11 bit studios: waiting for Frostpunk 2

11 bit studios in 30s

11 bit studios develops games with a Philosophy of meaningful entertainment. With games like Frostpunk and This War of Mine company proved to be top a player. By producing DLC to the existing games and launching it on others Platforms 11 bit studios showed that is able to monetize the existing products. Recently company announce the premier of Frostpunk 2 which is highly expected by players and investors.

11bit studios is a developer and publisher of games founded in 2009 in Warsaw company debuted on Warsaw Stock Exchange in 2010.

 

11 bit studios as a producer

So far company as developer delivered 7 games: Anomaly (2011), Funky Smugglers (2012), Sleepwalker’s Journey (2012), Anomaly 2 (2013), Anomaly Defenders (2014) This War of Mine (2014), Frostpunk (2018). The production of games covers the entire process of their creation, from development to its marketing and sales.

While making the games company established a Philosophy of meaningful entertainment. Pawel Feldman (publishing director) synthase these ideas in phrase “Games that make you think even after you stop playing them”. 

For example This War of Mine (with budget of 2 mln PLN generating more then 100 mln PLN income)  is a survival strategy where the player controls  group of civilian survivors during the wartime. The player has to make moral choice as to provide shelter and food. This game was inspired by Siege of Sarajevo. The game was even recognized by its educative values and was added to the recommended reading list in Polish high schools during the academic year of 2020–2021.

In the latest game Frostpunk the player is in the role of leader post apocalyptic city during the volcanic winter. Here player also needs to make many “moral” choices, such as child labour or supporting sick and old people. The Frostpunk, which cost of production was 10mln PLN and income produce till mid 2021 was 140mln PLN,  put the company on the higher level. Within 66 hours of the premiere, fans acquired over 250,000. copy.

taken from 11 bit studios site

11 bit studio as a publisher

As a publisher 11 bit studios helped to publish 5 games like Spacecom, Beat Cop Tower 57, Moonlighter Children of Morta.
This games are also not far away from the meaningful entertainment. Children of Morta tells the story of the Bergson family who are guardians of the Morta Mountain, family has to face threat that will test the strength of family ties.  While in Moonlighter player is put in the role of a shopkeeper who dreams to be a hero, player run his shop during the day and goes exploring at night.
The publishing process may intervene at difference level, for example only at level of sales and marketing this generates only 30% of the retail price. However if company co- finance production and it is responsible for test and marketing this margin maybe higher. For example in case of moonlighter the company support involves marketing, production, test and sales in this case this generates about 30% of the retail price. Till now the total revenue from the game development is 73mln PLN while royalties paid is 43mln PLN.

11 bit could good monetize current titles, the history of income

The company in not only good at producing and developing games, but also at monetization the current titles by making DLC and putting existing games on other platforms.  The DLC for example in case of This War of Mine we have:  “Father’s Promise” , “The Last Broadcast” and “Fading Embers”. While the Frostpunk revenues are boosted by DLC like: “The Rifts”, “The Last Autumn”, and “On The Edge”.  

We see how company generates income on following figure. From years 2011-end of 2017 company income was around 25mln PLN. After Frostpunk in 2018 company boosted their gains two fold generating income of 80 mln PLN, which put 11 bit studios to another level. We also observe that by producing further DLC 11 bit studio were able in a repeatable manner generates similar income in 2018 till now.

Here we put summary of games and DLC contributing mostly to the sales in each year:

·        2011-2017 This War of Mine and other games

·    2018: Frostpunk, Moonlighter, This War of Mine on Nintendo switch, This War of Mine DLC “The Last Broadcast”.

·       2019: Moonlighter on Xbox game pass, Frostpunk DLC “The Rifts”, Children of Morta on computer and PS4, This War of Mine DLC “Fading Embers”, Moonlighter DLC “Between Dimensions” , Frostpunk on PS4.

·     2020:  Frostpunk DLC „The Last Autumn” and „On the edge”, Frostpunk on console in  Japan, Children of Morta in Xpass and Moonlighter DL CAT PS4 and XBOX

·     2021: Frostpunk on Mac, moonlighter on  iOS Frostpunk DLC on consoles and Frostpunk  IN Epic Store

For the better understanding graph below we put the most import events in crosses on the stock price. In orange cross we have the premiere of This War of Mine, in green the announcement of Frostpunk. In red cross the premiere of Frostpunk. FInally in red cross we have announcement of Frostpunk 2.

11 bit studios Revenue
11 bit studios performance with marked important events

Current plans of 11 bit studio developer

The company with internal budget of 110 mln PLN runs 3 projects in parallel. For comparison the production budget of Frostpunk (PC version) was ten times lower it was below PLN 10 mln PLN.

The first project called Project 8 which hires 40 persons, company plan to hire additional 30 person. This project produce games aimed for console player type games. This “mysterious” game is supposed be close to CONTROL game. The next project dolly which hires 20 persons and company plan to extend for another 20 persons. This project focus on the survival type game. The third project Eleonor the biggest one with 60 people here are many veterans who worked in the Frostpunk. In august 2021 the company announced that this project is producing the Frostpunk 2. So far Frostpunk 2 is in top 10-15 on the steam Wishlist (January 2021) this game is expected to appear in 2023. For comparison the first Frostpunk was announced 20 months before premiere.

 

Current plans of 11 bit studio producer

The company thinks to spend more than 50 mln PLN on external projects in 2021-2023. The company runs three publishing projects. The current project are “Vitriol” (RPG with the scale of the project resembling “Frostpunk”, “Botin” and “AVA” . The first project Vitriol, produced by the Fool’s Theory studio of Bielsko-Biała. The second project Botin is produced by is Digital Sun Games of Spain, the studio behind the development of Moonlighter. The third project Ava is developed by Spanish studio Chibig.

Waiting for Frostpunk 2 and other ambitous plan

During investors day and in Q3 report company stated their futures goals. 11 bit studio aims  to develop three own titles and publish 6-9 titles from publishing in the years 2022-2025. So  very ambitious plan of three premier yearly from 2023. As mentioned before Frostpunk should appear in 2023. For comparison the first Frostpunk was announced 20 months before premiere.

 The company in two years want to hire 300 employees. Company aim to generate income of 656 mln PLN and gross profit of 328 mln PLN in years of 2021-2025. After  Q3 2021 report we can assume that it will be 30 mln PLN in years 2023-2025 which is 100 mln PLN per year. The market is discounting it with the such a high stock valuation (P/E of 60)

 

Despite many spendings company financial looks clean (cash and cash equivalents, investment fund units, bank deposits, and trade and tax receivables) an were valued at  121mln PLN  up 5.34% on the end of 2020. Company tends to put the cash aside and not paying dividends.

11 bit studios investors presentation

Pros

  • Company is good at monetization of existing projects by producing DLC and putting the games on other platform
  • Company creates games which generates not only the high income but serve also as meaningful entertainments
  • Diversified portfolio of games: company is developing its own three titles  but also help to publish games with external third parties
  • A lot of cash for the existing projects
  • Ambitus plan of management: 11 bit studio aims  to develop three own titles and publish 6-9 titles from publishing in the years 2022-2025

Cons

  • High market valuation  tends to discistoung huge success of Frostpunk 2.
  • Company tend to shift/postpone the premier of the game
  • Acquisition of smaller companies, however company has a lot of cash

11 bit main company information

Market Cap: 1.33 mld PLN(23-01-2021)
 Share Price: 560 PLN (23-01-2021)
 Business area: producer and publisher of games