Starbreeze: Cash positive agreements with optionality
Research Update
2025-02-19
11:58
Analyst Q&A
Closed
Tomas Otterbeck answered 5 questions.
Redeye has updated its estimates and provided commentary on the latest developments at Starbreeze. Fundamentally, it has been a strong quarter for the company. The partnerships with Krafton and Sony not only generate revenue in a sustainable way but also present a significant opportunity for Payday to attract new audiences.
Tomas Otterbeck
Johan Ekström
Net sales of SEK46m were in line with our estimates, while EBIT exceeded expectations by SEK10m. The contribution from Payday 3 was weaker than anticipated, whereas the third-party business with Roboquest continued to outperform our projections. Payday 3 accounted for SEK15m, while Payday 2 accounted for SEK10m. Its third-parties publishing generated almost SEK15m, with Roboquest as the main contributor. SEK5m came from the partnership with Krafton.
Starbreeze is successfully expanding the Payday brand through three key initiatives, through Sonys, Kraftons and Roblox highly popular platforms. In February, Payday 3 is free for over 50 million PlayStation Plus members, creating active players at the same level as the launch week. In 2026, Payday will likely be available on PUBG PC platform, which attract around 800 000 daily active users. An Payday experience is also available on Roblox, to reach an younger audience.
In February this year, Payday 3 was added to PlayStation Plus, a deal we estimate will bring in around SEK11m to SEK22m for Starbreeze during Q1. This means that approximately half, SEK 32 million, of the revenue is expected to come from game sales, while a total of SEK 27 million is expected to come from the partnership with Krafton and the deal with Sony. According to our calculations, this is expected to result in an EBITDA of SEK31m and an EBIT of SEK7m for the quarter. Overall, we expect SEK212m (unchanged) in net sales for the full year. EBITDA is raised from SEK 87 million to SEK109m, while EBIT is revised from SEK-9m to SEK22m. No changes has been done to our valuation range or our fair value of Starbreeze.
| Key Financials | ||||
|---|---|---|---|---|
| SEKm | 2023 | 2024 | 2025e | 2026e |
| Total Revenue | 633.5 | 185.9 | 211.7 | 481.4 |
| Revenue Growth | 417% | -70.7% | 13.9% | 127% |
| EBITDA | 441.7 | 92.8 | 108.5 | 342.0 |
| EBIT | 190.4 | -203.5 | 21.7 | 108.3 |
| EBIT Margin | 30.0% | -109% | 10.3% | 22.5% |
| Net Income | 154.2 | -202.0 | 29.7 | 120.3 |
| EV/Sales | 1.6 | 6.4 | 6.1 | 2.3 |
| EV/EBIT | 5.5 | -5.9 | 59.4 | 10.3 |
Case
Masters of “Games as a Service”
Starbreeze has shown that the company can create recurring revenue from a loyal fanbase for a long period of time twice, both with Payday 2 and through the publishing success Dead by Daylight. Payday 3 recouped its investment during the first weeks after launch. However, since then, the game has struggled to engage players. In 2025, Starbreeze will develop an experience within one of the most successful PC games (top 10), namely PUBG. In 2026, Starbreeze plans to release its next big game, based on Dungeons and Dragons.
Evidence
A game launch is only the beginning
Payday 2 has generated net revenues of more than SEK1.3b to Starbreeze in ten years. An interesting aspect is that Payday 2 brought in “only” SEK120m in net income during the initial period after launch (in this case four and a half months) which shows how well Starbreeze manages the business model “Game as a Service”.
Challenge
Payday 3 have struggled
Payday 3 performed below management’s expectations commercially. Since its launch week, the game has struggled to engage enough players to stay profitable in relation to the cost of developing new content. With mixed reviews on the biggest PC platform, in comparison to very positive for Payday 2, it is likely that the brand of Payday has not strengthened since the latest game.
Difficult to succeed in the competative landscape
Starbreeze has not been involved in a smash hit game since its publishing title “Dead by Daylight” in 2016. Since then many key people has left the company, and it is no longer owner operated. Still Starbreeze has a major loyal fanbase and own a strong brand Payday. However, the competition has increased in the live service space of gaming, since 2016, so innovation and quality is often needed to become successful.
Valuation
High dependence on few game launches
Starbreeze financial postition is solid after the succesful rights issue in june 2023 and the strong initial sales from Payday 3 of close to SEK500m. We expect a net cash position in Starbreeze of roughly SEK110m at the end of 2025. This is a major contrast to the SEK380m in debt Starbreeze had at the year-end of 2022. We assume Starbreeze is likely a takeover target.
Net sales of SEK46m were in line with our estimate, while EBIT was SEK10m higher than expected. The contribution from Payday 3 was weaker than expected, while the third-party business with Roboquest continued to perform above our expectations.
Disclosures and disclaimers