Starbreeze delivered Q1 revenues well above our expectations, driven primarily by a stronger-than-anticipated performance from PAYDAY 3 (“PD3”). The game benefited from its feature as PlayStation Plus’ Game of the Month in February and the launch of the Jacket DLC. While a detailed 2025 roadmap for PD3 is still pending, the company’s acquisition of full publishing rights enhances its agility in content deployment and was highlighted in the report as a key strategic focus. Meanwhile, no new material updates were shared on Project Baxter.

PAYDAY revenue was above estimates, while third-party publishing fell short of expectations

Q1 revenues reached 68 MSEK (Q4’24: 46 MSEK, Q1’24: 57 MSEK), which was 26% above our estimates and 20% higher than last year. Quarter-on-quarter, revenue increased by 46%, primarily driven by the work-for-hire partnership with KRAFTON, which contributed with 18 MSEK to revenue, and PD3 featuring as the game of the month on PlayStation Plus during February. Revenue from PD3 increased by 18 MSEK quarter-on-quarter to 33 MSEK (Q4’24: 15 MSEK), and PD2 revenue increased by about 2 MSEK to 12 MSEK (Q4’24: 10 MSEK), while third-party revenue decreased by 12 MSEK to 3 MSEK (Q4’24: 15 MSEK). While the work-for-hire contribution during the quarter was in line with our estimates, PAYDAY-related revenue stood out as clearly positive, where the effects from the PlayStation Plus feature were stronger than estimated. On another note, the 3PP revenue came as a bit of a surprise on the downside, as we had anticipated a more gradual decline during the quarter, following the strong Q4 print. While not disclosed explicitly, FX effects are likely to have impacted the top line negatively during the quarter, and given current FX rates we expect the stronger Swedish krona (against USD and EUR) to weigh on the financials in Q2 as well.

EBIT below with our estimates

Starbreeze reported a Q1 operating loss (EBIT) of -29 MSEK (Q4’24: -52 MSEK, Q1’24 adj: -43 MSEK), which was well below our expectations (-6 MSEK). However, following the change of premises during the first quarter, the termination of contracts resulted in an increase in depreciation of 17 MSEK year-on-year, and thus negatively impacting reported EBIT. In light of this, the quarter-on-quarter as well as year-on-year improvement was mainly driven by reduced amortization on game development. The amortization level was well in line with our estimates (Inderes est. 25 MSEK) and the significant reduction comes as the heaviest D&A period related to PD3 is now behind following its second year on the market. We expect amortization levels to be relatively stable at this level, even a bit lower, for the remainder of 2025 and until the 2026 release of Baxter.

Cash flow from operating activities after WC changes was -12 MSEK and investments for the quarter totaled 53 MSEK, leading to a free cash flow of -65 MSEK (Q4’24: -66 MSEK). Cash balance stood at 130 MSEK at the end of Q1 (Q4’24: 192 MSEK), with virtually no debt (excl. leasing). After the first quarter, the company received issue proceeds and the company’s claim against PLAION linked to PD3 has been settled to a total amount of ~95 MSEK. The cash flow decline was a bit higher than expected during the quarter as we had anticipated that the KRAFTON partnership would contribute more to improving cash flow. A partner deal regarding Baxter is still our base case as it would alleviate cash flow pressures, likely at the expense of revenue potential.

Fresh content is on the horizon

Q1 was relatively quiet for the PAYDAY franchise, with minimal new developments and content releases. However, fresh content is on the horizon, with a new paid heist ("Party Powder") and the long-awaited Armor 2.0 update set to launch on May 26. In parallel, the 3PP game Roboquest is expected to be released on PlayStation 4 and 5 by the end of Q2 2025. However, any sort of roadmap for 2025 is yet to be shared regarding PD3, leaving uncertainty around the cadence of future updates.

In parallel, the company is becoming increasingly proactive in leveraging the PAYDAY IP, evidenced by its partnership with KRAFTON, the relaunch of Notoriety on Roblox, and most notably, the recent acquisition of full publishing rights for PD3. The latter unlocks a new sort of freedom for Starbreeze to shape not only the game but the IP as well going forward. We believe this could potentially also spark renewed content development for PAYDAY 2, as well as accelerate long-term projects like the planned TV show. Additionally, the appointment of a new permanent CEO, Adolf Kristjansson, seems like a strategic fit for the company and could provide the leadership needed to execute the company’s vision. That said, we will continue to monitor Starbreeze’s actions before revising our long-term outlook on the franchise. As such, this places significant pressure on Project Baxter to deliver a successful launch, and the company provided no concrete update in the report on how the industry dialogues or potential partnership talks had progressed during the quarter.

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