Interim Report January – September 2019

Third quarter 2019

  • Revenues amounted to SEK 282.6 (225.0) million, an increase by 26 % compa­red to the same period last year.
  • Operating profit amounted to SEK 93.1 (68.3) million, an increase by 36 %.
  • Profit before tax amounted to SEK 92.9 (68.3) million, and profit after tax amounted to SEK 74.0 (52.9) million.
  • Cash flow from operating activities amounted to SEK 73.4 (97.4) million, and cash flow from investing activities amounted to SEK -32.5 (-82.4) million.
  • By the end of the period cash amounted to SEK 434.6 (344.1) million.
  • Earnings per share amounted to SEK 0.70 (0.50) per share.
  • Revenues in the quarter are mainly attributable to Age of Wonders: Planet­fall, Cities: Skylines, Hearts of Iron IV, Stellaris and Surviving Mars.

First nine months 2019

  • Revenues for the period amounted to SEK 908.0 (790.8) million, an increase by 15 % compared to the same period last year.
  • Operating profit amounted to SEK 310.0 (308.3) million, an increase by 1 %.
  • Profit before tax amounted to SEK 310.1 (308.4) million, and profit after tax amounted to SEK 243.6 (239.6) million.
  • Earnings per share amounted to SEK 2.31 (2.27).

Important events in the third quarter 2019

  • One new game was released during the period, Age of Wonders: Planetfall, developed by Triumph Studios.
  • Two new ports of expansions were released during the period; Campus for Cities: Skylines Console Edition and Utopia for Stellaris Console Edition.
  • A not yet announced externally developed game project was sold for SEK 80.0 million to a third party during the period, with a net loss of SEK 1.1 million.
  • Steam Summer Sale took place June 25 to July 9.

Comments from CEO

A strategy for growth and profitability

For years, we have been following a strategy that consists of methodically building a portfolio of games with long lifespans and strong proprietary IPs. By applying a business model where we sell base games and expansions, the games generate concurrent revenue throughout their lifespans. Our strategy also consists of gradually increasing our capacity and skill to develop and publish games within our three main segments – strategy, management and RPG – as well as continuously growing and strengthening the ties with our player community. This strategy has proven successful in creating growth, limited risk, and high margins.

During the third quarter of the year, we continued to execute on our strategy. In August, we launched the game Age of Wonders: Planetfall, developed by our studio Triumph Studios. Through Age of Wonders: Planetfall, we have expanded our game portfolio within the strategy game segment while building on our 20-year-old Age of Wonders franchise. The game has been very well received by both players and industry media and has established Triumph Studios as a key developer of strategy games for many years to come. For us, it is important to keep a good balance between our own studios and established relationships with external studios, which ensures we have core competence for upcoming game development while providing us with flexibility.

During the quarter, we also continued our growth within console games as we made the successful PC expansions Cities: Skylines – Campus and Stellaris: Utopia available for Xbox and PlayStation players. Console games are an important platform for us, which so far this year have generated more than 16% of our revenue, and we expect continued growth in console gaming in the coming years. By launching these two expansions on console, we are also continuing to build two of our most valuable brands – Cities: Skylines and Stellaris.

Revenue for the quarter grew by 26% compared to the same quarter last year and revenue for the past twelve months is 23% higher than a year ago. Profit before tax for the quarter increased by 36% from the third quarter 2018, and profit before tax for the last twelve months increased by 16% compared to a year ago. Our growth in revenue and profit is driven by the continuous addition of new games to our portfolio and the continued additions of expansions to our games over a long time. This also divides the responsibility for the revenue generation between several different games and between base games and expansions, which means that our growth is not dependent on any single game launch. However, this does not mean that growth is even from quarter to quarter, or even from year to year. On the contrary, revenue increases come in steps, while cost increases come more stable as we continuously increase our capacity.

After the end of the quarter, we both announced and released our new game Surviving the Aftermath, developed by our partner Iceflake Studios. Through Surviving the Aftermath, we build on our Surviving franchise, which we established with Surviving Mars last year, and expand the portfolio of management games. The game has been released in an early access version (not fully developed), which gives us the opportunity to continuously utilize and implement feedback from our player community in the coming year. The PC version of the game is available under the early access period exclusively on the Epic Games store, while the final version will also be available on Steam and other platforms. Through the collaboration with Epic Games, we receive a guaranteed remuneration, an effect we see from the competition among the distributors that has increased over the past year. We believe this competition will continue next year and benefit both players and game publishers.

In October we hosted PDXCON, our annual event for fans, which took place this year in Berlin. For me, as CEO, it was fantastic to be on stage to reveal what we have ahead of us, and especially to meet approximately 2000 fans who were there. The enthusiasm and excitement is so inspiring! We announced several expansions to be released in the next few months and revealed that our next Grand Strategy game is Crusader Kings III, scheduled to be released late 2020.

Ebba Ljungerud, CEO

Presentation of report

Ebba Ljungerud and Alexander Bricca will host a live stream to answer report and financial related questions on our Twitch channel on November 12 at 12:00 PM CET https://www.twitch.tv/paradoxinteractive.

Submit your questions before via our forum https://forum.paradoxplaza.com/forum/index.php?threads/paradox-q3-2019-report-and-livestream.1275248/ by e-mailing them to ir@paradoxinteractive.com or directly in the Twitch chat. The Twitch chat is open for anyone to view but to post comments or question you will need to create an account.

For additional information, please contact:

Ebba Ljungerud, CEO Paradox Interactive
Alexander Bricca, CFO Paradox Interactive
Email: ir@paradoxinteractive.com
Phone: +4670-355 54 18

This information is information that Paradox Interactive AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication on November 12, 2019.

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