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Adoption of Strategic Growth Trajectories for 11 Bit Studios S.A.

1 April 20253 pages556 words

Summary

The strategic growth trajectories for 11 bit studios S.A. establish a multi-pillar framework designed to transition the company from a creator of meaningful games to a developer of relatable games. This evolution emphasizes emotional authenticity and intuitive player resonance while maintaining a rigorous focus on engaging mechanics and emergent narratives. The strategy is built upon three distinct product pillars: Pillar A focuses on original in-house intellectual property with high market potential; Pillar B targets the long-term development of established titles as sustainable gaming platforms to stabilize revenue; and Pillar C involves the X-DEV publishing division, which seeks to diversify the portfolio by partnering with external global studios. Operational efficiency is centered on an optimal in-house development scale, utilizing teams of 30 to 60 developers working within four-year production cycles. While the primary focus remains on high-quality single-player experiences, the company intends to selectively integrate multiplayer or social components where appropriate. The publishing arm, X-DEV, will prioritize indie-scale productions with target budgets ranging from USD 1 million to 2 million per title, though additional funds are earmarked for opportunistic projects with significant commercial upside. The organizational vision emphasizes financial stability, prudent budgeting, and the preservation of independent decision-making. By simultaneously developing multiple titles across its three pillars, the company aims to foster sustainable growth and formalize its unique institutional know-how. This roadmap positions the Warsaw-based studio to deliver frequent market successes through a stable business model while empowering experienced creative directors to lead innovative, high-performing teams.

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11 bit studios S.A. Financial Results Q1 2023 — Investor Information

11 bit studios recorded nearly PLN 14.8 million in revenue for the first quarter of 2023, yielding an EBITDA of PLN 3.0 million and a net profit exceeding PLN 2.46 million. While these figures represent a year-on-year decline compared to the first quarter of 2022—which was bolstered by a surge in sales of This War of Mine following a high-profile charitable campaign for Ukraine—the results significantly exceeded internal budgetary expectations. Financial performance was supported by the continued monetization of the existing catalog, specifically Frostpunk and This War of Mine, as well as new revenue streams from the Frostpunk board game and a revaluation of the company's equity stake in Starward Industries. The Warsaw-based developer and publisher is currently in a phase of intensified investment, with game development expenditure rising 28.2% year-on-year to PLN 12.14 million. This capital is being deployed to support a robust pipeline of both third-party and proprietary titles. The publishing division is preparing for the 2023 releases of The Invincible and The Thaumaturge, both of which have seen increased visibility on Steam wishlists following recent promotional efforts. These upcoming launches are expected to provide a significant boost to the company's financial results in the latter half of the year. Looking toward long-term growth through 2025, the strategic focus remains on the release of major proprietary projects, including Frostpunk 2, The Alters, and the unannounced Project 8. Management maintains that the company’s strong cash position allows for an undivided focus on these development goals. By balancing the steady income from its established intellectual properties with a heavy investment in upcoming sequels and new titles, the company aims to secure a trajectory of sustained financial growth over the next several years.

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11 bit studios S.A. Financial Results Q1 2020 — Investor Letter

11 bit studios S.A. achieved its second-best quarterly performance in company history during the first quarter of 2020, driven by robust sales of its internal IP and publishing portfolio. Revenue reached PLN 30.52 million, representing a 114.3% increase year on year, while net profit rose by 226.9% to nearly PLN 14.51 million. These results were achieved despite non-cash provisions of over PLN 2.05 million related to an incentive scheme and the decision to defer IP Box tax relief benefits until the annual return. The company’s total financial assets, including cash and receivables, exceeded the PLN 100 million threshold for the first time, supported by strong operating cash flows of PLN 24.3 million. The primary catalyst for this growth was the January 2020 launch of the Frostpunk: The Last Autumn expansion, which spurred renewed interest in the base game. Cumulative revenue for the Frostpunk franchise surpassed PLN 100 million during this period, overtaking the lifetime earnings of the studio's previous major hit, This War of Mine. Additionally, the publishing division contributed 24% of total quarterly revenue, led by the performance of Moonlighter and Children of Morta. This diversification highlights the company's successful transition from a single-title developer to a multi-faceted producer and publisher. Looking forward, the Warsaw-based studio is focused on scaling its operations and workforce. Plans are underway to increase staff from 140 to approximately 200 employees to support the development of three internal titles currently under the working names Projekt 8, Projekt 9, and Projekt 10. Despite the operational challenges and travel restrictions imposed by the COVID-19 pandemic, the publishing division continues to expand its pipeline with three large-scale projects currently in development. The company maintains a positive outlook for the remainder of 2020, emphasizing a strategy of aggressive recruitment and portfolio expansion to sustain its growth trajectory.

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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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The global game development industry is undergoing a fundamental transition toward a more sustainable and efficient operational model, moving away from volatile hiring cycles in favor of long-term stability. With the market projected to reach $190 billion by 2025, industry leaders express significant optimism, as 77% of developers anticipate continued growth and a marked reduction in workforce instability. This evolution is characterized by a strategic shift toward leaner production cycles where studios prioritize creative intellectual property over the maintenance of internal technical infrastructure. Central to this transformation is the widespread adoption of externalized technology and third-party backend services. While only 6% of developers intend to rely on internal builds in 2025, nearly half plan to integrate specialized third-party tools to manage complex requirements such as cross-platform synchronization and unified player inventories. By outsourcing non-core technical burdens, studios can accelerate time-to-market and mitigate the financial risks associated with building bespoke systems. This shift enables a deeper focus on LiveOps and "forever game" models, which are increasingly viewed as the primary drivers of player lifetime value and long-term revenue. Furthermore, the industry is diversifying its financial and distributional strategies to bypass traditional gatekeepers. Developers are increasingly leveraging alternative funding sources, such as crowdfunding, and utilizing direct-to-consumer webshops to avoid high app store fees. As studios embrace sophisticated metagames and personalized engagement strategies, the integration of cross-platform capabilities and web-based distribution is becoming a strategic necessity. This new paradigm emphasizes technical agility and creative innovation, positioning the industry for a period of disciplined, technology-driven expansion.

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Annual Report of 11 bit studios S.A. for 2021

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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11 bit studiosMar 2022

Adoption of Strategic Growth Trajectories for 11 Bit Studios S.A.

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