Starbreeze AB (publ)

Thank you all for listening in. And my name is Matsu and I'm the acting CEO and CFO for the company. Let me run through some slides and then there will be time for some questions after the presentation. And you can also send in questions during the presentation, of course, and we will try to answer as many as we can after the presentation. So let's get into it. Third quarter key takeaways. We have had a quite intense quarter with Operation MedicBag related to Payday 3. Several updates and more content released with great results. After our big release now in October with VoIP and Server Browser, among other things, we're actually approaching the end of Operation MedicBag, but we have more content coming out now in November, December as well, of course. So I think when you look on the updates we've done both before the quarter and during the quarter, we see sentiment levels now that we haven't seen on Payday 3 before, only on Payday 2. So it's fantastic to see recent reviews around 80% positive. Our fans are really appreciating what we're doing at the moment. Feels good. We have also focused on further leveraging our IP payday and identified several good opportunities, both on how to expand the franchise into new areas of entertainment, but also taking existing games to more platforms. And to give you an idea, I mean, the strength in the IP continues to impress me more and more for every time I talk to a potential partner. I think the opportunities in Payday are fantastic and we see really good progress on that work. And we are now in the position also to actually have the opportunity to spend more time and focus more on actually the franchise expansion going forward. You will hear more about that from our marketing department, of course, going forward. Our next game, Baxter, ramped up in full production. We talked about that before. Fantastic game for release in 2026. I will come back to both Payday and Baxter further down in the presentation. We now have three games on the market, including Rover Quest that we publish. To mention a little bit about Rover Quest, it continues to perform better than we expected. We also see that the game is coming out now on PlayStation next year. So by that, we intend to further develop that game and also the opportunities around that IP. So it's a huge success for us and for the developer. We ended the quarter with a strong cash position of about 250 million. And important to keep in mind is that if you look on the investment levels now in third quarter, we actually peaked in investments, both when it comes to actual money invested and team size. Both related to Operation Medic Bag, of course, and also other updates for Payday 3, but also the fact that we are in for production for Baxter. So going forward, you will see significantly lower levels in investment from the company. And with that lower level of investment going forward, we also see that the planned investment that we have are fully funded by the cash we have on hand. Important to remember that and keep that in mind as well. So talking a little bit about our future and the strategy and that we have in service and this is something that we usually go through every quarter in the presentation as well. We talked about what we have delivered. And we we also talk about the future ahead of us. So looking into the years to come, our strategy is of course to build service stronger and better, and we do that through self publishing of our own titles. I think that's a good way to. both increase the margin in the company, but also leverage the IPs that we have. So we will have several games on the market, as I said, both driving revenue, but at the same time also increasing stability and, of course, reducing risk. We can't be one IP company. We need to have more games on the market and diverse revenue streams coming into the company. And we are in that position now, but we will expand that even further. And of course, we will continue to monetize on all the titles that we have published and will publish going forward. We have a long-term commitment to all the games that we do and publish. And we also have the ambition, of course, to expand our franchises beyond games. As an example, through movie series, movie or TV series, or merchandise and different things based on the IP. And as I mentioned also, we are now in the position with ramping down slightly on Operation Medic Bag and so on, that we have the resources to actually focus more on the franchise expansion and do more interesting things specifically on Payday 3, on Payday as a franchise. To go in a little bit more about Payday 3, this time last year, we just released Payday 3, a milestone and also a commercial success if you look on the release for Payday 3. But at the same time, we were facing technical difficulties, as you all know. But this being our flagship project, it really required us to get all hands on deck and fully focus on getting the game back on track. And now after a year of updates, fully loaded Operation Medic Bag and four DLC releases, we see really great improvements in sentiment. I'm not going to go through all the updates that we actually have done over the year, but as you see, there are significant improvements, both to the game play itself, but also when it comes to content. But by that, of course, we're not done. I mean, there is much more to come, both for the rest of this year, but also for year two. So you will see both more content coming out and you will see updates to the game. to further expand both the game activity and number of players actually playing the game. Just to be clear, we're not very happy with the current state of the game when it comes to sales. We have high ambitions and we will continue to make the improvements necessary to release more DLCs and also improve when it comes to retention in the game. So we will see more coming out now in the coming months and the years. So hopefully we can by that also reach the target we have to make Payday into a more profitable franchise over time. Baxter, if we go into our next, as I mentioned, our 2026 game called Baxter, both internally and externally at the moment. It's a Dungeons & Dragons game. We have been able to license the IP Dungeons & Dragons through our partner Wizards of the Coast. Fantastic IP. We are in the position to build a really great game based on that IP. As I mentioned, we've been in full production for a while and the game is really coming together in a great way and looks fantastic. It's a co-op game based on a reactive D&D world. A little bit on how we work with Project Baxter. Of course, we obviously learned a lot over the past years and we have done our homework. So before going into full production of Baxter, we did extensive research to make sure that we have the right scope and focus to reach our target audience when it comes to this game. We spent quite some time internally here, but also used external partners to actually get this together in a good way. Of course, we also learned a lot from the release of Payday 3. We have improved both our development process. We also made sure that we have the right technical platform and infrastructure to be able to deliver a great game with a high quality when it's time for release. We and Wizards of the Coast have the same vision for the game as well. And I'm really looking forward to be able to show and talk more about the game. Just to give you a little bit of a hint, this is a picture from our concept art from pre-production. And you also have the same scene from straight out of Unreal 5 actually. So how the same scene looks in engine. And as you can see, it's looking great and we actually follow our concept and actually improving when we move into full production. So as I said, really looking forward to talk more and show more from the game, but it's going to take a little bit longer before we do that externally. And by that we've gone into our financials for the quarter. Net sales for the quarter amounted to 42.7 million, a slight increase from previous quarter, but of course, a decrease compared to last year. Since the comparable quarter last year, we released payday three. Of course, that's hard to beat now a year later. with no release. Our EBTA amounted to 21.4 million. Our depreciation plan for Payday 3, we depreciate two thirds during the first 12 months after release. So our depreciations for the first year now after release have been high. And for the quarter, they amounted to 76.5 million. We do continue, as I mentioned several times here, we do continue to invest into our games, both in Payday and, of course, in Baxter. And that takes us to actually a loss in the quarter of 58.5 million, driven by the investments, of course. you look on our cash flow for the quarter we had a negative cash flow of 15.9 million from operating activities also of course related to the high investment levels that we actually had takes us to a good solid cash position though at about 250 million if you look on the full nine month period for 2024 we had net sales amounted to 139.5 million Our EBTA amounted to 78 million and our cash flow for the first nine months was positive with 65.2 million from operating activities. That's a good solid nine months. And if you go into a little bit more to our cash flow, how that have developed over the year. We closed 2023 with a cash position of 348 million. In the nine months following, we have a cash flow that is positive from operating activities done, as I said, with 65 million. But we invested heavily over the nine months with investments up to 180 million. Of that, 169 is in pure game development. So the vast majority of the investments are for the games. Part of our revenue related to Payday 3 is recognized as financing, and that's development of content not currently released. And that, together with some IFRS adjustments, sums up to a positive effect of $16 million for the first nine months. And that takes us then to the $250 million in cash position closing third quarter. If we talk a little bit about our operating expenses also, we do have high focus of course on our expenses and continue to do what we can to be as efficient as possible. Our underlying expenses are decreasing and we are now coming down to a long-term healthy level But we are continuously reviewing and doing adjustments, both when it comes to our priorities, but also how we staff the company, of course. Direct cost amounted to 80.6 million during the quarter. And that's a decrease compared to last year, mainly related to lower depreciations. We had high depreciations in the release month of PD3. But it relates to depreciations of intangible assets. And in the quarter then, as I mentioned, the depreciations amounted to 70.3 million. Recognized under direct cost, we also have rev share related to request and payday of about 4 million in the quarter. Selling and marketing. These expenses mainly relates to cost for personnel working with marketing and PR activities for our game. And in the quarter, we saw expenses of 6.7 million. Our administrative expenses amounted to 7.1 million in the quarter, a decrease compared to previous year. Partly impacted by the reversal of previous expense cost for a long-term incentive program related to Payday 3. But we also see lower admin expenses in general due to our focus on keeping costs low of course. We had 191 employees at the end of the period. That's an increase with four employees compared to the same period last year. We do recruit strategic people for our projects. We don't have the ambition to do any bigger recruitments and expanding the workforce further. So we are now at a good level to deliver the projects that we have. And to be in a little bit to our balance sheet as well, our intangible assets in the balance sheet is valued to $489 million, mainly related to capitalized expenses for game development and goodwill. Property, plant, and equipment, $112 million. The vast majority of that is related to our office lease, $105 million. And our current assets, $130 million. That mainly relates to prepaid expenses and trade receivables. And as I mentioned, our cash position then at the end of the quarter, 249, almost 250 million. Furthermore, external non-current liabilities, we have amortized the majority of our liabilities and the remaining part mainly relates to lease liabilities for our office as well. And our current liabilities of 141 million mainly relates to accrued expenses and trade payables. So we are now in good shape when it comes to our balance sheet, very clean and straightforward and with very low depth in the company. So by that, just to sum it up for the quarter, I think we have a good split between the sales, between our different games. Payday 3, still not where we want it to be, but we do see strong positive trends and really looking forward to releasing more content. And on top of that, of course, then, as I said several times, we do have a strong cash position, funded our projects for the development that we plan to do up until the release of Backstab and other projects and initiatives, of course, as well. So we are in a good position, very confident that we see good progress, both when it comes to payday and looking forward to talking more about Backstab. And by that, I think we open up for questions.

Thank you for that presentation, Mats. Starting with the first question from the chat here. Can you give us any update on the Payday movie or TV series?

Yeah, it's an ongoing project and very much alive. So it's not put on hold or anything like that, even though we haven't talked much about it lately. But it's ongoing, it takes time. That's a long lead time on actually getting these projects together. But we are confident that we will be able to secure a deal for a movie and TV series. Hopefully not that long down the line. Thank you. More information coming up on that as soon as we have clarity on that.

Do you have any plans to license the Payday brand further?

uh of course the short answer is yes uh i mean the ip as i said is fantastically strong still and and keep um we keep talking to partners uh potential partners um and there are opportunities we're pursuing at the moment because i mean the strength in the ip is just tremendous so we will see more news coming out about that and if you look on what we've done now just recently um We had characters appear in Ubisoft Rainbow Six game. So you see the interest for Payday is very, very big and there are really big partners that want to work with us. So it feels good. You will see more coming up on that.

I think you briefly mentioned it in the presentation, but when will we be able to see more trailers or in-game sequences from Project Baxter?

My ambition is to make sure that we keep talking about Baxter and showcase more from the game as quick as we can. Of course, our marketing department and publishing department wants to do that in the best way for the game. But the ambition, of course, is to show more and talk more compared to what we did for Payday 3 earlier in the process and disclose more information. I can't give you an exact date when we will do so, but hopefully we can announce more content around year end or beginning of next year.

On the topic of Project Baxter, will it be close in line with what Payday is as a concept or will it be something fairly newish?

Payday is a concept. It's a fantastic game, Payday, but we can't replicate Payday into more game. Payday is what it is. What we can say about Baxter is, of course, it's a co-op experience, so we will use the co-op feeling from Payday to some extent into Baxter. But it's a new game, and it's based on a fantastic IP that needs to and deserves to live on its own. So Baxter is going to be a fantastic game, but it's going to be a new game. It's not going to be a version of Payday. But you will see similarities when it comes to the co-op experience, of course, because that's our strength as a company as well.

When is any distribution or partnership deal expected to be done for Baxter? And will it be a full release or is there a plan for any early access release of Baxter?

We are not in any rush to do a publishing deal or a contract related to Baxter. As I mentioned, we have our development funded for Baxter, but we are talking to partners to make sure that we get the best how do you say, the best opportunity to actually do both a good game, but also to take it to the market in the best way. And of course, if we have an opportunity then to reduce the risk in the project a little bit by taking in a partner, that might be an opportunity for us to do so. But we are in no rush. It will take some time. And if and when we do a deal for Baxter, we will disclose that in a structured way from the company as well.

Moving on to the cash cash position, which declined during the quarter, you indicated that payday three related investments will be lower moving forward. Could you share more details on this?

Yeah, we have a plan for year two, as we call it now for period three. We will continue to release content and do updates to the game. But keep in mind that what we have done over the last 12 months with Operation Medic Bag, and as I showed on one of the slides, significant improvements to the game, that we will reduce the effort when it comes to actually doing updates to the game compared to Operation Medic Bag. But there will still be a lot of updates and content coming out. But in total, if you look on the full 12-month period that we are living now, of course, and looking forward, comparing that, then the investment level will be lower because we will not do operating medic bag anymore. So that's natural. So the investment levels will be lower, but we will continue to invest.

With the recent big launch here of a new server browser revamped user interface and voice over IP, had you expected a more significant boost in player activity than what we've observed so far?

Both yes and no. I mean, of course, we always want to see more players coming into the game and experience payday because we strongly believe it is a fantastic game. The features we launched now was highly expected or waited for by the community. We do see increasing play activity, but keep in mind it takes time to turn a game around from the problematic release that we actually had. It's a marathon, it's not a quick sprint we're talking about here when it comes to Payday 3. It's going to take time to build up the player base for Payday 3. But we see that the releases we've done now in VoIP and Server Browser and the revamped UI is very well received by the community and also new players coming in. I expect player activity to increase over time. Of course, also related to new updates that we do and new content. We also see that new content drives player activity. So hopefully we'll see that over the coming months as well when new content is coming out. But my expectations are always higher. But we do our best to keep up with those expectations as well.

Could you explain the reason for the very high depreciations for the current reports? I know you covered it in the presentation, but maybe you can repeat that.

Yeah, as I said, we have a quite aggressive depreciation plan for payday three. So when we released the game, we depreciated one third the first month and then another third of the asset in the coming 11 months. And that will then decrease now for the coming quarters because it's only one third left to depreciate on the game. And we take that over five years going forward. So it's going to be a significantly lower depreciation going forward.

Thank you very much for those answers. And thank you everyone for participating in this presentation call.

Have a great day. Yeah. Thank you very much for listening in. So have a good day. Thank you. Bye-bye.