Financial

Skonsolidowany Raport Półroczny za Okres 1.01.2023 - 30.06.2023

1 September 202390 pages34,555 words

Summary

PCF Group S.A. reported a transition toward a self-publishing and "Game-as-a-Service" model during the first half of 2023, a period marked by significant capital restructuring and a shift from profitability to an operational loss. The Group recorded a consolidated net loss of PLN 13.1 million for H1 2023, compared to a PLN 25.5 million profit in the same period of 2022. This downturn was driven by a 24% year-over-year decrease in sales revenues to PLN 68.7 million and a sharp rise in operating costs, which reached PLN 136.9 million as the company expanded its development teams and internal publishing infrastructure. Despite the net loss, the Group’s financial position was bolstered by successful capital-raising activities. Through the issuance of Series E, F, and G shares, the Group raised approximately PLN 235 million, strengthening total equity to PLN 394.2 million and increasing cash reserves to PLN 165.4 million. A strategic partnership with Krafton, Inc., which acquired a 10% stake, and the entry of Nationale-Nederlanden OFE as a significant shareholder, provided the necessary liquidity to fund an ambitious project pipeline. This pipeline includes "Project Maverick" for Microsoft—a work-for-hire agreement valued between $30–50 million—alongside self-published titles such as Projects Dagger, Bifrost, and Victoria. The Group’s revenue remains heavily reliant on its "Production for Hire" segment, which accounted for over 75% of total income, primarily through ongoing collaborations with Square Enix and Microsoft. Notably, the Group has yet to receive royalties for *Outriders*, as sales have not yet recouped the publisher's development and promotion costs. Looking forward, the Group has set a total revenue target of PLN 3.0 billion for the 2023–2027 period and has suspended dividend payments until at least 2025 to prioritize the reinvestment of capital into its expanding portfolio of AAA titles and proprietary software frameworks.

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Financial

Półroczne Sprawozdanie Zarządu z Działalności Grupy Kapitałowej PCF Group S.A. i Spółki PCF Group S.A.: za okres 1.01.2023 – 30.06.2023

PCF Group S.A. underwent a significant strategic transition during the first half of 2023, shifting its focus toward self-publishing and Game-as-a-Service models while maintaining a robust global presence across Poland, North America, and Europe. The primary objective of this period was to secure the capital necessary to fund an ambitious 2023–2027 growth strategy, which targets 3.0 billion PLN in revenue. This was largely achieved through the issuance of Series F and G shares, raising approximately 235 million PLN and attracting Krafton, Inc. as a strategic 10% anchor investor. Despite these capital inflows increasing total assets to 481.9 million PLN and bolstering cash reserves, the Group faced a challenging fiscal environment, reporting a net loss of 13.1 million PLN on revenues of 68.7 million PLN—a 24% year-over-year decline. The financial downturn was primarily driven by the conclusion of major development work on Outriders Worldslayer and the termination of a previous agreement with Take-Two Interactive. Revenue remains highly concentrated, with over 75% derived from a work-for-hire contract with Square Enix. Furthermore, the Group has yet to receive royalties for Outriders as net sales have not yet recouped publisher costs. To diversify its portfolio, the Group signed a production agreement with Microsoft for Project Maverick, a AAA title with a budget of $30–50 million, and increased its stake in VR developer Incuvo S.A. to 62.25%. Operational risks remain centered on high dependency on external publishers who retain ownership of key intellectual property, as well as significant key-man reliance on CEO Sebastian Wojciechowski, who maintains a 41.65% stake. While the Group faces rising administrative costs and wage pressures across its international studios, its strong liquidity position and the development of the proprietary PCF Framework are intended to support the transition toward a self-publishing model and the eventual release of internal titles such as Projects Gemini, Dagger, and Bifrost.

market-analysis investment game-publishing+1

PCF GroupSept 2023

Financial

Skonsolidowany Raport Półroczny Za Okres 01.01.2024 - 30.06.2024

PCF Group S.A. (People Can Fly) reported a period of significant financial and strategic transition during the first half of 2024. While consolidated sales revenues increased to 76.3 million PLN from 68.7 million PLN in the previous year, the Group’s net loss widened substantially to 33.3 million PLN. This downturn was primarily driven by rising operating costs, which reached 171.1 million PLN, and significant non-cash impairment charges totaling approximately 85 million PLN related to the cancellation of Project Red and Project Dagger. The Group’s cash reserves fell to 83.4 million PLN by June 30, 2024, as heavy investment in intangible assets and negative operating cash flows pressured liquidity. The Group’s revenue model remains heavily reliant on development fees from international partners, including Square Enix, Microsoft, and Krafton. However, a strategic shift in the relationship with Square Enix regarding Project Gemini—now operating on a cost-only work-for-hire basis—has compressed margins. To stabilize operations, the Group secured a new agreement with Krafton for Project Echo and continues to utilize the IP Box tax relief in Poland. Despite these efforts, the unsatisfactory launch of Bulletstorm VR and the termination of associated publishing agreements have further complicated the transition toward a self-publishing model. Looking forward, management has initiated a comprehensive review of strategic options to secure 350 million PLN in new financing required for the 2025–2026 period. This capital is essential to sustain the development of major self-published titles, including Project Bison, Bifrost, and Victoria, which have been rescheduled for release between 2025 and 2026. While the Board maintains a going concern assumption for the next 12 months, it acknowledges that failure to secure additional funding by the end of 2024 may necessitate a reduction in operational scale or a significant adjustment to the current business model.

mergers-acquisitions investment europe+1

PCF GroupSept 2024

Financial

Skonsolidowany Raport Kwartalny Za Trzeci Kwartał 2023 Roku

PCF Group S.A. transitioned through a period of intensive capital restructuring and strategic pivot during the first three quarters of 2023. The primary objective was to secure funding for an ambitious shift toward self-publishing and "Game-as-a-Service" models while maintaining its established work-for-hire operations. Geographically, the Group expanded its international footprint, particularly in Ireland and Canada, while managing a diverse portfolio of AAA projects including partnerships with Square Enix and Microsoft. Financial performance during this period was characterized by a significant downturn in profitability, with the Group reporting a consolidated net loss of 13.4 million PLN compared to a 42.1 million PLN profit in the previous year. Sales revenues fell to 111.2 million PLN, driven by a 20% increase in operating costs as the company scaled its development and publishing infrastructure. Despite these operational losses, the Group’s balance sheet strengthened considerably. Total assets grew to 579.9 million PLN, supported by a major capital increase that raised approximately 241 million PLN through the issuance of new shares. This influx of capital, which included Krafton Inc. becoming a strategic anchor investor with a 10% stake, bolstered cash reserves to 173.8 million PLN. The Group’s strategic focus remains divided between high-profile collaborations and internal IP development. While the work-for-hire segment continues to be the primary revenue driver, substantial investments were directed toward self-published projects such as Bifrost and Victoria. However, the Group also demonstrated fiscal discipline by scaling back Project Dagger and halting negotiations on Project Dolphin due to external market pressures. Looking forward, the Board has prioritized long-term growth over immediate returns, recommending no dividend payments until at least 2025 to ensure sufficient liquidity for its expanding production pipeline.

investment mergers-acquisitions market-analysis+1

PCF GroupNov 2023

Financial

Skonsolidowany Raport Półroczny za okres 01.01.2025-30.06.2025

PCF Group reported a significant increase in consolidated sales revenue for the first half of 2025, reaching 115.3 million PLN compared to 76.3 million PLN in the same period of 2024. This growth was primarily driven by the development fee segment, bolstered by high-profile "work-for-hire" collaborations with industry leaders including Microsoft (Project Maverick/Gears of War: E-Day), Sony (Project Delta), and Krafton. Despite the revenue surge, the Group recorded a consolidated net loss of 21.3 million PLN. While this represents an improvement over the 33.3 million PLN loss in H1 2024, the financial position remains pressured, characterized by a sharp decline in cash reserves from 58.1 million PLN to 11.2 million PLN and a reduction in total assets to 327.0 million PLN. The reporting period was defined by a major strategic pivot toward third-party development to mitigate liquidity challenges following a failed 350 million PLN funding round in late 2024. This shift necessitated the suspension of several internal projects, most notably Project Bifrost and Project Gemini. The suspension of Bifrost led to 12.2 million PLN in write-offs, including impairments to Unreal Engine licenses and goodwill related to the Chicago development team. Furthermore, the breakdown in negotiations with Square Enix regarding Project Gemini and the decision to exit the VR publishing market resulted in over 110 layoffs. Management maintains a going concern assumption supported by a five-year recovery plan and a post-balance sheet Series H share issuance in August 2025, which raised 20 million PLN. While the self-publishing segment continues to face headwinds—evidenced by an operating loss of 48.8 million PLN and initial sales for the early access launch of *Lost Rift* (Project Victoria) falling below projections—the Group remains focused on AAA and compact-AAA titles for PC and consoles. The ownership structure remains stable, with Chairman Sebastian Wojciechowski maintaining a 41.71% stake as the Group navigates its transition toward a more sustainable service-based revenue model.

investment mergers-acquisitions market-analysis+2

PCF GroupSept 2025

Financial

Mid-Year Consolidated Report for Period 3 and 9 Months Completed 30 September 2021

PCF Group demonstrated robust financial growth and strategic expansion during the first nine months of 2021, characterized by a significant increase in scale and a transition toward a more diversified business model. Consolidated sales revenues rose to 131.8 million PLN, up from 79.3 million PLN in the prior year, while net profit more than doubled to 46.4 million PLN. This performance was underpinned by a strong cash position of 149.8 million PLN, largely bolstered by 131.6 million PLN in net proceeds from Series B and D share issuances. These capital increases drove total equity to 241.6 million PLN, providing the necessary liquidity for international expansion and studio acquisitions. The Group’s revenue profile remained heavily reliant on the work-for-hire segment, which accounted for over 90% of total income through partnerships with major publishers like Square Enix and Take-Two Interactive. Despite the April 2021 launch of Outriders, the Group did not record royalty income through the third quarter, as sales had not yet recouped the publisher's development and promotion costs. Strategically, the Group is shifting toward a self-publishing model and expanding its development pipeline with projects such as Gemini and Dagger. This evolution is supported by the acquisition of Game On Creative in Canada and the establishment of People Can Fly Chicago, reflecting a growing global footprint across Poland, the United States, and Canada. Operational costs increased to 92.1 million PLN due to higher headcount and public offering expenses, yet the Group maintained a stable financial outlook. Key corporate developments included a dividend distribution of 5.6 million PLN and a strategic investment agreement with Square Enix involving subscription warrants. By the end of September 2021, the Group had successfully integrated new entities and secured its financial foundation through share capital increases, positioning itself to pursue a goal of annual game premieres starting in 2024.

investment mergers-acquisitions market-analysis+2

PCF GroupNov 2021

Financial

Roczne Skonsolidowane Sprawozdanie Finansowe za 2021 Rok

PCF Group experienced a period of transformative financial and operational growth in 2021, driven by strategic acquisitions, a successful public offering, and the release of the major title *Outriders*. Sales revenue rose 74% year-over-year to 180.3 million PLN, while net profit more than doubled to 61.3 million PLN. This performance was underpinned by a robust equity position of 259.5 million PLN and a significant increase in cash reserves, which reached 137.1 million PLN by year-end. The Group’s total assets nearly tripled to 316.7 million PLN, reflecting substantial investments in intangible assets and development work. The Group’s strategic expansion included the acquisition of Game On Creative, the Phosphor Games development team, and a majority stake in Incuvo S.A., adding 54.6 million PLN in goodwill and enhancing capabilities in motion capture and virtual reality. Geographically, the Group expanded its footprint with new offices in Montreal, New York, and Chicago, while nearly doubling its workforce to 495 employees. While the "work-for-hire" model remained the primary revenue driver—accounting for over 90% of sales through partnerships with major publishers—the Group formally introduced a self-publishing segment to diversify its long-term revenue streams. Financial stability was maintained through conservative accounting practices under IFRS standards, including the application of "IP Box" tax relief, which reduced the effective tax rate to 4.8%. Although *Outriders* had not yet reached the recoupment threshold for royalties by the end of 2021, the Group’s liquidity remained strong with an EBITDA of 73.2 million PLN. Management concluded that the Group is well-positioned for continued operations, noting that external factors such as the COVID-19 pandemic and regional geopolitical instability presented no immediate threat to its financial health or asset values.

investment mergers-acquisitions europe+2

PCF GroupApr 2022

Skonsolidowany Raport Półroczny za Okres 1.01.2023 - 30.06.2023

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Półroczne Sprawozdanie Zarządu z Działalności Grupy Kapitałowej PCF Group S.A. i Spółki PCF Group S.A.: za okres 1.01.2023 – 30.06.2023

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Roczne Skonsolidowane Sprawozdanie Finansowe za 2021 Rok