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10 July 2023

PCF Group intends to conduct the issue of up to 2.51 million Series G shares, from which it expects to raise at least PLN 100.9 million. The planned issue is the second stage of financing the updated development strategy of the People Can Fly group, announced at the end of January 2023.

The issue of Series G shares will supplement the issue of Series F shares under which the Company has allotted 3.34 million shares out of a total pool of 5.85 million shares. The combined number of Series F shares (3.34 million) and Series G shares (2.51 million) will therefore not exceed 5.85 million, which is the maximum number of shares the Company was prepared to offer in the May/June public offering. There will therefore be no capital dilution beyond that originally planned.

The updated development strategy of the People Can Fly group calls for release of most of the games from its portfolio in the self-publishing model. At the same time, the company remains open to cooperation with renowned partners in the work-for-hire model. Such contracts offer PCF Group financial stability, with a positive impact on generation of revenue and cashflows.

The strategic goal of PCF Group is to generate at least PLN 3 billion in cumulative revenues in 2023–2027, nearly five times more than in 2018–2022.

“Implementation of our adopted strategy requires that we secure adequate financing,” said Sebastian Wojciechowski, CEO and principal shareholder of PCF Group. “In late May and early June we conducted the issue of Series F shares, from which we raised about PLN 134.4 million. That was less than we planned, which is why we are preparing to issue Series G shares. In the meantime, we have executed several of our business targets, including conclusion of a development and publishing agreement with the Microsoft Corporation for development of a game from the AAA segment code-named Project Maverick, and signed a nonbinding letter of intent for potential cooperation with a renowned publisher from the United States for development of a new video game for VR platforms code-named Dolphin. We believe that the market will value this. We plan to offer the Series G shares for at least at the same price as the Series F shares, i.e. PLN 40.20 per share, or higher, and thus the total value of the issue should be at least PLN 100.9 million. This will allow us to raise the amount originally planned, without additional dilution of the capital beyond what we announced in the first issue this year.”

Second stage of equity financing

The issue of Series F shares conducted in late May and early June was to include a maximum of about 5.85 million shares, from which PCF Group expected to raise about PLN 205 to 295 million. Ultimately, after the book-building, the company decided to offer about 3.34 million shares at PLN 40.20 per share. The offering was directed almost entirely to Krafton, a South Korean publisher and developer of games with which PCF Group had previously signed an investment agreement.

The planned issue of Series G shares will supplement the issue of Series F shares and cover up to 2.51 million shares (the combined number of Series F and Series G shares will thus be a maximum of about 5.85 million shares, i.e. the same as the maximum number of shares the company was prepared to sell in the June offering).

Under an additional agreement concluded with Krafton in mid-June of this year, the South Korean publisher will have a right of priority in taking up Series G shares at a price of PLN 40.20 per share, in a number that will allow it to maintain a 10% share in the capital of PCF Group, regardless of the number and price of Series G shares taken up by other investors.

The resolution on the planned increase in the share capital of PCF Group will be put to a vote at the Extraordinary General Meeting called for 7 August 2023. The draft resolution provides that the issue of Series G shares will be conducted in a manner analogous to the offering of Series F shares, i.e. via private subscription (not requiring publication of a prospectus), directed exclusively to eligible investors invited to take part in the offering or investors subscribing for shares with a total value of at least EUR 100,000. The issue will be conducted excluding the pre-emptive rights of current shareholders, but shareholders eligible to take part in the offering, holding at least 0.25% of the company’s shares (at the end of the day on 7 August 2023), will have a right of priority in taking up new shares enabling them to maintain their existing share in the capital.

The timing of the issue of Series G shares will depend on market conditions. According to Sebastian Wojciechowski, “We will analyse the market situation on an ongoing basis and look for the optimal time to conduct the offering of shares. We will have up to six months to do this, counting from the date of adoption by the Extraordinary General Meeting of the resolution increasing the share capital.”

In addition to proceeds from the issue of shares, for the purpose of implementing the new strategy the company intends to use its own cash, operating funds generated by the company, and other available sources of financing that do not result in dilution of shareholder interests.

Eight projects in the pipeline, another in negotiations

People Can Fly is currently working on eight projects at various stages of advancement. Five of them are games from the AAA segment, two of which are being developed in the work-for-hire model: the game code-named Project Gemini (commissioned by Square Enix, already in the production phase) and Project Maverick (commissioned by Microsoft Corporation). Three more games in the AAA segment—Project Dagger, Project Bifrost and Project Victoria—are in pre-production, and the company plans to release them in the self-publishing model, with launches in 2025–2026. Another game is Project Red, from the compact-AAA segment, currently in the concept stage. The People Can Fly pipeline also includes two games for virtual reality platforms—Bulletstorm VR (previously code-named Thunder) and Green Hell VR—developed by PCF Group subsidiary Incuvo.

Moreover, in the second half of June the company signed a letter of intent and began negotiations with a renowned American publisher for potential cooperation in development of a game for VR platforms code-named Dolphin, with an anticipated development budget of USD 16 to 24 million. If the negotiations are successful, the pipeline of games developed by People Can Fly will be joined by another project pursued in the work-for-hire model.

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People Can Fly was founded in 2002 and is one of the pioneers on the market for shooter games in Europe, and one of the top three most experienced Polish developers of games from the AAA segment. People Can Fly has developed such games as Painkiller (launched in 2004), Bulletstorm (2011), Gears of War: Judgment (2013) and Outriders (2021).

There are currently over 640 people working in the group, two-thirds of them in Europe and one-third in North America, of whom over 500 are game developers.

In January 2023 the group updated its growth strategy. It calls for increased publishing activity, implementation of most projects in the self-publishing model and the game-as-a-service model, as well as the use of diverse models for monetization of the games published by the group. The group plans further increases in the size of production teams and development of talent, as well as investments in new segments of the entertainment industry.

In 2022 the group generated revenue of PLN 171.5 million and consolidated EBITDA (operating profit plus amortization) of PLN 48.2 million.

The shares of PCF Group, which owns the People Can Fly studio, have been listed on the Warsaw Stock Exchange since December 2020.

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IMPORTANT NOTICES
This material is solely for information purposes and has been prepared exclusively in order to provide essential information on the terms of the issuance and the offering for the new shares of PCF Group S.A. (the “Company”). This material is by no means intended, whether directly or indirectly, to promote the offering or subscription of the shares of the Company referred to in this material (the “New Shares”) and does not represent advertisement or promotional material prepared or published by the Company for the purpose of promoting the New Shares or their subscription, purchase or offering or for the purpose of encouraging an investor, whether directly or indirectly, to acquire or subscribe for the New Shares. The Company has not published and has no intention of publishing any materials aimed at promoting the New Shares or their subscription or purchase after the date of this material.

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This material does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in the New Shares. Any investment decision to subscribe for or acquire the New Shares in the offering, subscription and/or sale of such shares must be made solely on the basis of publicly available information, which has not been independently verified.
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