Year-end Report 2020
Fourth quarter 2020
Revenues amounted to MSEK 433.7 (MSEK 381.3), an increase by 14 % compared to the same period last year.
Operating profit amounted to MSEK 79.5 (MSEK 163.5), a decrease by 51 %.
Profit after financial items amounted to MSEK 78.6 (MSEK 156.7), and profit after tax amounted to MSEK 59.5 (MSEK 130.5).
Cash flow from operating activities amounted to MSEK 387.1 (MSEK 265.4), and cash flow from investing activities amounted to MSEK -207.3 (MSEK -135.4).
By the end of the period cash amounted to MSEK 767.6 (MSEK 554.2).
Earnings per share amounted to SEK 0.56 (1.24) after dilution.
Revenues in the quarter are mainly attributable to Cities: Skylines, Crusader Kings III, Europa Universalis IV, Hearts of Iron IV and Stellaris.
Full year 2020
Revenues amounted to MSEK 1,793.8 (MSEK 1,289.3), an increase by 39 % compared to the same period last year.
Operating profit amounted to MSEK 632.1 (MSEK 473.5), an increase by 33 %.
Profit after financial items amounted to MSEK 628.0 (MSEK 466.8), and profit after tax amounted to MSEK 490.6 (MSEK 374.1).
Earnings per share amounted to SEK 4.64 (3.54) after dilution.
Important events in the fourth quarter 2020
The new game Empire of Sin, developed by Romero Games, was released December 1, 2020.
Two expansions were released during the period; Star Kings for Age of Wonders: Planetfall, and Battle for the Bosporus for Hearts of Iron IV.
The Group’s employees continue to work from home to reduce the spread of Covid-19.
Comments from CEO
Proven strategy drives long-term growth through a different year
2020 was the best year in Paradox's history, with strong growth in revenue, profits and players. Our established brands continue to develop and grow with new players and new content, and the successful launch of Crusader Kings III in the third quarter gave us a further boost.
Crusader Kings III broke several of our previous records at release, in terms of both number of simultaneous players and copies sold. A couple of months later, it is clear that the players' behavior in Crusader Kings III follows the same pattern as in our other grand strategy games: they stay in the game for a long time and a large proportion continue to play regularly long after purchase. It is a clear sign for us that we have succeeded in building on a brand through a sequel, which we will be able to further develop with new content for many years to come. We are pleased that Crusader Kings III, during the fourth quarter, was also awarded several industry awards and nominations as the best strategy game of the year, for example by the gaming media IGN and Polygon and at the DICE Awards and The Game Awards.
In the fourth quarter we released the mafia game Empire of Sin, which takes place in 1920s Chicago. We are not satisfied with the launch, neither with the quality of the game nor how it was received by the market. After a game launch, we always do a thorough review of the project so that we can learn and become better at ensuring quality in our games to get closer to what players expected. For Empire of Sin, we have now released a number of updates to develop the game in the right direction and we will continue to build on the game for the future.
Revenue for the quarter increased by 14% compared to the fourth quarter last year and revenue for the year increased by 39% from 2019. Profit before tax for the quarter decreased by 50% compared to the corresponding quarter the year before while profit before tax for the year increased by 35% from 2019. Profit is negatively affected by the fact that we now apply a degressive amortisation model for both Crusader Kings III and Empire of Sin, whereby larger costs are taken during the first two quarters after the game’s launch. During the quarter, we also cancelled an unannounced game project. This in itself is not unusual; we often choose to cancel less promising game projects to reallocate resources to projects with higher potential, but it still has a negative effect on the result in the quarter. The write-down and the degressive amortisation model had a negative impact on the fourth quarter with SEK 52 million.
At the same time as we have had a record year, the ongoing corona pandemic has, as mentioned before, had a mixed effect on our business. The inflow of new players was during the beginning of the pandemic high, which initially had a positive impact on our sales, but the increased player base also creates a long-term remaining value. At the same time, our studio organization in particular has found it difficult to maintain the usual production pace. We have therefore chosen to postpone several planned but not communicated releases to ensure the right quality, which postpones the release dates during 2021. For us, it is crucial that our games are well received by the players, so we always choose, if possible, to give our development studios the time required to achieve our quality goals.
This also affects the development of Vampire: the Masquerade - Bloodlines 2, where we communicated a delay during the third quarter of 2020. We have now chosen to postpone the release of the game further, and we will not be launching the game in 2021. We have also decided that Hardsuit Labs will no longer be leading the development of Bloodlines 2, and we have started a collaboration with a new studio partner to finish work on the game. This has been a difficult decision, but we are convinced that it is the right way forward to do the game justice.
Our growth has always, and will continue to, vary from quarter to quarter and from year to year. It is part of our industry and something we are comfortable with, and regardless of short-term challenges, our long-term strategy remains: to, methodically and over time, further develop our wholly owned brands and grow the audience around them. Therefore, it is very exciting that this quarter we have passed the milestone of over five million monthly players, an increase of 25% compared to last year, and over 18 million registered Paradox accounts, an increase of 50% compared to last year. During the year, we also invested more than ever in game development - SEK 614 million, which is 45% more than the year before - and at the end of the year, the capitalised development amounted to SEK 920 million, an increase of 59% from the previous year. This game development will, together with the increased player base, form an important basis for our future growth.
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 February 23 at 12:00 PM CET https://www.twitch.tv/paradoxinteractive.
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