Interim report January - March 2018

Fri, May 18, 2018 08:00 CET

First quarter 2018

Revenues amounted to SEK 267.0 (121.3) million, an increase by 120 % compared to the same period last year.
Operating profit amounted to SEK 140.5 (38.0) million, an increase by 270 %.
Profit before tax amounted to SEK 140.5 (38.0) million, and profit after tax amounted to SEK 108.8 (29.2) million.
Cash flow from operating activities amounted to SEK 144.2 (85.7) million, and cash flow from investing activities amounted to SEK -90.3 (-44.6) million.
By the end of the period cash and short term placements amounted to SEK 373.6 (288.0) million.
Earnings per share amounted to SEK 1.03 (0.28) per share.
Revenue from the first quarter of 2018 are mainly attributable to Stellaris, Cities: Skylines, Surviving Mars, Hearts of Iron IV and Europa Universalis IV.

Important events in the first quarter

One new game was released during the period, Surviving Mars, developed by Bulgarian development studio Haemimont Games.
Several expansions were released during the period; Back to Hell for Steel Division: Normandy 44, Apocalypse for Stellaris, Waking the Tiger for Hearts of Iron IV, Rule Britannia for Europa Universalis IV and Content Creator Pack for Cities: Skylines for console.
Steam Winter Sale started December 21 and continued until January 4.
January 2 Paradox acquired 33 % of the shares in development studio Hardsuit Labs, based in Seattle, for USD 2.0 million. Paradox has an option to increase its ownership in the future.

Words from CEO

A good start to 2018

When we decided to list Paradox Interactive, we chose to do so right after a somewhat mediocre quarter – something that was intentional from our side. In fact, it gave us the chance to properly inform people that our industry is not driven by quarterly results. It’s important for an investor to understand this and view the company and its business long-term. Paradox is not a company for the nervous investor.

When we look at first-quarter earnings for 2018, this point is well worth remembering. We have had a good quarter in every way, with a well-defined release schedule. Compared with the previous year’s first quarter, I would even describe the quarter as excellent. It feels extra special because many people in the organization have worked persistently to put together good releases. We have also seen a major boost in the impact of our marketing efforts.

Internally we usually say that we focus on the marathon, not the sprint. It’s about having the stamina to reach all the way to the finish line. In the same way that we run the company and our strategies for the long term, we also consider the interaction with our players as long term. Conversions in the form of a game purchase is not the end destination – it’s rather the beginning of our shared journey ahead. This means that every new game release can be viewed as a foundation on which we continue to build together with our community. For example, we can see for several of our games that profitability and the number of players rise steadily over time (in some cases, over the course of several years). This means that the launch period remains important for Paradox, but nowhere near as critical as it was merely a few years ago. Of course, we still aim to attract an active player base that will return to the games on a regular basis.

During the quarter, we released a new game and several expansions. We are very pleased with the release of Surviving Mars, which has met the goals and expectations we set in our forecast. In addition, we are very proud to have released the game for the first time on PC, Mac, Linux, PS4 and XboxOne simultaneously across multiple time zones. Overall the game has been well received, especially by critics, although some challenges have dragged down user ratings below the level we are used to seeing for releases. The development team and publishing team are now working on further development of the game, along with the players, to enhance the gaming experience based on player feedback.

We also released a number of highly anticipated expansions during the quarter. These stimulate renewed interest in the game, while attracting players back. Hearts of Iron IV: Waking the Tiger sold very well, for instance, even though many loyal players already have the expansion pass for the game. With the release of Europa Universalis IV: Rule Britannia, we broke a new record for number of active monthly players. Stellaris: Apocalypse reached plenty of new players, too, which was evident in two ways: sales were positive and the story trailer was viewed more than 2 million times. Furthermore, Steel Division: Back to Hell was well received in the community thanks to a desire for solo content. In addition, a content creator pack provided Cities: Skylines Console with new content. The content was created by the game’s modders who, through a partnership with Paradox, become co-creators of the game.

After the period, Battletech was launched and progressed according to plan with good concurrent user figures, i.e. the number of players playing simultaneously.

In January, the entire company gathered at Kolmården for a few days of conferences and team building. There, we talked about the organization and our strategy for the future and we celebrated the 20-year anniversary of Paradox Development Studio in 2018. In March, the Game Developers Conference also kicked off in San Francisco. This year, our primary focus was on our partnerships since we’ll be saving our announcements for PDXCON in May. We also had speakers at the developers conference and contributed speakers to Tencent’s internal conference.

This will be the last CEO statement from me alone. As outgoing CEO, I will write the next statement together with Ebba, the CEO-elect. Moving ahead, I look forward to stepping into my new role as executive chairman and letting you get acquainted with our new CEO. I will, however, remain in my position until the end of July, and there is much we want to accomplish both before and after that date!

Fredrik Wester, CEO

Presentation of interim report

Fredrik Wester and Alexander Bricca will host a live stream to answer report and financial related questions on our Twitch channel on May 18 at 12:00 PM CEST https://www.twitch.tv/paradoxinteractive.

Submit your questions before via our forum https://forum.paradoxplaza.com/forum/index.php?threads/q1-report-q-a-stream-may-18-12pm-cest-noon.1096412/, 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
Alexander Bricca, 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 May 18, 2018

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 100 titles and Paradox Interactive owns the most important brands, including Stellaris, Europa Universalis, Hearts of Iron, Crusader Kings, Cities: Skylines, Magicka and Age of Wonders. 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.

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