Starbreeze Q3 results on Thursday: Laying the cards on the table

Starbreeze will report its Q3 results on Thursday at 6.45 am CET. With PAYDAY 3 being released during the quarter, we expect a significant increase in revenues and profits. So far, no official sales figures for PAYDAY 3 have been released, but we know that about 3.2 million unique players played the game during September. Since then, however, the player count (on Steam) has decreased markedly due to, among other things, technical issues experienced after launch. The decrease in player count creates downward pressure on the short-term estimates. If Starbreeze manages to entice players to return to the game with new updates, the game's fortunes might still improve.

We expect a significant increase in revenues and profits for the quarter

We project Starbreeze's Q3 revenues to increase to SEK 433 million compared to SEK 39 million in Q3'22. The primary drivers of revenue are PAYDAY 3 unit sales and the Game financing* liability being credited in the revenues. Our estimate for PAYDAY 3 units sold in Q3 is 1.3 million. There is quite a bit of uncertainty related to this quarter's revenue estimate as it rests on several assumptions, of which the range of outcomes is wide. The three primary assumptions are how many PAYDAY 3 units were sold (incl. Game pass reimbursement), Starbreeze's share of each unit sold, and how much of the Game financing liability is credited in Q3. Therefore, our revenue estimate for this quarter could end up significantly differing from the reported numbers.

We expect EBIT to come in at SEK 351 million (Q3'22: MSEK 9). We assume that costs (except for amortization of game development costs) will not scale in line with revenues, leading to a strong EBIT margin. We expect minimal financial expenses as the conversion of the convertible loan and the final amortization of debt was carried out in July 2023. Our EPS estimate for Q3 is SEK 0.24 (Q3'22: SEK -0.01).

PAYDAY 3's player count has steadily declined since launch

Immediately after the launch, the game experienced technical issues that prevented players from accessing the game. The technical issues angered players and led to a flood of complaints and negative reviews. Eventually, the issues were fixed, and since then, the complaints have zeroed in on a perceived lack of content and an unrewarding progression system. With the game being available through multiple platforms, we don't have a clear picture of how many players are currently playing the game. On Steam, however, we see that the number of concurrent users (CCU) for PAYDAY 3 has steadily declined since launch. The all-time peak CCU was 78k on the day of the launch. For the last 24 hours, the peak is down to less than 2k users. PAYDAY 2, for reference, currently has 34k concurrent users on Steam.

A declining trend is to be expected, but PAYDAY 3 currently (49 days since launch) has only 2% of the number of players it had on day 1. The comparable figures for PAYDAY 2 were 15%, Remnant II 9%, and Starfield 15%. As stated, these figures reflect only one platform, Steam, but it is fair to say that PAYDAY 3 has failed to retain players’ interest. The main challenge for Starbreeze now is to successfully entice players to return to the game when new content and updates are released. Players might return by themselves, or Starbreeze might try to stimulate the situation by offering a discount on the game and/or providing free in-game content as a goodwill gesture.

Near-term performance comes down to PAYDAY 3

Our current estimate of units sold for Q4'23 is 0.8 million, leading to revenues of SEK 110 million and an EBIT of SEK 30 million. This would bring our full-year revenue and EBIT estimates to SEK 613 million and SEK 366 million, respectively. However, the lower-than-expected player figures seen during October and November create downward pressure on the Q4 estimates of units sold. We will revisit these estimates in conjunction with the release of the Q3 results. As the next internally developed game from Starbreeze, Project Baxter, is set to be released in 2026, the performance of 2024 also largely rests on PAYDAY 3's shoulders and how/if it can recover from the messy launch and the badwill it created. Beyond PAYDAY 3, Starbreeze will generate some revenue from PAYDAY 2 and Starbreeze's third-party publishing projects.

Third-party publishing

At the beginning of November, Starbreeze announced its fourth third-party publishing project, GodsTV (2026 release). In addition, Starbreeze has signed on as publisher for the following projects: The Tribe Must Survive (Late 2023), Roboquest (Nov 2023), and the Fortnite island Turtle vs Turtle (Oct 2023). Roboquest officially launched on November 7th after a three-year early access period. The game has been received very well so far, with a 94% positive rating on Steam. On Steam, the peak concurrent user metric on the release day was 3.3k, which is a modest amount. However, the expectations for an indie game like Roboquest are also lower, and the player count has increased slightly each day since launch. No figures regarding the size of Starbreeze's commitment to Roboquest or the other publishing projects have been released, which makes estimating potential revenues difficult. We assume that all four projects are monetarily on the smaller side. It is a deliberate strategy of Starbreeze to start with smaller projects to build up their internal publishing capabilities rather than to swing for the fences with large commitments.

* In our revenue estimate of SEK 433 million, some SEK 259 million comes from the crediting of the Game financing liability. The Game financing liability is the financing that the co-publisher Plaion has provided Starbreeze for the development of PAYDAY 3. The liability will be credited in connection with PAYDAY 3 sales. As the crediting takes place through revenue sharing, it does not affect cash flow. The liability was SEK 237.6 million at the end of Q2'23 and has increased as further financing was obtained towards the release of PAYDAY 3.