Interim report January – June 2020
SECOND QUARTER 2020
Revenues amounted to MSEK 464.9 (MSEK 387.2), an increase by 20 % compared to the same period last year.
Operating profit amounted to MSEK 199.0 (MSEK 154.2), an increase by 29 %.
Profit after financial items amounted to MSEK 197.7 (MSEK 154.0), and profit after tax amounted to MSEK 154.5 (MSEK 120.3).
Cash flow from operating activities amounted to MSEK 278.5 (MSEK 232.7), and cash flow from investing activities amounted to MSEK -148.4 (MSEK -104.9).
By the end of the period cash amounted to MSEK 637.2 (MSEK 396.4).
Earnings per share amounted to SEK 1.46 (1.14) after dilution.
Revenues in the quarter are mainly attributable to Age of Wonders: Planetfall, Cities: Skylines, Europa Universalis IV, Hearts of Iron IV and Stellaris.
FIRST HALF-YEAR 2020
Revenues amounted to MSEK 865.3 (MSEK 625.4), an increase by 38 % compared to the same period last year.
Operating profit amounted to MSEK 364.9 (MSEK 217.0), an increase by 68 %.
Profit after financial items amounted to MSEK 362.4 (MSEK 217.2), and profit after tax amounted to MSEK 282.5 (MSEK 169.6).
Earnings per share amounted to SEK 2.67 (1.61) after dilution.
IMPORTANT EVENTS IN THE SECOND QUARTER 2020
Four expansions were released during the period; Invasions for Age of Wonders: Planetfall, Emperor for Europa Universalis IV, Island Bound for Prison Architect and Apocalypse for Stellaris: Console Edition.
The new mobile game Stellaris: Galaxy Command was released worldwide.
Paradox Publisher Weekend on Steam took place May 14 - May 18.
The Group’s employees work from home since mid-March to reduce the spread of Covid-19. At present, there is no set date for employees to return to work from regular office premises.
AFTER THE END OF THE PERIOD
Paris-based development studio Playrion Game Studio was acquired July 1, 2020.
Finland-based development studio Iceflake Studios was acquired July 16, 2020.
The release of Vampire: The Masquerade – Bloodlines 2 will be postponed until 2021.
CEO COMMENTS
Strengthening our forces for the future
Closing the books for the first half of the year, I am pleased to see that we have once again delivered a strong financial quarter while we have also laid several important building blocks for the future. The second quarter came with a major increase in our capacity and competence to develop and publish games - both through organic growth and through acquisitions.
In June, we presented our plans for a new game studio in Barcelona: Paradox Tinto. Paradox Tinto is an important step to further expand our capacity within our central game genre - grand strategy. Johan Andersson, who has been working as Game Director at Paradox Development Studio in Stockholm, will lead the studio onsite in Barcelona.
During the quarter we also worked intensely on two acquisitions that were made public in July - Playrion Game Studio and Iceflake Studios. Playrion Game Studio is a mobile-first studio in Paris. Through this acquisition we are enhancing our ability to develop and publish mobile games, and we also welcome Airlines Manager to our game portfolio. _Airlines Manage_r is a management game with a long lifespan like many of our other games, but for mobile.
Iceflake Studios, on the other hand, is a Finnish game studio with whom we already have a successful collaboration regarding Surviving the Aftermath, which is sold in early access through the Epic Games Store. This acquisition also provides additional development competence and capacity within management games.
When we look at potential acquisitions, many aspects are taken into consideration in addition to the purely financial: we look for a company culture that is consistent with ours and a fit around our central game genres, but we are also searching for strong teams that have already achieved a lot together. Sometimes we make acquisitions based on a need for increased resources and more talent in areas we are already good at ourselves, while other times our purpose is to acquire new skill sets and sometimes it is to broaden our brand portfolio with new game titles.
Another important part of our acquisition strategy is to ensure we integrate our acquisitions into our ecosystem in a diligent way. We always strive to combine the help a studio receives from Paradox Interactive's structure and resources as a parent company with the creative freedom needed to create and build really good games. Integrating companies requires time and resources, and we are convinced that this tactic generates greater value than the individual units on their own.
In addition to the new colleagues we have gained through acquisitions, we also prepared for the future in our existing operations through recruitments during the period. At the end of the second quarter, our employee count amounted to 534 employees in the entire group. Following the acquisitions of Playrion and Iceflake, which were completed after the end of the second quarter, and the start-up of Paradox Tinto, our operations stretch to nine locations in six countries around the world.
Our revenue and profit deliver on new records in the second quarter of the year. Our revenue increased by 20% compared with the same quarter last year and the revenue for the past twelve months increased by 29% compared with the previous year. Our profit before tax increased by 29% compared with the same quarter last year and, compared to the previous year's twelve-month period, profit before tax increased by 42%. While we are incredibly proud of the quarter I would like to mention, as so often before, that our quarters rarely can be compared to each other; instead it is the overall picture over time that gives the fairest indicator of our economic development.
One of our main growth factors is the game expansions we launch on an ongoing basis. During the quarter, we launched the expansions Emperor for Europa Universalis IV, Island Bound for Prison Architect, and Invasions for Age of Wonders: Planetfall - all in line with our strategy to provide games with strong brands and longevity.
PC continues to be our largest platform by a good margin, but during the quarter we also continued to expand on other platforms: on console through the expansion Apocalypse for Stellaris and on mobile through the launch of Stellaris: Galaxy Command globally. This way, we reach more players with our brands and can further diversify our sources of revenue.
Covid-19 has continued to be a significant element during the period where our employees are working from home since March. During the latter part of summer we have seen that the positive trend we have noticed in regards to increased gaming has somewhat decreased. We have also noticed an impact on our productivity with the risk that primarily game titles which have not yet been communicated may be delayed.
In summary, we leave an operational as well as financially successful quarter behind us with strengthened relationships with our fantastic fans. Through the acquisitions and recruitments we have made in recent months, we have many new colleagues to welcome when our summer holidays come to an end, which is something I am really looking forward to!
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 August 11 at 12:00 PM CEST.
Submit your questions before either via our forum or by e-mailing them to ir@paradoxinteractive.com - it is also possible to ask your questions directly in our stream chat. The Twitch chat is open for anyone to view but to post comments or question you will need to create an account.
RECORDING OF THE PRESENTATION
If you wish to view the presentation you can find a recording of the live stream here: