A few financials:
2017 annual report:
SEK are converted to US$ at a rate of about 10 to 1.
- Loss before tax ~ 17 million US$, which probably includes a significant amount of depreciation.
- EBITDA ~ -5 million US$, operating cashflow ~ -2 million US$, so this is not an accountants problem — they are losing actual money.
- Sales went up compared to 2016 by a few million $, but the workforce expanded, too, and sales per employee dropped from over 200,000 US$ to about 130,000.
- Two titles (PAYDAY and Dead by Daylight) account for about 90% of revenues.
- They hired a huge amount of people in 2017 (up from 212 in 2016 to 650 at year-end 2017). -It is stated elsewhere that the increase is in large part due to the acquisition of Indian production company Dhruva, so the actual cost impact may be less than it appears from the raw numbers-
- About one third of reported total revenues is “capitalized development costs.” So that’s not real cash coming in, instead they treat (part of) their development expenses as an asset in expectation of future revenues that might flow from that development.
- That percentage was about the same in 2015 and 2016, but much lower in 2014.
- Operating costs in 2017 were ~ 74 million US$, that number was ~ 13 million in 2015.
- They received a huge cash inflow in 2017 (~ +85 million US$). As far as I can see, that was before going public in October 2017, so that must have been debt or hybrid instruments. Despite going public in 2017, they burned two thirds of their liquid cash (“Cash and cash equivalents”) in that year, but still had a fair amount of cash left in the bank.
- The only significant impairment in 2017 was -2 million US$ on a game called RAID.
So it seems what happened is that they invested heavily in new development in 2017, partly financed by going public in October of that year, but probably also with new debt incurred in 2016. For the new development investments, they massively increased their headcount.
This looks risky to me, although generally, the company was in no bad shape at the end of 2017. But the investments have to pay off soon.
2018 interim statements (latest available - Q3):
- It seems they had a substantive problem with cash flow, and could only meet their cash needs by issuing 20 million new shares. The company still incurred a (small) loss (pp.19-20).
- They appear to have been compelled to sell their main cash cow Dead by Daylight, which accounts for two thirds of all net sales (p.10).
- Return to profitability and positive cash flow, but probably only due to the one-time effect of the fire sale of Dead by Daylight publishing rights (revealed as 16 million US$ or ~ 160 million SEK, p.5)
- Without the 16 million from the DbyD sale, they would still have burned loads of cash in that quarter.
- SS3 mentioned on p.3 as a ‘major publishing project’ in the pipeline.
- Interestingly, Acer agreed to extend a $7million convertible bond by one year at the same conditions, indicating they didn’t see the imminent collapse coming (p.5).
- After selling the main cash cow (two thirds of sales), the company had a huge hole on the revenue side, again profit and cash negative, p.6.
- CFO leaves, p.5.
- Company wants to replace bank loans by secured note (unclear by what it would be secured), p. 5.
- Company launches Overkill The Walking Dead, but the game obviously couldn’t replace Dead by Daylight.
The shareprice (SE0007158928) went down 90% over the next few months (Nov 2018 - Jan 2019).
5 Dec 2018: Starbreeze offices raided by law enforcement, CEO is fired, refuses to comment on ongoing criminal investigation.
21 Dec 2018: Court order puts Starbreeze into administration, creditor committee established.