Interim report January - March 2017

Fri, May 05, 2017 08:00 CET

First quarter 2017

Revenues amounted to SEK 121.3 (93.3) million, an increase by 30 % compared to the same period last year.
Operating profit amounted to SEK 38.0 (25.2) million, an increase by 51 %.
Profit before tax amounted to SEK 38.0 (25.2) million, and profit after tax amounted to SEK 29.2 (19.4) million.
Cash flow from operating activities amounted to SEK 85.7 (32.4) million, and cash flow from investing activities amounted to SEK -44.6 (-15.2) million.
By the end of the period cash and short term placements amounted to SEK 288.0 (106.2) million.
Earnings per share amounted to SEK 0.28 (0.18) per share.
Revenue from the first quarter of 2017 are mainly attributable to Cities: Skylines, Stellaris, Crusader Kings II, Hearts of Iron IV and Europa Universalis IV.

Important events in the first quarter

One expansion was released during the period; Monks and Mystics for Crusader Kings II.
Steam Winter Sale started December 22 and lasted until January 2.
White Wolf announced its partnership with the Paris-based publisher Focus Home Interactive regarding a licensed PC and console game taken place in the World of Darkness.
In February it was advertised that Hearts of Iron IV had passed 500,000 units sold.
In March it was advertised that Cities: Skylines had passed 3.5 million units sold.
A partnership with Eugen Systems regarding the new game Steel Division: Normandy 44 was announced, with a planned release in May 2017.

Words from CEO

A company in constant change

The only thing constant is change - a worn out phrase yet still very appropriate when describing the games industry over the last decade. We’ve seen big, established and influential companies like THQ and Atari either wholly or partially disappear. Others, such as Valve - the people behind Steam, have seen their power and influence grow enormously in a short time frame. I would wager that the speed with which a company can go from being very important to practically irrelevant is greater in the games industry than in many other sectors.

From the outside, this can appear to be a worrying state of affairs, but those of us who are active in the industry also know how this pressure has helped us to create competitive advantages. We need to work hard, fast and smart to stay relevant. In other industries, there is a lot of talk about going digital and developing digital strategies. The game industry is practically digitalised already so we don’t talk about digital strategies, we talk about strategies - period.

At Paradox, we make no secret about the importance of evolving, improving and developing ourselves. This applies to the company as a whole, but also the products and services that we provide. A certain comfort with these types of changes is something that we require of everyone that works at Paradox. It is also something that our partners and players are expected to be ready to accept.

Among the bigger changes that we have gone through over years are: The shift from being solely a development studio to becoming a successful international publisher; the change in our game distribution model from physical to digital games and the general development of our own business models where we have, amongst other things, shifted away from working solely with base products (single games) to a model where we iterate on games and release content (eg. Expansions) over a longer period of time.

We have also experimented within a number of different business areas and channels, whereby some ideas were quickly discarded, while others have become large integrated parts of our operations. A good example of this is streaming and venturing into simulation games. Handled correctly, each new initiative offers new possibilities to us, irrespective of whether we choose to pursue it in the long term. An example of this is the way we have focused on producing a large portfolio which has increased the general awareness of Paradox and our titles, even if some of the individual games released have not been great successes.

To continue in the same vein and avoid becoming complacent, we believe that it is vital to both continue challenging ourselves while at the same time developing processes to act upon all the creative competences and ideas that already exist within the company

For that reason, we have now put in place: a person whose role is to create and develop processes; a board of innovation, in which I sit and an internal innovation task force made up of people from different parts of the company.

The rest of the company and, to a certain extent, our community are also involved. So far this involvement has consisted of various types of customer questionnaires and experiments, in addition to a larger workshop which will be held later this spring.

We have always had a strong focus on leadership and in an ever-changing environment the strength of the leadership becomes even more important. At Paradox, we view every employee as a leaders as self-leadership is a fundamental part of our culture.

We take on people with great capacity for self-leadership, but we also support this through leadership courses that are available to all our employees. The formal official leadership from our personnel managers is also something that we see as central and are always trying to develop. We have an organisation where our employees have, as shown in our employee satisfaction surveys, a very high level of confidence in their closest manager and in the leadership of the company in general, which is a massive strength for the company.

To develop ourselves as leaders is also something that have prioritised highly in the management team and, to this end, we have for many years worked actively with individual and group leadership, in order to move the organisation forward in the best possible way.

During the first quarter of 2017, we released an expansion to Crusader Kings II. The game keeps on performing well both in terms of bringing in new players and re-activating existing players. We have also participated in the Game Developers Conference in San Francisco during which we: met with existing and potential partners as we usually do; gave demonstrations of our games to the media and our developers took part of the educational conference. This year we also had several speakers as a part of the program for the conference participants.

During the conference we announced our partnership with Eugen Systems and that we are publishing their game, Steel Division. We also announced a new expansion for Europa Universalis IV - Mandate of Heaven and announced a release-date for Cities: Skylines on the Xbox, which came out on the 21st of April.

While this quarter has been relatively quiet with only one game release, we have been laying the groundwork for the coming quarter which will be jam-packed with activity such as: our publisher weekend on Steam; the releases of Steel Division, Europa Universalis IV: Mandate of Heaven and Stellaris: Utopia, Cities: Skylines on Xbox; our AGM and PDXCon - our own conference.

Of course we have more things going on than just those items, but I think that you by now have realized that we prefer to focus on what is confirmed and soon to be delivered upon rather than things that are planned for the future. One thing I can say though is that our future continues to be bright and that we look forward to having more news to share with you in the near future.

Fredrik Wester, CEO

Presentation of interim report

Fredrik Wester and Andras Vajlok will host a live stream to answer report and financial related questions on our Twitch channel on May 5 at 16:20 PM CEST https://www.twitch.tv/paradoxinteractive.

Submit your questions before via our forum https://forum.paradoxplaza.com/forum/index.php?threads/quarterly-report-q1-q-a-stream-friday-may-5th-at-16-20-cest.1018798/, 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 of Paradox Interactive

Andras Vajlok, CFO of 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 May 5, 2017.

About Paradox Interactive

The Paradox Interactive group includes publishing and internal development of games and licensing of White Wolf’s brands. The publishing operation publishes both internally developed titles and titles developed by independent studios as well as music and books. The game portfolio includes more than 90 titles and Paradox Interactive owns the most important brands, including Stellaris, Europa Universalis, Hearts of Iron, Crusader Kings, Cities: Skylines, Tyranny and Magicka. From the start over ten years ago, the company has published its games all over the world, initially through physical distribution using partners, but beginning in 2006 has primarily distributed digitally using its own publishing arm. The development platform is primarily PC, but the company has released games on console and mobile platforms as well. The largest markets today include the US, UK, Germany, France, Russia and Scandinavia. Today, close to 1.5 million gamers play a Paradox game each month and the number of Paradox registered users exceeds six million.

Paradox Interactive AB (publ)’s shares are listed on Nasdaq Stockholm First North Premier under ticker PDX. Avanza Bank is the company’s Certified Adviser. For more information, please visit https://www.paradoxinteractive.com.