeze.com and corporate.starbreeze.com.