Legal

Letter to Shareholders

1 March 20246 pages1,655 words

Summary

This shareholder letter details the strategic restructuring and financial challenges faced by PCF Group S.A. throughout 2024 and early 2025. Addressing a volatile global video game market, the leadership outlines a significant pivot away from self-publishing and VR ventures toward a renewed focus on the Work-for-Hire (WFH) segment and AAA action titles. The primary thesis centers on stabilizing the company’s foundations through rigorous cost-cutting and portfolio optimization following a period of financial pressure and unsuccessful attempts to secure external strategic investment. Key findings include the cancellation of several major projects due to low commercial potential or lack of creative vision. Project Dagger and Project Red were abandoned, leading to a 7.7 million PLN write-off in mid-2024. Most significantly, the company recorded a 154.9 million PLN impairment charge for Project Bifrost at the end of 2024 due to financing uncertainties. These setbacks necessitated the first year-over-year workforce reduction in the group’s history, impacting over 150 employees across various departments and projects, including the Square Enix-partnered Project Gemini. The geographic and industrial scope covers the global gaming market with specific impacts on the group’s Polish and international subsidiaries, including Incuvo S.A. and Game On. Methodologically, the report relies on internal financial audits and strategic reviews conducted by the Board of Directors. Despite these hardships, the leadership highlights a return to stability through new WFH contracts with major industry players, including Krafton Inc., Sony Interactive Entertainment (Project Delta), and Microsoft, for whom they are developing a new installment in the Gears of War franchise (Project Maverick). The group concludes by signaling a cautious transition into 2025, prioritizing cash-flow positive projects and the early access release of Project Victoria.

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Półroczne Sprawozdanie Zarządu z Działalności Grupy Kapitałowej PCF Group S.A. oraz Spółki PCF Group S.A.: 2024

PCF Group S.A. experienced a period of significant strategic realignment and financial volatility during the first half of 2024. Operating across international hubs in Poland, the UK, the US, and Canada, the Group reported revenues of 76.3 million PLN, an 11% year-over-year increase. This growth was primarily fueled by development fees from major work-for-hire partnerships, including Project Gemini with Square Enix, Project Maverick with Microsoft, and the newly initiated Project Echo with Krafton. Despite rising revenues, the Group’s net loss widened to 33.3 million PLN, a 155% increase from the previous year, driven by a 63% surge in operating costs and substantial non-cash write-offs. The reporting period was defined by a rigorous consolidation of the production pipeline. The Group canceled Project Dagger and Project Red following strategic re-evaluations, resulting in combined write-offs exceeding 76 million PLN. Furthermore, the renegotiation of the Project Gemini contract with Square Enix transitioned the project to a near-break-even margin, while the disappointing commercial performance of Bulletstorm VR led to the termination of its publishing agreement. These challenges have prompted a formal review of strategic options to secure new financial or strategic investors, as the Group estimates a need for 350 million PLN in new financing between 2025 and 2026 to sustain its self-publishing ambitions. Looking ahead, the Group’s long-term strategy targets 3.3 billion PLN in total revenue through 2028, anchored by the scheduled 2025 release of Project Bison and the 2026 early access launches of Project Bifrost and Project Victoria. While the Group maintains a stable equity-to-assets ratio of 0.80 and a current liquidity ratio of 1.76, it faces ongoing risks related to high wage pressures, dependency on external publishers who retain key intellectual property rights, and the inherent uncertainty of transitioning to a self-publishing model. Management has suspended dividends and incentive programs to prioritize liquidity as it navigates this capital-intensive development phase.

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Sprawozdanie z działalności Grupy Kapitałowej PCF Group S.A. i spółki PCF Group S.A. w 2024 r.

The 2024 Management Board Report for PCF Group S.A. details a period of significant strategic pivoting and financial restructuring for the global AAA game developer. Operating across Poland, North America, and Europe, the Group reported a 27% increase in consolidated revenue to 190.4 million PLN, driven by work-for-hire fees from major partners including Square Enix, Microsoft, Krafton, and Sony. Despite this top-line growth, the Group incurred a substantial net loss of 175.3 million PLN, primarily due to 154.9 million PLN in non-cash write-downs following the cancellation of Project Dagger and Project Red, and the discontinuation of Project Bifrost. The Group’s thesis centers on achieving financial stabilization by balancing its ambitious self-publishing goals with a robust work-for-hire segment. This shift follows a failure to secure 350 million PLN in new financing, leading to a focus on "compact-AAA" titles and a gradual exit from the VR publishing market. While liquidity ratios declined significantly and working capital turned negative in 2024, management maintains that new agreements—such as Project Echo with Krafton and Project Delta with Sony—alongside ongoing major productions like Project Gemini and Project Maverick, provide a viable path toward a cumulative revenue target of 3.3 billion PLN through 2028. Corporate governance remains highly centralized, with CEO Sebastian Wojciechowski holding 41.71% of voting rights and maintaining personal rights to appoint the Board President. This "key man" dependency is noted alongside other operational risks, including high revenue concentration among a few publishers and the financial underperformance of recent releases like Bulletstorm VR. Moving forward, the Group intends to prioritize internal IP development, such as Project Victoria, while utilizing milestone-based external funding to manage its 716-person workforce and meet its long-term financial obligations.

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PCF GroupApr 2025

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Półroczne Sprawozdanie Zarządu z Działalności Grupy Kapitałowej PCF Group S.A. oraz Spółki PCF Group S.A.: 2025

PCF Group S.A. experienced a period of significant strategic realignment and financial volatility during the first half of 2025. While total sales revenue grew by 51% year-over-year to 115.3 million PLN, the Group recorded a net loss of 21.3 million PLN and a sharp 81% decline in cash reserves. This revenue growth was primarily driven by "work-for-hire" development fees from major international partners, including Microsoft for Project Maverick (revealed as Gears of War: E-Day), Krafton for Project Echo/Zulu, and Sony Interactive Entertainment for Project Delta. These partnerships have become the Group's primary financial stabilizer as it pivots away from more capital-intensive self-publishing and VR ventures. The reporting period was defined by the suspension of several high-profile projects and a subsequent reduction in workforce. Most notably, work on Project Gemini was halted on June 1, 2025, following a breakdown in communication and contract negotiations with publisher Square Enix, leading to the layoff of over 60 employees. Additionally, the self-published Project Bifrost was suspended due to cash flow constraints, resulting in significant non-cash write-offs totaling approximately 173 million PLN when combined with the impairment of the subsidiary Incuvo S.A. The Group also began a gradual withdrawal from the VR publishing market following the underperformance of Bulletstorm VR. To address liquidity challenges and a tightening immediate liquidity ratio, the Group successfully raised capital through the issuance of 6.67 million Series H shares in August 2025. Despite the contraction in its self-publishing pipeline, the Group launched Project Victoria (retitled Lost Rift) in Early Access on Steam in September 2025, though its long-term success remains uncertain. Moving forward, the Group faces ongoing risks related to its dependence on third-party publishers, currency fluctuations affecting its PLN-based cost structure, and the need to maintain high-skilled development talent in a competitive global market.

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PCF GroupSept 2025

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Raport bieżący nr 29/2024

The Board of PCF Group S.A., headquartered in Warsaw, formally concluded the strategic options review for the company and its capital group on 10 December 2024, after earlier interim reports in August and September 2024. The primary purpose of the decision was to acknowledge that the anticipated external financing of roughly 350 million PLN—required to sustain the current scale of self‑publishing projects—was not secured, rendering the original strategic plan unfeasible. Consequently, the Board resolved to refocus financial management toward immediate liquidity improvement. The new priority is to align investment outlays for internal game development and publishing with revenue generated from the work‑for‑hire segment, thereby achieving a balanced cash‑flow structure. This shift implies a reduction in self‑publishing activities until the financing gap is closed or alternative funding sources emerge. The scope of the assessment covers PCF Group S.A. and its subsidiary People Can Fly, operating within the Polish market and the broader European video‑game industry. The time frame spans the strategic review period from August to December 2024. No external survey or statistical sampling was employed; the conclusion derives from internal financial analysis and the failure to attract the targeted capital injection. Future disclosures regarding specific remedial actions will be made publicly in accordance with applicable regulations, ensuring transparency of the group’s efforts to restore financial stability and continue operations across both self‑publishing and contract‑based development streams.

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PCF GroupDec 2024

Presentation

Aktualizacja Strategii Nowe Otwarcie: Polska

People Can Fly’s strategic update, issued on 31 January 2023, outlines a transformation from a single‑title studio into a multi‑project, globally distributed developer and emerging self‑publisher. The core thesis is that leveraging the group’s expertise in AAA shooters, Unreal Engine technology, and a newly expanded talent pool will enable simultaneous delivery of several high‑quality games while shifting revenue generation toward Game‑as‑a‑Service and diversified monetisation models. Over the past two years the group has completed the Outriders launch and its Worldslayer expansion, restructured its production pipeline from one‑game‑at‑a‑time to parallel development, and opened new studios in Kraków and Montréal. Acquisitions of Phosphor Games (Chicago), Game On Creative (motion‑capture and cinematics), and Incuvo S.A. (VR) have broadened capabilities into compact‑AAA, virtual‑reality and live‑service titles. The workforce now exceeds 600 “Aviators,” including roughly 400 developers, with two‑thirds based in Europe and one‑third in North America. Internal processes rely on agile, matrix‑based feature teams, a proprietary PCF Framework for Unreal Engine, and Centers of Excellence that foster cross‑project knowledge sharing. Future plans target six new releases by 2027, aiming for at least 3 billion PLN in combined revenue from 2023‑2027. The pipeline includes the AAA work‑for‑hire title Gemini (partnered with Square Enix, slated for 2026), the self‑funded AAA projects Dagger, Bifrost and Victoria (all projected for 2025‑26), the compact‑AAA concept Red, and the self‑published VR titles Thunder (2023) and Green Hell VR (202

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PCF GroupJan 2023

Financial

Sprawozdanie Zarządu z Działalności Grupy Kapitałowej PCF Group Spółka Akcyjna oraz Spółki PCF Group Spółka Akcyjna w 2020 Roku

In 2020, PCF Group S.A. underwent a transformative period marked by its debut on the Warsaw Stock Exchange and a significant shift in its corporate structure. Following its conversion into a joint-stock company and the absorption of its primary subsidiary, the Group expanded its global footprint to include wholly-owned production studios in the United States, Canada, and the United Kingdom. This expansion was supported by a successful IPO that raised 100.3 million PLN, facilitating the acquisition of a development team in Chicago and the establishment of new studios in Łódź and Montreal. Financial performance in 2020 was characterized by robust growth, with consolidated revenue rising 24% to 103.8 million PLN and net profit surging by over 400% to 24.6 million PLN. This growth was primarily driven by work-for-hire Triple-A game production, which accounted for 96% of revenue. The Group benefited from a preferential 5% "IP Box" tax rate and pandemic-related subsidies from both Polish and North American government programs. Despite this growth, revenue remained highly concentrated, with over 80% derived from a strategic partnership with Square Enix. The Group’s development pipeline centers on high-profile action-RPG titles, including the 2021 release of *Outriders* and two major projects slated for 2024: *Project Gemini* and *Project Dagger*. While the Group continues to rely on major publishers like Square Enix and Take-Two Interactive for financing and distribution, it is actively transitioning toward a self-publishing model, notably retaining the intellectual property for *Project Dagger*. Strategic risks include heavy reliance on specialized talent, currency fluctuations, and the "key man" risk associated with CEO Sebastian Wojciechowski, who maintains a 50.31% stake and significant statutory control. Governance is characterized by high insider concentration, with a shareholder agreement controlling 71.25% of voting rights. While the Group adheres to most Warsaw Stock Exchange standards, it maintains a centralized management structure tailored to its rapid transition from a private entity to a major public developer.

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PCF GroupApr 2021

Letter to Shareholders

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