Financial

Annual Report of 11 Bit Studios S.A. for 2023

1 April 2024132 pages65,681 words

Summary

11 bit studios S.A. transitioned through a significant investment phase in 2023, characterized by a deliberate shift toward larger-scale production and a multi-brand intellectual property model. While the company reported a 29.6% decline in revenue to PLN 52.3 million and a sharp contraction in net profit to PLN 0.52 million, these results reflect a maturing product portfolio and the absence of major proprietary releases during the period. Financial performance was further impacted by non-cash adjustments, including a PLN 6.5 million write-down of its stake in Starward Industries and unfavorable currency exchange fluctuations affecting its primary revenue streams in USD and EUR. Despite lower earnings, the company maintained a robust financial position, ending the year with PLN 54.3 million in cash and deposits and no significant external debt. This liquidity supported a record investment of PLN 58.2 million into game development, bringing total "ongoing development work" to PLN 149.6 million. These resources are concentrated on three major proprietary titles—*Frostpunk 2*, *The Alters*, and *Project 8*—as the studio moves toward a strategic goal of releasing one internal game every few quarters. Notably, the publishing division reached a record 42% share of total revenue, bolstered by the release of *The Invincible* and strong back-catalogue performance from titles like *Frostpunk* and *Children of Morta*. The company expanded its workforce to 299 employees and modernized its Warsaw headquarters, emphasizing human capital and operational readiness for a landmark 2024 release schedule. Strategic agreements, such as advance payments from Microsoft for Game Pass inclusions, have further strengthened the balance sheet. While management identified risks related to talent shortages and macroeconomic volatility, the successful accumulation of over two million wishlists for *Frostpunk 2* underscores a positive outlook. The company remains committed to its 2021–2025 incentive targets and continues to utilize "IP Box" tax relief to optimize its fiscal position as it prepares for its next growth cycle.

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Annual Report of 11 Bit Studios S.A. for 2024

11 bit studios S.A. reported record-breaking financial results for 2024, characterized by a 168.9% year-on-year revenue increase to PLN 140.54 million. This growth was primarily driven by the successful September launch of *Frostpunk 2*, which sold 592,000 copies by year-end and recouped its development costs within three days. Performance was further bolstered by strong back-catalogue sales and a robust publishing division, with the United States remaining the company's largest market and Steam serving as the dominant distribution platform. Despite record top-line growth, the company recorded a modest net profit of PLN 6.9 million and an operating loss of PLN 2.84 million. These figures were heavily impacted by PLN 67.4 million in non-cash impairment losses, most notably a PLN 48.4 million charge following the discontinuation of "Project 8" due to poor projected returns. Additional impairments were recognized for the underperformance of published titles *The Thaumaturge* and *Creatures of Ava*. However, the company’s liquidity position remains strong, with cash reserves increasing to PLN 65.5 million, providing sufficient funding for upcoming projects without the need for external financing. The company’s strategic outlook focuses on transitioning toward larger-scale intellectual properties. Key milestones include the rescheduled release of *The Alters* in June 2025 and the initiation of a new *Frostpunk* universe title slated for 2027. While the studio currently lacks formal ESG and diversity policies, it maintains a stable governance structure and utilizes the IP Box tax relief to optimize its effective tax rate. Operating primarily from its Warsaw headquarters, the firm continues to manage significant exposure to foreign exchange risks while navigating a competitive global gaming market valued at over $187 billion.

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11 bit studios S.A. maintained a robust financial and strategic position in 2021, despite a year-over-year decline in earnings driven by a lack of new product premieres. The company reported annual revenue of 70.12 million PLN and a net profit of 28.69 million PLN, down from 37.36 million PLN in 2020. Notwithstanding lower sales, the balance sheet strengthened significantly, with total assets rising to 219.5 million PLN and record financial assets reaching 107.41 million PLN. This stability was fueled by the sustained performance of the "back catalogue," including *Frostpunk* and *This War of Mine*, alongside effective utilization of the "IP Box" tax relief. The company is currently undergoing a major strategic transition from "Indie" developer to a larger-scale producer and publisher. To support this, 11 bit studios expanded its workforce to over 200 employees and increased R&D investment, with capitalized development costs for unfinished projects—specifically *Frostpunk 2*, *Dolly*, and *Project 8*—rising to 52.93 million PLN. All internal projects have migrated to Unreal Engine under a new licensing deal with Epic Games. Additionally, the company expanded its external footprint by acquiring a 40% stake in Fool’s Theory and committing 50 million PLN to its publishing pipeline through 2023. Geographically, the United States remains the dominant market, accounting for 76% of total revenue, with Steam serving as the primary distribution channel. Because 78% of revenue is denominated in USD while costs are largely in PLN, the company remains highly sensitive to currency volatility. Looking ahead, management has established an ambitious 2021–2025 incentive program targeting 656 million PLN in consolidated revenue, underpinned by a shift toward a multi-team structure capable of delivering annual releases. Operations remain centered in Poland, with the company maintaining high liquidity and self-financing capabilities to fund its upcoming production cycles.

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Annual Report 11 Bit Studios for 2022

In 2022, Warsaw-based 11 bit studios S.A. demonstrated financial resilience and strategic expansion despite a 4.3% contraction in the global gaming market. The company reported revenues of 74.2 million PLN, a 5.8% year-over-year increase driven by strong back-catalog performance and a record 38% revenue share from its publishing division. While net profit decreased by 20.2% to 22.9 million PLN—largely due to rising operating costs, increased payroll, and a significant 3.66 million PLN charitable donation to the Ukrainian Red Cross—the studio outperformed internal budget expectations and maintained a robust equity-to-asset ratio of 92%. The studio’s strategic focus shifted toward a long-term production pipeline, with intangible assets surging 69% to 99.9 million PLN. This growth reflects heavy investment in three major internal titles—*Frostpunk 2*, *The Alters*, and *Project 8*—with a combined production budget of approximately 130 million PLN. Simultaneously, the company expanded its publishing reach by acquiring a 40% stake in Fool’s Theory and a 5.18% stake in Starward Industries, supporting upcoming external releases like *The Invincible* and *The Thaumaturge*. Geographically, the United States remains the primary market, accounting for 77.4% of total sales. Operating under IFRS standards, the company utilized the IP Box tax relief to maintain an effective tax rate of 15.93% and opted to allocate its 2021 profits to supplementary capital rather than dividends to self-finance future growth. To support this scaling, the workforce grew by 30% to 245 employees, managed under a new hybrid work model. While the company currently lacks formal ESG and diversity policies, it maintains high liquidity and a conservative leverage ratio of 8.98%, positioning itself to release one internal and three to four external titles annually.

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Annual Report 11 Bit Studios S.A. for 2020

In 2020, 11 bit studios S.A. achieved its strongest financial performance to date, characterized by record-breaking revenues of 87.1 million PLN and a net profit of 37.36 million PLN, representing a 57.5% year-over-year increase. These results were primarily driven by the sustained monetization of core intellectual properties, specifically the *Frostpunk* and *This War of Mine* franchises, alongside a growing contribution from the publishing division, which accounted for 29% of total revenue. The company successfully utilized the IP Box tax relief, significantly lowering its effective tax rate to 8.09% and further bolstering its net margin to 42.9%. The company’s strategic focus shifted toward scaling operations and transitioning from indie-level projects to larger-scale productions. This evolution included expanding the internal pipeline to three major proprietary projects—Project 8, Dolly, and Eleanor—and adopting Unreal Engine for future development. To support this growth, the workforce expanded to over 170 employees, and the company moved to a new headquarters in Warsaw. Despite the global COVID-19 pandemic, the transition to remote work caused minimal disruption to production schedules or financial stability. By the end of 2020, the financial position remained exceptionally robust, with total financial resources reaching a historic high of 107.7 million PLN and no debt. This liquidity allows for the full self-financing of current development and publishing expansions. Key corporate milestones included a leadership transition with Przemysław Marszał becoming President of the Board and the establishment of an ambitious 2021–2025 incentive program tied to cumulative revenue targets of 656 million PLN. While the United States remains the primary market, accounting for nearly 77% of sales, the company continues to manage risks associated with foreign exchange volatility and the competitive labor market for specialized developers.

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Annual Report of 11 bit studios S.A. for 2013

During the 2013 fiscal year, 11 bit studios S.A. achieved its third consecutive year of profitability, characterized by a strategic transition from a pure development house to a diversified global publisher and distributor. While net sales revenue grew by 28% year-over-year to 4.3 million PLN—with total revenues reaching 5.75 million PLN—net profit saw a moderate decline to approximately 1.01 million PLN. This decrease in margin was primarily driven by a 44.9% rise in operating costs, largely attributed to increased personnel expenses and the simultaneous development of three major titles, including the high-profile project This War of Mine and Anomaly Defenders. The company’s financial health remained robust, ending the year with 3.74 million PLN in cash reserves and total assets of 8.7 million PLN. A significant portion of these assets consisted of capitalized development costs and work-in-progress inventory, reflecting a heavy reinvestment of capital into future intellectual property. This internal funding capability allowed management to pursue 2014 operations without seeking external financing. To further stabilize its business model, the firm launched the "11 bit launchpad" publishing initiative and the "Games Republic" digital distribution platform, aiming to reduce reliance on third-party platforms and diversify revenue streams. Operating primarily in the global market, the company generated over 93% of its revenue from foreign sales, creating significant exposure to currency fluctuations, particularly the USD/PLN exchange rate. Other identified risks included the inherent unpredictability of consumer demand and the technical challenges of securing approvals for closed console platforms. To mitigate these, the firm focused on cross-platform development for PC and mobile while utilizing internal training systems to address the shortage of specialized talent in the Polish labor market. Independent audits confirmed the company’s strong liquidity and compliance with Polish accounting regulations, maintaining a transparent corporate governance profile on the NewConnect exchange.

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Annual Report 11 Bit Studios S.A. for 2019

In 2019, 11 bit studios S.A. demonstrated a period of significant financial consolidation and strategic expansion, characterized by a transition toward a multi-project development and publishing model. The company reported sales revenues of 71.2 million PLN and a net profit of 21.7 million PLN. While these figures represent a decrease from the record-breaking results of 2018, the firm significantly strengthened its balance sheet, increasing total assets to 155.7 million PLN and growing its cash reserves and financial assets to nearly 100 million PLN. This robust liquidity was supported by the sustained monetization of core titles such as Frostpunk and Moonlighter, alongside the successful debut of Children of Morta. A key driver of profitability was the implementation of the IP Box tax relief, which reduced the effective tax rate from 21.94% to 13.26%. This fiscal efficiency, combined with the decision to allocate the previous year’s entire profit to reserve capital rather than dividends, has enabled the company to self-finance an ambitious growth strategy. This strategy involves expanding the internal workforce to 135 employees and establishing three distinct development teams to support a release cycle of one proprietary game every 12 to 18 months. Current internal investments are focused on "Project 8," "Project 9," and "Project 10," alongside the continued development of a proprietary game engine. The publishing division emerged as a critical pillar of the business, increasing its revenue contribution from 18% to 40% in 2019. To sustain this momentum, the company signed several new external publishing agreements and increased its investment cap for third-party projects. While the company faces risks related to currency fluctuations—with 90% of revenue denominated in USD—and the competitive global market for specialized talent, its operational stability remained high. Even with the onset of the COVID-19 pandemic in early 2020, the studio reported no material impact on liquidity or sales, having successfully transitioned to a remote work model.

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Annual Report of 11 Bit Studios S.A. for 2023

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