Starbreeze's net sales exceeded our expectations for the quarter by 53%. At the same time, EBIT was in line with our expectations, due to a higher depreciation rate of Payday 3 and a one-time expense related to the employee incentive program linked to the launch of Payday 3. Nevertheless, cash flow remained strong, resulting in a cash position of SEK387m at the end of the quarter compared to SEK348m the quarter before.

Payday 3 managed to surpass our conservative sales expectations once again this quarter. The game generated sales of approximately SEK23m, compared to Payday 2, which had much more modest sales of SEK11m. This contrasts with the same period last year when sales were over SEK26m. This means that the Payday game series contributed SEK8m higher net sales to Starbreeze during the quarter compared to last year. It's also worth noting that Starbreeze and its publishers share net sales (most likely equally), which means that Payday as a game series has an even better growth trajectory.

Excluding effects from the personnel incentive program EBITDA was SEK28.6m.

The amortization of intangible assets was SEK71.8m, mostly related to amortizations of Payday 3. Trade receivables linked to PAYDAY 3 amounted to SEK 31.5 million. Starbreeze receives cash after its publisher Plaion receives cash. Starbreeze has issued an invoice for the share to which Starbreeze is entitled according to the terms of the revenue sharing agreement. This means that Starbreeze will continue to have a relatively healthy cash flow next quarter despite softer sales.

However, the low player activity in Payday 3 continues to raise questions about the game's future commercial potential. Several initiatives are underway to improve the game and better satisfy the loyal Payday player community. In the CEO statement, interim CEO Jurgen Goeldner mentions that the company has noticed a slight shift in sentiment towards the game, with more positivity and slightly higher player activity. The CEO statement also mentions that these initiatives are likely to show a more visible effect in Q3 and Q4 this year.

We continue to have relatively conservative sales estimates for Payday 3 despite another strong quarter that exceeded our expectations.  Management was clear about its sales expatiations both in the CEO statement and in the earnings call; Payday 3 will perform better in H2. At the moment approximately half of the development team (150 employees) are working on Payday 3. And many of them are trying to fix what’s according to the community is broken, the project called “Medic Bag”. These efforts will delay the new content package (DLC) that was planned to be released during the spring. The next DLC will therefore be released during the summer instead.

The seasonal pattern for Starbreeze and, more specifically, Payday 2 is that Q2 has strong sales due to the spring/summer sale on the PC platform Steam. This year, we are more uncertain about the positive effect as Payday 2 does not receive any significant new content, while Payday 3 still has very low player activity on Steam.

The optionality is instead, the third-party publishing game Roboquest. During Q1, third-party publishing accounted for more than SEK17m. During Q2 sales could be relatively evenly distributed between Payday 2 , Payday 3 and Roboquest.

We have lowered our estimates for Q2, due to a delayed Payday 3 DLC and a continued conservative approach regarding Payday 3. We estimate net sales of SEK35m (SEK50m) with an EBIT of SEK-13m (SEK-7m).

For the full-year of 2024, we estimate net sales of SEK190m (SEK181m). EBIT is almost unchanged (SEK50,8m versus SEK51.2m).

The enterprise value (EV) at current levels around SEK0.27 per share is less than SEK50m. These are historically low levels for Starbreeze, and there is much indication that the IP rights for Payday are significantly more valuable despite the rough start for Payday 3. However, the market rarely looks beyond two years, and during this period, it is highly uncertain what profitability Starbreeze will demonstrate. Given Starbreeze's low enterprise value and focused business with a clean balance sheet, it cannot be ruled out that there are entities interested in acquiring Starbreeze with a bid premium, primarily to access its Payday brand. The most likely contenders, in our view, is currently Microsoft and Tencent. However, there are several other entities that may be interested.