February 13, 2018

Year-end report 2017

Fourth quarter 2017

  • Revenues amounted to SEK 222.4 (198.4) million, an increase by 12 % compared to the same period last year.

  • Operating profit amounted to SEK 86.7 (85.9) million, an increase by 1 %.

  • Profit before tax amounted to SEK 86.7 (86.0) million, and profit after tax amounted to SEK 68.8 (68.1) million.

  • Cash flow from operating activities amounted to SEK 139.7 (90.6) million, and cash flow from investing activities amounted to SEK -63.4 (-58.8) million.

  • By the end of the period cash and short term placements amounted to SEK 320.1 (246.9) million.

  • Earnings per share amounted to SEK 0.65 (0.65) per share.

  • Revenue from the fourth quarter of 2017 are mainly attributable to Cities: Skylines, Stellaris, Europa Universalis IV, Hearts of Iron IV and Crusader Kings II.

Full year 2017

  • Revenues for the period amounted to SEK 813.8 (653.7) million, an increase by 24 % compared to the same period last year.

  • Operating profit amounted to SEK 339.8 (308.0) million, an increase by 10 %.

  • Profit before tax amounted to SEK 339.6 (308.6) million, and profit after tax amounted to SEK 264.9 (240.4) million.

  • Earnings per share amounted to SEK 2.51 (2.28).

  • The Board of Directors propose a dividend of SEK 1.00 (1.00) per share for the financial year 2017.

Important events in the fourth quarter 2017

  • Several expansions were released during the period; Green Cities to Cities: Skylines, Cradle of Civilization to Europa Universalis IV, Jade Dragon to Crusader Kings II and Snowfall to Cities: Skylines Console.

  • Steam Winter Sale started December 21 and continued until January 4.

Words from CEO

Gearing up for 2020

For the past two years, Paradox has been gradually increasing its investments. As we gear up for 2020, we can see that our investments are larger than ever. Currently, we are doing bigger and better productions than before and we have more parallel productions in the works, all while facing higher quality demands. One example of this is the player expectation that our game series should be long term and have high replayability value.

To meet these demands, we have expanded the organization a little in advance so that we can prepare for the ventures that await us in the future. This means lower margins in the short term, but an expected high growth curve in the long term – even if all games do not reach their maximum potential.

When we expand the organization, it’s also important to ensure we have the right people in the right places and in different key roles. It’s about matching each person’s skills, personal strengths and motivation with the stage the company finds itself in. This way, we can also ensure that we’ve got what it takes to be able to meet the needs of our players and our employees. A sign of how far Paradox has come as an organisation lies in the very talented people we have in senior positions, across all areas of the company. This also gives us the luxury to organize ourselves in the manner that best fits our targets and what we are trying to achieve.

During my own time at Paradox for example, I have mainly focused on the company’s growth and business opportunities. This is where my main strength lies. But for the past two years, I have not been able to spend as much time on these tasks as I’ve wanted. Therefore, my focus for 2018 will be to make changes in my role which will enable me to once again put more time and effort into what I do best.

We close the fourth quarter in much the same way as the entire year – by launching a number of expansions to our existing titles.

  • We released an additional expansion and a content pack for Cities: Skylines on PC (Green Cities and European Suburbia)

  • We launched the expansion Snowfall for Cities: Skylines on console.

  • New content was added to Crusader Kings II through the Jade Dragon expansion.

  • Europa Universalis IV got the Cradle of Civilization expansion.

  • For Stellaris, we released a new content pack: Humanoids Species Pack.

As we have mentioned earlier, we are far from satisfied with only one single full-price release during the year. However, it is important to remember that several of our expansions can be compared with other full-price titles in the market, both in terms of content and price. Also, all expansions help us to continue broadening our audience. Furthermore, we once again have five games on Steam’s list of the 100 best-selling games worldwide in 2017. This is a sign of strength for the products that make up our long tail, and it speaks to our ability to release relevant updates.

Looking ahead, we have two confirmed major releases to look forward to in 2018: Surviving Mars and Battletech. Both have been featured extensively on several global games media lists of top game releases to watch out for in 2018.

First up is Surviving Mars, a sci-fi game with a settlement builder simulation in the same vein as Cities: Skylines. The game is all about colonizing Mars and surviving the process. It is being released simultaneously on both PC and console, and is being developed by Haemimont Games. Haemimont specializes in creating games with long lifespans, which creates value for players while broadening the audience over a long period of time. In this respect they resemble our own studios, Triumph Studios and Paradox Development Studio.

After that, we are releasing our next game: the long-awaited Battletech, which combines both skill and luck. The game comes from the original creator of BattleTech and MechWarrior and the developers of the award-winning series Shadowrun Returns.

We continue to dig deeper where we stand, as we can clearly see that we are broadening our existing audience with each game release. To create additional growth, we will therefore primarily expand our geographical reach, platforms and acquisitions.

We will focus on what we believe gives us the best returns in the short or long term. To do this, we are testing the waters by evaluating and experimenting, which is apparent in our approach to our territories. For example, our expansion in China has been slower than expected, and market alignment has been harder than we first thought. However, sales of Cities: Skylines are still robust in China. Beyond this, we are looking into potential partnerships and opportunities with different players in other markets to create more localized content in our games.

In terms of platforms, we are planning to release the first mobile game from our internal mobile investment in 2018. This initiative is about creating games that are more hardcore for the mobile platform. In the future, our aim is also to release mobile games created by our internal mobile team. These will be published by Paradox and be based on our own IPs.

We have made no secret that we are continuously looking for attractive acquisitions. We bought Triumph Studios in 2017, and in early 2018 we announced our acquisition of a 33 percent stake in Hardsuit Labs. And progress is being made with White Wolf Entertainment’s efforts to develop World of Darkness. In 2018, they will step up their visibility in the market by organizing community activities and launching the fifth edition of the role-play board game Vampire the Masquerade. The game is being launched as a book, and the book is the basis for all the stories and descriptions of the world that will turn up in any subsequent products.

Internally we have a saying: the only two stages for a business to be in are development or dissolution. We hope it is clear to everyone who follows us which category we consider ourselves to be in.

Fredrik Wester, CEO

Presentation of the year-end report

Fredrik Wester and Andras Vajlok will host a live stream to answer report and financial related questions on our Twitch channel at 12:00 PM CET (noon) https://www.twitch.tv/paradoxinteractive.

Submit your questions before via our forum https://forum.paradoxplaza.com/forum/index.php?threads/quarterly-report-q4-live-stream-and-q-a-feb-13th-12pm-cet.1068697/ , by e-mailing them to ir@paradoxplaza.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:

Fredrik Wester, CEO Paradox Interactive

Andras Vajlok, CFO Paradox Interactive

Email: ir@paradoxplaza.com

Phone: +4670-355 54 89

This information is information that Paradox Interactive AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication on February 13, 2018.