Starbreeze announced yesterday a work-for-hire agreement with KRAFTON Inc, the South Korean gaming giant behind the global hit PUBG: Battlegrounds. We view this agreement as a good strategic fit as Starbreeze takes no financial risks, retains full ownership of the PAYDAY IP, and gains increased visibility and reach by introducing the PAYDAY gameplay experience to one of the world’s most popular games.

Following Starbreeze's Q3 report, we took the opportunity to interview the company's acting CEO and CFO, Mats Juhl, to gain deeper insights into the latest results. Mats shares his thoughts on the activity around PAYDAY 3, the upcoming Project Baxter, Roboquest, and key areas to watch in the coming quarters.

Despite a recent drop in the share price, we don’t see any rush into the stock yet. A PD3 turnaround appears increasingly improbable, and short-term catalysts are limited.

Starbreeze’s Q3 revenues and adjusted EBIT aligned with our expectations. The company highlighted its ability to significantly reduce investment levels for PD3 heading into its second year, partly due to the phase-out of Operation Medic Bag (“OMB”).

Starbreeze will release its Q3 2024 results on Thursday, November 14. We expect Q3 revenue to remain at a low level with challenging y/y comparisons due to the timing of the PD3 launch last year.

Our estimates assume PD3 will not see a major recovery, and the next two game releases will achieve moderate commercial success, with Starbreeze securing game financing for these projects. We believe this outlook is largely priced into the current share value.