Starbreeze Q2 results this Thursday: Final quarter before the release of PAYDAY 3

Starbreeze will report its Q2 results on Thursday at 7.30 am. We expect revenue to be in line with previous quarters, while we project EBIT to be negative due to increased marketing costs related to PAYDAY 3. Q2 was an eventful quarter for Starbreeze, with the company conducting a rights issue, announcing the release date of PAYDAY 3, releasing three DLCs for PAYDAY 2, and PopReach releasing a licensed PAYDAY mobile game. However, undoubtedly the highlight of the year and the key driver of the stock is the release of PAYDAY 3 on September 21st. Therefore, any information provided regarding PAYDAY 3 is of primary interest when it comes to the Q2 report.

We expect Q2 operating results to be in line with previous quarters

We project Starbreeze's Q2 revenue to increase slightly to SEK 33 million compared to SEK 32 million in Q2'22. The primary driver of revenue remains PAYDAY 2, supplemented by minor revenue from other sources, such as the licensed PAYDAY mobile game released during the quarter. In line with Q1'23, we expect EBIT to be negative at SEK 5.5 million due to increased spending related to the upcoming release of PAYDAY 3. We also expect increased financial expenses due to costs associated with the rights issue conducted during the quarter. The increase in financial expenses will naturally further suppress the Q2 net earnings.

PAYDAY 3 will determine the 2023 results

2023 is all about PAYDAY 3, and the game's success will determine the year's outcome. Our full-year revenue and EBIT estimates are SEK 669 million and SEK 455 million, respectively. These estimates are wholly dependent on a successful PAYDAY 3. Estimating the revenues derived from a new game is never easy, and this was further complicated by the announcement that PAYDAY 3 will be available on day one on Microsoft's subscription service, Xbox Game Pass. We hope to learn more regarding this deal and to what extent Starbreeze is reimbursed for making the game available on Xbox Game Pass.

With PAYDAY 3's release date nearing, we have seen more and more of the game itself. During the first week of August, Starbreeze conducted a closed beta for PAYDAY 3, allowing selected players to experience part of the game. The overall reaction from the beta testers is primarily positive, with the testers commending the core gameplay mechanics and the overall playing experience. PAYDAY 3 has received some criticism from the player base, especially for their decision to require players to maintain a constant internet connection to play the game (always online).

Starbreeze announcing their second third-party publishing project

In August, Starbreeze announced that they will publish the game Roboquest by independent game developer RyseUp Studios. The game will be released in 2023. Roboquest is now the second third-party publishing project announced by Starbreeze, signaling that they are serious about developing their publishing division. A successful publishing division would help lessen the company's dependency on the PAYDAY franchise and offer an additional stream for future revenue growth.