Net sales came in higher than expected. Sales totaling SEK69m were more in line with our previous estimate of SEK78m than our reduced estimate during our "preview" of SEK47m. Revenue for Payday 3 was twice as high as for Payday 2 during the quarter, which was a better distribution than we had expected. However, Starbreeze received more than 50% of net revenue from the publisher, resulting in a positive net effect of approximately SEK12m within the "Net sales" category. The business unit within publishing, consisting only of Roboquest during the quarter, performed as expected and generated approximately SEK14m during the quarter. However, the game had its official launch during the quarter (having previously been in soft launch on Steam). We expect that the platform deal with Microsoft also contributed positively to publishing revenues. This means that this revenue is likely to be significantly longer-lasting in Q1, despite the game's relatively good popularity.

Profitability, however, was worse than our estimates, with EBIT and EBITDA coming in lower than expected. Two cost items were higher than expected. Sales and marketing expenses were SEK15m compared to the expected SEK9.5m. But it was primarily the difficult-to-predict "Other Revenue/Expenses" that caused trouble, which can be seen as a balance between assets and liabilities. This item had a negative currency effect, which negatively affected the result. However, it has no impact on the operational activities, making it misleading in many ways. The net effect of "Other Revenue/Expenses" in our estimates was around SEK0m while the outcome of these two was around SEK-15m. EBITDA was thus SEK-20.6m compared to the expected SEK17.1m.

The amortization rate during the quarter was also higher than expected. Depreciation and impairment were SEK74.4m compared to the expected SEK23.5m. This naturally has a dramatic effect on EBIT, which during the quarter was SEK-95.0m compared to our estimate of SEK-6.4m.

The cash position was SEK348m at the end of the year. In the balance sheet, there are also receivables of approximately SEK150m to be paid out by the publisher, which means that Starbreeze is considered to have a stable financial position.

The CEO commented on the poor engagement for Payday 3. The proven best strategy a gaming company can have to reverse a negative trend is to listen to the player community and make the changes they want. A fairly simple recipe for success, but of course, more difficult to implement optimally in practice. Payday still has a very engaged community, which makes the prospects better than for many other game series.

We currently have relatively pessimistic sales estimates for 2024, reflecting the uncertainty surrounding Payday 3 in the coming quarters. We feel slightly more positive after the stronger numbers for the quarter. However, it must be taken into account that Payday 3 was still a new game during the quarter, while holiday sales should have provided some additional sales.

We are not making major changes regarding our estimates for the coming three years. We are slightly adjusting up the net revenue for 2024 because Payday 3 sales did not exceed expectations during the quarter. We anticipate a similar pattern as the previous year, where Q2 and Q4 are the strongest months for Starbreeze. Player sentiment has not been particularly positive in recent months, something we expect to improve slightly in the coming months as Starbreeze addresses elements in the game that people complain about. During Q2, we expect that a new DLC and, for example, our spring sale on various platforms will increase revenues.

For 2024, we have raised our full-year estimate slightly for net sales to SEK181m (SEK159m). We have also slightly increased the expected operating result (EBIT) to SEK-51m (SEK-58m).

For 2025, we maintain our estimate for net revenue. We have increased the expected operating result (EBIT) to SEK39m (SEK-61m). This is entirely explained by lower estimated amortization during the year. Starbreeze has a more aggressive amortization rate than previously estimated, which weighed on EBIT during the last reported quarter. Starbreeze amortized about one-third of the activations for Payday 3 during Q3, coinciding with the game's launch. Over the next 11 months, the company will amortize an additional third. The final third will then be written off starting in Q4 2024 and continuing for 24 months. This pertains to amortizations only for the base game launched at the end of September 2023.

The enterprise value (EV) was approximately SEK110m at that time. These are historically low levels for Starbreeze, and there is much indication that the IP rights for Payday are significantly more valuable despite the rough start for Payday 3. However, the market rarely looks beyond two years, and during this period, it is highly uncertain what profitability Starbreeze will demonstrate. Given Starbreeze's low enterprise value and focused business with a clean balance sheet, it cannot be ruled out that there are entities interested in acquiring Starbreeze with a bid premium, primarily to access its Payday brand. The most likely contender, in our view, is currently Microsoft. However, there are several other entities that may be interested.

Since we currently anticipate a negative EBIT for 2024 and 2025 before the next major game launch, it is challenging to draw any significant conclusions using a peer table. The median for Nordic companies regarding EV/EBIT is half of what it is for the international ones. However, the international companies have a median EBIT margin of 22% compared to the Nordic ones, which have 15% according to estimates for 2024. Growth is also expected to be lower for the Nordic companies during this year.

On the blunt profitability measure of EV/EBITDA, Starbreeze appears cheap. However, this measure can be misleading for companies that capitalize a larger portion of costs and have different strategies for amortization rates.