Starbreeze’s Q2 revenues were in line with our expectations, but operating profit (EBIT) fell short, primarily due to higher-than-anticipated direct costs. The company emphasized its ongoing commitment to developing and expanding PAYDAY 3 (“PD3”), with the goal of growing the player base and driving sales. Starbreeze also announced that it has initiated planning and project work for content slated for PAYDAY 3’s second year on the market. Additionally, the company reaffirmed its previous guidance, anticipating increased PAYDAY 3 sales in the third quarter, driven by upcoming updates and content releases.

Revenues from PD3 exceeded our estimates but overall sales were in line with expectations

Starbreeze’s Q2 revenues decreased by 7% y/y to 40.2 MSEK, in line with our estimate of 39.7 MSEK. The y/y decrease in revenues was primarily driven by lower sales from PD2, amounting to 9.2 MSEK (Q1’24: 11 MSEK), slightly below our estimate of 10 MSEK. Revenues from PD3 stood at 22 MSEK (Q1’24: 23 MSEK), exceeding our 19 MSEK estimate. The third-party publishing business generated sales of 8.8 MSEK, down from 17 MSEK in the previous quarter and slightly below our estimate of 10 MSEK. Overall, the top line was very much in line with our expectations.

EBIT fell short of our estimates due to higher D&A

Starbreeze reported an operating profit (EBIT) of -70.8 MSEK in Q2, which was lower than our expectations of -60.7 MSEK. The lower EBIT was attributed to higher direct costs, were related amortization and personnel-related costs were above our forecasts. Operating expenses (OPEX) were, on aggregate, in line with our estimates, however, EBIT took a 2.1 MSEK hit related to currency effects during the quarter which also contributed to the lower-than-expected EBIT. Cash flow from operating activities after WC changes was 2.7 MSEK, where the paid receivable linked to PD3 sales had a positive effect on working capital of about 19 MSEK. An additional 12.4 MSEK in trade receivables linked to PD3 remains to be collected. At the same time, investments totaled 68.1 MSEK, resulting in a free cash flow of -65.4 MSEK. At the end of the quarter, Starbreeze had cash and cash equivalents of 334.6 MSEK and virtually no debt, indicating a continuous robust financial position at the moment.

A step in the right direction but it is still a long way to go

The launches of the second DLC, Boys in Blue, coupled with recent OMB updates during the second quarter have been a step in the right direction in terms of player activity in PD3, and the trend is currently slightly positive. Yesterday’s launch of the third DLC, Houston Breakout, received, in general, good feedback and resulted in the highest CCU (Concurrent User) year-to-date on Steam (4,694) and thus further contributing to the positive trend witnessed. However, given available Steam data, significantly more players still favor the predecessor and if the player activity doesn’t increase more substantially in the coming months, current high investment levels into the game cannot be motivated for much longer in our view. Starbreeze is heading to pivotal months with one additional paid DLC slated until the end of September, where further iterations of solo-mode, improvements related to matchmaking as well as the releases of e.g. offline mode and CrimeNet are yet to come. These game updates and enhancements have the potential to significantly boost player engagement in PAYDAY 3, though whether this will materialize remains uncertain. Starbreeze has projected a notable impact on sales starting from Q3 and beyond. With highly anticipated features like offline mode, VOIP, and CrimeNet still pending release, we believe Starbreeze could attract a larger player base to PAYDAY 3. However, it is challenging to gauge the extent of this growth and how sustainable the expected increase in player activity will be.

The decline in the cash position was anticipated and underscores the critical role PAYDAY 3’s recovery plays in enabling Starbreeze to self-publish Project Baxter. Without a significant rebound in PAYDAY 3’s performance, we believe Starbreeze may need to seek a co-publisher for the game or explore alternative strategies to meet the planned 2026 launch timeline.