Starbreeze AB (publ) Q1 report January 2017 – March 31 2017
The first quarterly report in Swedish is available at www.starbreeze.com/investor-relations/. The English version of the report will be available within a week. Financial statements in English are available at the end of this document.
FIRST QUARTER (JANUARY-MARCH 2017)
- Net revenue amounted to SEK 57,3 million (SEK 40,8 million), representing a growth of 40.4 %.
- During the quarter, PAYDAY 2 represented SEK 23,7 million (SEK 39,6 million) of net revenue. Dead by Daylight represented SEK 20,9 million (SEK 0,0 million).
- Operating income before depreciation and amortization, EBITDA, amounted to SEK -35,3 million (SEK -4,3 million), implying a margin of -33,1 percent.
- Earnings per share before dilution were SEK -0.18 (SEK -0.06) and earnings per share after dilution were SEK -0.18 (SEK -0.06).
- As of March 31, cash and cash equivalents totaled SEK 516,9 million (SEK 416,5 million).
THE FUTURE OF ENTERTAINMENT
CEO BO ANDERSSON KLINT GIVES HIS COMMENT
Due to seasonality, revenues for the first quarter of the calendar year is usually lower than the following quarters, which also hold true this year, as there are fewer sales activities for both PC and console platforms. Nevertheless, net revenue rose by over 40% compared with the first quarter2016, driven by continued good momentum for Starbreeze Publishing and Dead by Daylight.
This year, PAYDAY 2 had its big spring campaign on Steam, "Spring Break" in Q2, instead of in Q1 as in previous years. Despite this, sales of the quarter held up well, mainly because we as the sole IP owner, enjoy 100% of revenues. The shift in timing for “Spring Break” also gave us a solid start of the second quarter with April sales of SEK 11.6 million (SEK 2.0 million) directly related to PAYDAY 2.
We are almost done building the three parallel teams that will create more PAYDAY content and get OVERKILL's The Walking Dead and Crossfire ready for our fans. We have also formed an advanced tech team that both performs R&D for StarVR and supports game development.
The marketing team has been expanded to meet the needs we have for the increasing number of both own games and publishing activities. With all this in place, we expect a slower increase in the number of employees and related costs from the third quarter.
A significant cost item in our income statement is outsourcing of more volume-related game production tasks. When we get approval from the Indian Investment Authority, we’ll close the acquisition of Dhruva Interactive and expect to lower our costs for these tasks.
The second quarter usually holds most of our marketing costs, mainly due to our participation at the trade show E3 in Los Angeles. This year, our marketing costs will instead peak in the first quarter as we shifted from E3 to activities that we believe give “more bang for the buck”.
The quarter has also been charged with non-recurring costs relating to the ongoing listing on Nasdaq Stockholm.
Our joint venture with Acer, StarVR Corporation, carries all marketing and sales costs of StarVR, but as long as Starbreeze maintains the IP rights, we carry R&D related costs. In the first quarter, these amounted to 9.4% of total operating expenses. At the same time, we have no manufacturing costs as these are carried by Acer.
The seasonality impact on our top-line combined with the ramp up of key production and marketing teams, resulted in an EBITDA of SEK -35.3 million (SEK -4.2 million), costs in line with planned budget. Our plan is, and will always be, long-term and optimized to create great years, not single quarterly profits.
It is worth mentioning that depreciation got a temporary uptick as we took the bulk of the investment in John Wick: Chronicles upfront. A treatment driven by IFRS accounting rules.
Cash flow from operations was slightly negative by SEK -4.8 million (SEK 4.0 million) and net cash flow from investments was SEK -146.5 million (SEK -54.2 million). The latter higher amount was due, inter alia, to a larger lump sum payment to StarVR Corporation, in accordance with the financing milestone plan totaling USD 12.5 million as previously announced. We are now halfway through this financing plan. The first quarter also included the first and thus large milestone payments for major publishing projects such as Psychonauts 2.
We exit the quarter with a stable cash at hand of SEK 516.9 million (SEK 416.5 million) and yet again, let me repeat that this significant cash balance will be used for selected key investments, which we over time foresee will generate great returns.
NEW LAUNCH WINDOW FOR OVERKILL's THE WALKING DEAD
Together with the development team of OVERKILL's The Walking Dead, we have decided to extend the production schedule so that the title can reach its full potential and to drive our original vision one step further. It's a brand new co-op game we are developing with new characters and storylines. The game will have great re-playability with many unique dynamic levels. In order to reach our vision, we are developing completely new technologies that we need to refine to get where we want. We are completely intent on succeeding, but it will take a little longer than we estimated when we started the project. We and Skybound Entertainment are fully dedicated to releasing an unforgettable experience for fans worldwide and then continuing to support it with high quality content in coming years.
STARSTREAM AND STARBREEZE PRODUCT PORTFOLIO
This year we have chosen not to participate at E3. Instead we are wholeheartedly committed to establishing our own online information platform: Starstream, which was broadcast on May 10th, 2017.
During Starstream, we showcased large portions of our portfolio, released titles and projects under development, and also give the Starbreeze brand more dedicated focus. We gave a first glimpse into the production of OVERKILL's The Walking Dead as well as a taste of where we want to take Crossfire co-op.
For OVERKILL's The Walking Dead, we have more than 80 developers dedicated to the project and we talked about the foundation and game concept. In true co-op spirit the game encourages players to complete missions with varying degrees of difficulty. With focus on characters and technological advances that enable deeper re-playability than we have had in previous products, we aim to deliver a game that satisfies both the franchise’s fans and hard core gamers.
Our next game release in Starbreeze publishing, RAID: World War II, also premiered the RAID groups new taskmaster; through the character “Control”, the eminent John Cleese will guide the players through their adventures. We also showed the Indie Publishing’s premiere title Antisphere and opened for pre-orders on the digital platform Steam. PAYDAY players who pre-order the game will get six brand new masks as an added bonus.
In the System Shock 3 segment, our latest publishing project, Warren Spector presented for the first time conceptual images for the game and shared his vision. In a panel, together with industry veteran Tim Shafer, Warren discussed the industry in general and how it has evolved over the decades.
For our blockbuster product PAYDAY, we showed a first trailer for our upcoming mobile game PAYDAY: CrimeWar. We also announced the market's largest VR game with PAYDAY 2 VR. Here we presented something groundbreaking where players for the first time can play co-op on the same mission regardless if they play via Steam on PC or through a compatible VR headset on the same platform.
PAYDAY 2 is still our biggest source of revenue and we have proven the business model for almost four years. Since the game has repaid its investment several times, we have decided to continue to update the game for another year, completely free for players. We enable this by releasing a new version of PAYDAY 2, The Ultimate Edition, where we bundle all DLCs and put the price to 45 USD. Our previous total price for the base game with all paid updates had a total price over 200 USD. That way, we offer players all of PAYDAY 2 at an attractive price and with an unbeatable amount of content. In addition, we make PAYDAY VR a component of PAYDAY 2: Ultimate Edition to further enhance its appeal and yet again renew and expand PAYDAY.
Storm has long been an IP we have kept behind locked doors, but that we now presented a vision for. As a hub for our VR ecosystem, we showed a preview of Storm as co-operative PC game and competitive e-sport experience in virtual reality. Our investments in various technologies all build towards this vision.
Let’s keep building this!
This information is information that Starbreeze AB is obliged to make public pursuant to the Securities Markets Act. The information was submitted for publication at 8:30am CEST on May 11 2017.
For further information, please contact:
Maeva Sponbergs, Investor Relations, Starbreeze AB.
Tel: +46(0)8-209 208, email: firstname.lastname@example.org
About Starbreeze Starbreeze is an independent creator, publisher and distributor of high quality entertainment products. With studios in Stockholm, Paris, Los Angeles, Barcelona and Brussels, the company creates games and other virtual reality entertainment products, based on proprietary design and licensed content. Starbreeze most recent games include PAYDAY 2®, John Wick VR shooter and upcoming survival co-op FPS OVERKILL’s The Walking Dead. Under its publishing initiative, Starbreeze has together with Canadian studio Behaviour Digital successfully launched horror thriller Dead by Daylight.
Starbreeze has set out to develop truly immersive virtual reality experiences, by integrating software and hardware in its StarVR® head mounted display, which is produced together with Acer, displaying a unique field of view and a mission to bring top-end VR to large audiences. Together with IMAX, Starbreeze aspires to dominate the location based VR market with the IMAX VR centers. The first IMAX VR center opened in Los Angeles in January 2017.
Headquartered in Stockholm, Sweden, Starbreeze's shares are listed on Nasdaq Stockholm First North Premier under the tickers STAR A and STAR B with the ISIN-codes SE0007158928 (A share) and SE0005992831 (B share). Remium Nordic is the company's Certified Adviser.
For more information, please visit http://www.starbreeze.com, http://www.starvr.com, http://www.overkillsoftware.com