YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

*Please note that this is a translation for information purposes only - in case of any discrepancies between this version and the Swedish, the Swedish version shall prevail.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 • www.paradoxinteractive.com 1 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

FOURTH QUARTER 2020 IMPORTANT EVENTS IN THE FOURTH QUARTER 2020 • Revenues amounted to MSEK 433.7 (MSEK 381.3), an increase by 14 % • The new game Empire of Sin, developed by Romero Games, was released compared to the same period last year. December 1, 2020. • Operating profit amounted to MSEK 79.5 (MSEK 163.5), a decrease by 51 %. • Two expansions were released during the period; Star Kings for Age of • Profit after financial items amounted to MSEK 78.6 (MSEK 156.7), and profit Wonders: Planetfall, and Battle for the Bosporus for IV. after tax amounted to MSEK 59.5 (MSEK 130.5). • The Group’s employees continue to work from home to reduce the spread of • Cash flow from operating activities amounted to MSEK 387.1 (MSEK 265.4), and Covid-19. 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). AFTER THE END OF THE PERIOD • Earnings per share amounted to SEK 0.56 (1.24) after dilution. • No significant events have occurred after the end of the period. • Revenues in the quarter are mainly attributable to Cities: Skylines, Crusader Kings III, 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. ABOUT The Paradox group today consists of both publishing and internal development of games and brands. The game portfolio includes more than 100 titles and Paradox owns the most important brands, including Stellaris, Europa Universalis, Hearts of Iron, Crusader Kings, Cities: Skylines, , Architect, , and the catalogue of brands.

From the start in 2004, the company has published its games all over the world, initially through physical distribution but since 2006 primarily in digital channels. Paradox games are developed primarily for PC and console platforms, but the company also releases games on mobile. The largest markets today include the US, UK, , Germany, , Russia and Scandinavia. Today, over five million gamers play a Paradox game each month and the number of registered Paradox users exceeds 18 million.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 2 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

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 cle- ar that the players' behavior in Crusader Kings III follows the same pattern as in our other games: they stay in the game for a long time and a large propor- tion 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 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 pro- ject so that we can learn and become better at ensuring quality in our games to get closer to what players expec- ted. 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.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholmockholm • www.paradoxinteractive.com 3 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

Revenue for the quarter increased by 14% compared chosen to postpone the release of the game further, and to the fourth quarter last year and revenue for the year we will not be launching the game in 2021. We have also increased by 39% from 2019. Profit before tax for the qu- decided that Hardsuit Labs will no longer be leading arter decreased by 50% compared to the corresponding the development of Bloodlines 2, and we have started quarter the year before while profit before tax for the a collaboration with a new studio partner to finish work year increased by 35% from 2019. Profit is negatively af- on the game. This has been a difficult decision, but we fected by the fact that we now apply a degressive amor- are convinced that it is the right way forward to do the tisation model for both Crusader Kings III and Empire of game justice. Sin, whereby larger costs are taken during the first two quarters after the game’s launch. During the quarter, we Our growth has always, and will continue to, vary from also cancelled an unannounced game project. This in quarter to quarter and from year to year. It is part of itself is not unusual; we often choose to cancel less pro- our industry and something we are comfortable with, mising game projects to reallocate resources to projects and regardless of short-term challenges, our long- with higher potential, but it still has a negative effect term strategy remains: to, methodically and over time, on the result in the quarter. The write-down and the further develop our wholly owned brands and grow the degressive amortisation model had a negative impact audience around them. Therefore, it is very exciting that on the fourth quarter with SEK 52 million. this quarter we have passed the milestone of over five million monthly players, an increase of 25% compared At the same time as we have had a record year, the to last year, and over 18 million registered Paradox ac- ongoing corona pandemic has, as mentioned before, counts, an increase of 50% compared to last year. During had a mixed effect on our business. The inflow of new the year, we also invested more than ever in game deve- players was during the beginning of the pandemic high, lopment - SEK 614 million, which is 45% more than the which initially had a positive impact on our sales, but the year before - and at the end of the year, the capitalised increased player base also creates a long-term remai- development amounted to SEK 920 million, an increase ning value. At the same time, our studio organization of 59% from the previous year. This game development in particular has found it difficult to maintain the usual will, together with the increased player base, form an production pace. We have therefore chosen to postpone important basis for our future growth. several planned but not communicated releases to en- sure the right quality, which postpones the release dates Ebba Ljungerud, CEO 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

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 666 Stockholm • www.paradoxinteractive.com 4 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

RELEASES DURING THE QUARTER

EMPIRE OF SIN Releasedate: December 1, 2020 Platform: PC, , XBOX, PLAYSTATION Developer: Romero Games Description: Empire of Sin is a new strategy game brought to you by Romero Games and Paradox Interactive that puts you at the heart of the ruthless criminal underworld of 1920s Prohibition-era Chicago. Slip into the shoes of one of the fourteen real and historically inspired mob bosses such as Al Capone, Stephanie St. Clair or Goldie Garneau and assemble a rag-tag gang, build and manage your criminal empire, and defend your turf from rival gangs. It’s up to you to hustle, charm and intimidate your way to the top and do whatever it takes to stay there - break a leg!

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 5 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

RELEASES DURING THE QUARTER

DLC DLC

AGE OF WONDERS: PLANETFALL - STAR KINGS HEARTS OF IRON IV - BATTLE FOR THE BOSPORUS Releasedate: November 10, 2020 Releasedate: October 15, 2020 Platform: PC, XBOX, PLAYSTATION Platform: PC Developer: Developer: Paradox Development Studio Description: It is time to bring together the disparate factions and Description: This expansion for Hearts of Iron IV adds dedicated national unite the shattered Star Union in peace once and for all. Suit up as the focus trees to the minor powers around the Black Sea and the Aegean. noble Paladins of the new Oathbound faction, piloting giant mechs with Bulgaria, Greece and can each chart unique historical and alternate massive arc weapons who have taken up the sacred charge of unifying history paths as they resist efforts by the major powers to dominate the the galaxy and saving all of mankind. The future of the Star Union is in strategic sealanes of the Bosporus and Dardanelles. your hands!

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 6 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

REVENUE AND PROFIT FOURTH QUARTER

REVENUE AND PROFIT FOURTH QUARTER Selling expenses for the period amounted to MSEK FINANCIAL POSITION Revenues amounted to MSEK 433.7 (MSEK 381.3), an in- 58.7 (MSEK 64.2). Capitalised development amounted to MSEK 920.5 crease by 14 % compared to the same period last year. (MSEK 580.7) by the end of the period. The new game Empire of Sin, developed by Romero Administrative expenses for the period amounted to Games, was released December 1, 2020. Two expan- MSEK 22.6 (MSEK 59.8). The previous year's quarter Licenses, brands and similar rights amounted to sions were released during the period; Star Kings for was burdened by non - recurring costs related to MSEK 304.6 (MSEK 200.6). Age of Wonders: Planetfall, and Battle for the Bosporus Paradox Development Studio's and Paradox Inte- for Hearts of Iron IV. Revenues in the quarter are mainly ractive's move to new premises on Magnus Ladul- Goodwill amounted to MSEK 20.2 (MSEK 0.0) attribu- attributable to Cities: Skylines, Crusader Kings III, Euro- åsgatan in Stockholm, as well as costs for a training table to the acquisition of Iceflake Studios. pa Universalis IV, Hearts of Iron IV and Stellaris. conference for the Group's employees. By the end of the period property and equipment Cost of goods sold amounted to MSEK 252.2 (MSEK Other income amounted to MSEK 0.5 (MSEK 48.2), amounted to MSEK 26.5 (MSEK 32.6). 132.7), primarily attributable to game development, and other expenses to MSEK 21.0 (MSEK 9.4). The development support, operation and maintenance previous year's other income includes revalued debt Right-of-use assets for offices amounted to MSEK of games, as well as royalties to third parties. Costs for additional purchase consideration amounting 199.4 (MSEK 235.5). for game development has increased following game to MSEK 44.1. The negative development of other investments and releases of new games. The new expenses is primarily driven by a weaker price per- Shares in associates amount to MSEK 24.7 (MSEK game Empire of Sin is amortised using a degressive formance of USD against SEK in the Group's liquid 18.8) by the end of the period, relating to 33 % of amortisation model where 1/3 of the development assets, operating receivables and liabilities during shares in Seattle-based development studio Hardsu- cost is amortised the first month after release, 1/3 is the quarter compared with the same quarter last it Labs. The shares are valued at the equity method. amortised month 2-6 after release, and 1/3 is amorti- year. sed month 7-18 after release. Write-downs within the Accounts receivable amounted to MSEK 177.0 (MSEK function amounts to MSEK 24.3 (MSEK 8.3), relating to a Operating profit amounted to MSEK 79.5 (MSEK 249.7) by the end of the period, mainly attributable not yet announced game where development has been 163.5), a decrease by 51 %. to sales during the last month of the period. cancelled. Work on development support as well as operation and maintenance has since the beginning of Financial items amounted to MSEK -0.9 (MSEK -6.7). Cash and cash equivalents amounted to MSEK 767.6 the year been mainly identified within the cost of goods Financial items primarily consists of interest on lease (MSEK 554.2). sold function, which contributes to an increase of the liabilities. post. Costs for royalties are in line with the comparison Shareholders' equity amounts to MSEK 1,508.2 period. Since the end of the year, the item is referred to Profit after financial items amounted to MSEK 78.6 (MSEK 1,125.2), of which MSEK 490.6 (MSEK 374.1) as cost of goods sold, since it is considered to be a more (MSEK 156.7), and profit after tax amounted to MSEK consists of accumulated profit for the year. accurate description of the function's content. 59.5 (MSEK 130.5).

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 7 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

Long term lease liabilities amounts to MSEK 167.8 FULL YEAR SUMMARY ACCOUNTING PRINCIPLES (MSEK 194.0) consisting of liabilities for office Revenues amounted to MSEK 1,793.8 (MSEK 1,289.3), This interim report has been prepared in accordan- premises. an increase by 39 % compared to the same period ce with IAS 34, Interim Financial Reporting as well last year. Cost of goods sold amounted to MSEK as RFR 1 and the annual accounts act. The parent Deferred tax liabilities amounts to MSEK 193.4 (MSEK 805.7 (MSEK 500.3), primarily attributable to game company applies the Swedish Financial Reporting 126.1), mainly relating to untaxed reserves and development, development support, operation and Board's recommendation RFR 2, accounting for legal intangible assets from acquisitions. maintenance of games, as well as royalties to third entities. Two new games have been released during parties. Costs for game development has increa- the year where a degressive amortisation is applied. Other long term liabilities amounted to MSEK 0.4 sed following game investments and releases of In all other aspects the same accounting principles (MSEK 23.3) by the end of the period. new games. Write-downs within cost of goods sold have been applied as in the latest annual report. amounts to MSEK 56.6 (MSEK 31.5). Cost of royalties Short term lease liabilities amounts to MSEK 34.1 is in line with the comparison period. Operating RISKS AND UNCERTAINTIES (MSEK 42.2) consisting of short term liabilities for profit amounted to MSEK 632.1 (MSEK 473.5), an Paradox is, like most companies, exposed to certain office premises. increase by 33 %. Profit after financial items amoun- risks in its operations. The risks and uncertainties ted to MSEK 628.0 (MSEK 466.8), and profit after tax are described as a whole in the Annual Report for Other current liabilities amount to MSEK 65.4 (MSEK amounted to MSEK 490.6 (MSEK 374.1). Cash flow 2019, page 23. Risks to be specifically mentioned 12.1), and mainly consist of short-term commitments from operating activities amounted to MSEK 1,126.3 includes a dependency on key employees, depen- for acquisitions. (MSEK 727.8). Cash flow from investing activities dency on a few sales partners, delays of game pro- amounted to MSEK -758.4 (MSEK -374.4). Cash flow jects, low revenues from game releases, and foreign Accrued expenses and prepaid income amounts to from financing activities amounted to MSEK -148.5 currency. These risks and uncertainties may have MSEK 431.3 (MSEK 333.8). The change is mainly re- (MSEK -129.1). a direct or indirect impact on the group's financial position and results. lated to an increase in prepaid revenue from games sold where revenue is accounted for at a later date. PARENT COMPANY FOURTH QUARTER The parent company consists of the publishing DIVIDEND PROPOSAL The Board proposes a dividend of SEK 1.00 per CASH FLOW FOURTH QUARTER branch, and the parent company provides adminis- share. The Board proposes Thursday, May 20, 2021 Cash flow from operating activities amounted to trational services to subsidiaries. The subsidiaries as record date. If the meeting approves the proposal, MSEK 387.1 (MSEK 265.4), primarily attributable to mainly have intercompany revenue from game the dividend will be distributed by Euroclear the operating profit and adjustments for items not development invoiced to the parent company, why AB on Tuesday May 25, 2021. included in the cash flow. Cash flow from investing the financial development of the parent company to activities amounted to MSEK -207.3 (MSEK -135.4), a great extent follows the group's development. Pa- mainly referring to investments in game developme- rent company revenues for the quarter amounted to nt. Cash flow from financing activities amounted to MSEK 430.3 (MSEK 388.3). Operating profit amounted MSEK -8.5 (MSEK -11.4) mainly relating to amortisa- to MSEK 93.2 (MSEK 118.6). Profit after financial items tion of lease liabilities for office premises. amounted to MSEK 93.5 (MSEK 118.6). Profit after tax amounted to MSEK -45.5 (MSEK 2.2).

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 8 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

CONTACT Additional information about the company can be found on the cor- porate website www.paradoxinteractive.com. The company can be contacted by e-mail, [email protected], or by post Paradox Interactive AB, Magnus Ladulåsgatan 4, 118 66, Stockholm, Sweden.

CALENDAR Paradox intends to distribute financial reports on the below dates.

Interim report January - March 2021 2021-05-11 AGM 2021 2021-05-18 Interim report January - June 2021 2021-08-10 Interim report January - September 2021 2021-11-16 Year-end report January - December 2021 2022-02-22

ASSURANCE BY THE BOARD OF DIRECTORS The board of directors hereby provide an assurance that the year- end report provides a true and fair view of the parent company's and the group's business, positions and earnings, and also describe the significant risks and uncertainties faced by the companies making up the group.

Stockholm February 23, 2021

Fredrik Wester Ebba Ljungerud Chairman of the Board Chief Executive Officer

Håkan Sjunnesson Josephine Salenstedt

Mathias Hermansson Linda Höglund

This report has not been subject to special review by the company's auditors.

This information is information that Paradox Interactive AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication on February 23, 2021.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 9 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

KEY FIGURES FOR THE GROUP 2020-10-01 2019-10-01 2020-01-01 2019-01-01 2020-12-31 2019-12-31 2020-12-31 2019-12-31

Revenues, KSEK 433,663 381,338 1,793,794 1,289,332

Operating profit, KSEK 79,532 163,493 632,108 473,530 Profit after financial items, KSEK 78,634 156,747 628,030 466,849 Profit after tax, KSEK 59,541 130,500 490,575 374,080

Operating margin 18% 43% 35% 37% Profit margin 14% 34% 27% 29% Equity/assets ratio 60% 58% 60% 58%

Equity per share before dilution, SEK 14.28 10.66 14.28 10.66 Equity per share after dilution, SEK 14.24 10.66 14.24 10.66 Earnings per share before and after dilution, SEK 0.56 1.24 4.65 3.54 Earnings per share before and after dilution, SEK 0.56 1.24 4.64 3.54

Number of shares by the end of the period before dilution 105,600,000 105,600,000 105,600,000 105,600,000 Number of shares by the end of the period after dilution 105,889,000 105,600,000 105,889,000 105,600,000 Average number of shares before dilution 105,600,000 105,600,000 105,600,000 105,600,000 Average number of shares after dilution 105,933,186 105,600,000 105,839,159 105,600,000

Average number of employees 648 475 567 453 Number of employees by the end of the period 662 479 662 479

For definitions of key figures, see the annual report.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 10 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

GROUP INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME (KSEK) 2020-10-01 2019-10-01 2020-01-01 2019-01-01 2020-12-31 2019-12-31 2020-12-31 2019-12-31

Revenues 433,663 381,338 1,793,794 1,289,332 Cost of goods sold -252,183 -132,718 -805,644 -500,286

Gross profit 181,479 248,620 988,149 789,046

Selling expenses -58,745 -64,164 -215,138 -193,582 Administrative expenses -22,639 -59,755 -120,422 -173,665 Other income 471 48,209 25,612 63,553 Other expenses -21,033 -9,417 -46,094 -11,821

Operating profit 79,532 163,493 632,108 473,530

Profit from shares in subsidiaries - - - 34 Financial income 247 2 698 583 Financial expense -1,146 -6,748 -4,775 -7,298

Profit after financial items 78,634 156,747 628,030 466,849

Tax -19,093 -26,247 -137,455 -92,769

Profit for the period 59,541 130,500 490,575 374,080

Profit for the period is attributable to the shareholders of the parent company

Earnings per share before dilution, SEK 0.56 1.24 4.65 3.54 Earnings per share after dilution, SEK 0.56 1.24 4.64 3.54

OTHER COMPREHENSIVE INCOME Items that may be reclassified to profit or loss

Translation differences -15,618 -3,910 -13,896 2,919

Total comprehensive income for the period 43,923 126,589 476,679 376,999

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 11 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

GROUP BALANCE SHEET (KSEK)

2020-12-31 2019-12-31

ASSETS Non-current assets Capitalised development 920,467 580,736 Licenses, brands and similar rights 304,587 200,561 Goodwill 20,218 - Property and equipment 26,529 32,583 Right-of-use assets 199,440 235,521 Investments in associates 24,669 18,835 Other long term assets 1,234 3,462

Total non-current assets 1,497,146 1,071,698

Current assets Accounts receivable 176,979 249,716 Other receivables 23,777 18,646 Prepaid expenses and accrued revenue 52,606 48,019 Cash and cash equivalents 767,561 554,227

Total current assets 1,020,923 870,609

TOTAL ASSETS 2,518,068 1,942,307

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 12 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

GROUP BALANCE SHEET (KSEK)

2020-12-31 2019-12-31 EQUITY AND LIABILITIES Equity Share capital 528 528 Other capital contributed 27,994 27,994 Reserves -4,788 9,107 Retained earnings 993,849 713,467 Profit for the period 490,575 374,080

Total equity 1,508,158 1,125,176

Long term liabilities Lease liabilities 167,775 194,034 Deferred tax liabilities 193,396 126,078 Other liabilities 422 23,293

Total long term liabilities 361,594 343,404

Current liabilities Accounts payable 66,667 45,030 Current tax liabilities 50,819 40,467 Lease liabilities 34,129 42,247 Other liabilities 65,446 12,144 Accrued expenses and prepaid revenues 431,257 333,837

Total current liabilities 648,317 473,726

TOTAL EQUITY AND LIABILITIES 2,518,068 1,942,307

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 13 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

CHANGE IN GROUP EQUITY (KSEK) Other capital Retained Share capital contributed Reserves earnings Total equity

At the beginning of the period 2019-01-01 528 27,994 6,188 819,067 853,777 Dividend -105,600 -105,600

Profit for the period and total income for the period - - 2,919 374,080 376,999

At the end of the period 2019-12-31 528 27,994 9,107 1,087,547 1,125,176

At the beginning of the period 2020-01-01 528 27,994 9,107 1,087,547 1,125,176 Dividend -105,600 -105,600 Profit for the period and total income for the period - - -13,896 490,575 476,679 Items reported directly against equity 12,144 12,144 Repurchase warrants -242 -242

At the end of the period 2020-12-31 528 27,994 -4,788 1,484,423 1,508,158

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 14 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

GROUP CASH FLOW STATEMENT (KSEK) 2020-10-01 2019-10-01 2020-01-01 2019-01-01 2020-12-31 2019-12-31 2020-12-31 2019-12-31

Operating profit 79,532 163,493 632,108 473,530 Adjustment of depreciations, amortisations and write-downs 138,021 74,080 412,674 262,205 Other adjustments 1,960 -40,020 7,136 -41,684 Interest received 247 2 698 2 Interest paid -1,146 -6,748 -4,775 -7,298 Tax paid -27,788 -15,467 -113,560 -63,104 Cash flow from current operations before changes in working capital 190,826 175,340 934,281 623,652 Changes in working capital

Change in current receivables 138,211 -110,712 73,781 -118,733 Change in current liabilities 58,027 200,819 118,243 222,852

Cash flow from current operations 387,064 265,446 1,126,305 727,770

Investing activities Investments in capitalised development -160,210 -120,701 -613,948 -421,986 Proceeds from capitalised development - - - 80,000 Investments in licenses, brands and similar rights -12,392 - -22,970 - Proceeds from licenses, brands and similar rights - 350 - 350 Investments in equipment -463 -15,074 -4,639 -32,806 Investments in subsidiaries -37,443 - -119,999 26 Investments in other financial assets 3,186 - 3,186 -

Cash flow from investing activities -207,322 -135,425 -758,370 -374,416

Financing activities Received deposits - - 422 - Amortisation of lease liability -8,467 -11,352 -43,062 -23,464 Paid dividend - - -105,600 -105,600 Repurchase warrants - - -242 -

Cash flow from financing activities -8,467 -11,352 -148,482 -129,064

Cash flow for the period 171,275 118,669 219,452 224,291 Cash and cash equivalents at the beginning of the period 600,025 434,593 554,227 327,044 Exchange rate effect -3,738 966 -6,119 2,892

Paradox InteractiveCash AB and (publ) cash • equivalents Org.nr: 556667-4759 at the end • Magnus of the Ladulåsgatan period 4, 118 66 Stockholm • www.paradoxinteractive.com 767,561 554,227 767,561 554,227 15 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

PARENT COMPANY INCOME STATEMENT (KSEK) 2020-10-01 2019-10-01 2020-01-01 2019-01-01 2020-12-31 2019-12-31 2020-12-31 2019-12-31

Revenues 430,331 388,319 1,781,416 1,289,081 Cost of goods sold -239,982 -133,909 -774,299 -463,661

Gross profit 190,349 254,410 1,007,116 825,421

Selling expenses -56,779 -65,542 -211,417 -193,582 Administrative expenses -21,677 -63,213 -116,757 -174,596 Other income 422 2,314 17,824 13,713 Other expenses -19,117 -9,404 -43,004 -10,548

Operating profit 93,198 118,566 653,762 460,407

Profit from shares in subsidiaries - - - 34 Financial income 287 2 730 2 Financial expense -3 -2 -225 -7

Profit after financial items 93,483 118,565 654,267 460,436

Year-end appropriations -150,225 -111,500 -150,225 -111,500 Income tax expense 11,243 -4,901 -112,532 -77,745

Profit for the year and total income for the year -45,500 2,165 391,510 271,190

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 16 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

PARENT COMPANY BALANCE SHEET (KSEK)

2020-12-31 2019-12-31 ASSETS Non-current assets Capitalised development 913,222 566,006 Licenses, brands and similar rights 86,090 111,464 Property and equipment 19,406 24,287 Shares in subsidiaries 305,812 106,454 Investments in associates 16,766 16,766 Other long term assets 60 3,462

Total non-current assets 1,341,356 828,440

Current assets Accounts receivable 174,229 249,522 Receivables from group companies 3,845 20,426 Other receivables 16,536 16,437 Prepaid expenses and accrued revenues 52,245 48,602 Cash and cash equivalents 688,427 519,333

Total current assets 935,281 854,320

TOTAL ASSETS 2,276,637 1,682,760

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 17 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

PARENT COMPANY BALANCE SHEET (KSEK)

2020-12-31 2019-12-31 EQUITY AND LIABILITIES Equity Restricted equity

Share capital 528 528 Capitalised development reserve 913,222 566,006 Non-restricted equity

Share premium reserve 27,994 27,994 Retained earnings -277,573 -107,850 Profit for the period 391,510 271,190

Total equity 1,055,681 757,869

Untaxed reserves 623,100 472,875

Untaxed reserves Other liabilities 422 23,293

Total long term liabilities 422 23,293

Current liabilities Accounts payable 63,904 38,539 Liabilities to group companies 57,373 27,859 Current tax liabilities 46,228 39,030 Other liabilities 50,115 2,353 Accrued expenses and prepaid revenues 379,815 320,942

Total current liabilities 597,434 428,723

TOTAL EQUITY AND LIABILITIES 2,276,637 1,682,760

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 18 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

NOTES (KSEK) NOTE 1 SEGMENT REPORTING Group Management has determined the operating segments based on the information processed by the President and which is the basis for making strategic decisions. The operations consist of one segment.

Group revenue from clients based on where the distributor is located is divided into the following geographical areas;

2020-10-01 2019-10-01 2020-01-01 2019-01-01 2020-12-31 2019-12-31 2020-12-31 2019-12-31

USA 365,641 332,315 1,526,282 1,090,842 Sweden 10,456 4,223 50,055 24,366 Rest of 49,804 38,961 189,231 156,957 Rest of the World 7,763 5,840 28,227 17,168

Total 433,663 381,338 1,793,794 1,289,332

Group revenue divided into major product categories;

2020-10-01 2019-10-01 2020-01-01 2019-01-01 2020-12-31 2019-12-31 2020-12-31 2019-12-31

PC 380,199 322,345 1,544,096 1,071,588 Console 39,139 54,036 212,413 199,256 Mobile 12,764 1,411 26,244 6,597 Other 1,560 3,546 11,040 11,891

Total 433,663 381,338 1,793,794 1,289,332

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 19 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

NOTE 2 DEPRECIATIONS, AMORTISATIONS AND WRITE-DOWNS DIVIDED PER FUNCTION

2020-10-01 2019-10-01 2020-01-01 2019-01-01 2020-12-31 2019-12-31 2020-12-31 2019-12-31

Cost of goods sold 134,874 61,012 385,750 233,246 Selling expenses 1,335 - 5,295 - Administrative expenses 1,812 13,068 21,629 28,959

Total 138,021 74,080 412,674 262,205

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 20 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

NOTE 3 ACQUISITIONS Iceflake Studios Playrion Game Studio On July 16, 2020, 100% of the shares were acquired in Iceflake Studios OY, based in , Finland. On July 1, 2020, 100% of the shares were acquired in Playrion Game Studio SAS, based in , Fran- Paradox has paid a fixed purchase price of MEUR 2.6, of which MEUR 1.3 was settled at the time of ce. Paradox has paid a fixed purchase price of MEUR 15.9, of which MEUR 9.9 was settled at the time of purchase, MEUR 0.3 is settled one year after the time of purchase, and MEUR 1.0 is settled two years purchase, MEUR 3.5 was settled before year-end 2020, MEUR 1.3 is settled by June 30, 2021, and MEUR after the time of purchase. 1.3 is settled by December 31, 2021.

The acquisition will increase Paradox development capacity for upcoming games. The cash flow effect The acquisition will increase Paradox development capacity for upcoming mobile games. The cash of the acquisition at Group level is MSEK -20.5, where MSEK -0.4 regarding expensed acquisition costs flow effect of the acquisition at Group level is MSEK -137.3, where MSEK -2.6 regarding expensed acqui- are included in administrative expenses. sition costs are included in administrative expenses.

If Iceflake had been acquired on January 1, 2020, the acquisition had contributed revenue of MSEK 0.5 If Playrion had been acquired on January 1, 2020, the acquisition had contributed revenue of MSEK million and a positive result of MSEK 1.8. Iceflake contributed with MSEK 0.1 in revenues and MSEK -0.6 44.8 million and a positive result of MSEK 18.2. Playrion contributed with MSEK 15.8 in revenues and in loss from the date of acquisition until September 30, 2020. MSEK 4.0 in profit from the date of acquisition until December 31, 2020.

Purchase price: Purchase price: Cash consideration 13,438 Cash consideration 103,986 Cash consideration, settled within 1 year after the time of purchase 2,688 Cash consideration, settled within 6 months from the time of purchase 36,604 Cash consideration, settled within 2 years after the time of purchase 10,750 Cash consideration, settled within 1 year from the time of purchase 13,321

26,876 Cash consideration, settled within 2 years from the time of purchase 13,321 167,233 Reported amounts on identifiable net assets

Cash and cash equivalents 6,807 Reported amounts on identifiable net assets Other assets 431 Licenses, brands, and similar rights 182,982 Other liabilities -1,183 Cash and cash equivalents 29,851

6,055 Other assets 18,119 Deferred tax liabilities -51,235 Goodwill 20,821 Other liabilities -12,484

167,233

Goodwill 0

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 21 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

NOTE 4 WARRANT SCHEMES Warrant scheme 2020/2023 The Annual General Meeting on May 15, 2020, decided to introduce a warrant scheme aimed at employees of the Group. The number of outstanding warrants amounts to 289,000 with the right to subscribe for the same number of shares in Paradox Interactive AB (publ). Allotted warrants were issued free of charge at a market price of SEK 15.66 according to a valuation based on Black & Scholes. The exercise price for the warrants was set at SEK 264.26 and subscription for shares can take place June 15, 2023 to June 30, 2023. Personnel-related costs including social security contributions for the program amount to MSEK 4.8, reported during the third quarter of 2020. In the event of full subscrip- tion of these warrants, the parent company's equity will be increased by MSEK 76.4.

Warrant scheme 2019/2022 The Annual General Meeting on May 17, 2019 decided to introduce a warrant scheme aimed at employ- ees of the Group. The number of outstanding warrants amounts to 253,350 with the right to subscribe for the same number of shares in Paradox Interactive AB (publ). Allotted warrants were issued free of charge in two rounds at a market price of SEK 16.97 and SEK 21.07, respectively, according to a valuation based on Black & Scholes. The exercise price for the warrants was set at SEK 175.01 and subscription of shares can take place from June 15, 2022 to June 30, 2022. Personnel-related costs including social security contributions for the program amount to MSEK 5.9, of which MSEK 4.5 was re- ported during the third quarter of 2020. I In the event of full subscription of these warrants, the parent company's equity will be increased by MSEK 44.3.

Warrant scheme 2018/2021 The Annual General Meeting on May 18, 2018, decided to introduce a warrant scheme aimed at employees the Group. The number of outstanding warrants amounts to 211,000 with the right to subscribe for the same number of shares in Paradox Interactive AB (publ). Allotted warrants were issued free of charge at a market price of SEK 17.42 according to valuation based on Black & Scholes. The exercise price for the warrants was set at SEK 241.72, and shares can be subscribed for during the period June 15, 2021 to June 30, 2021. Personnel-related costs, including social security contributions for the program, amount to MSEK 5.3, of which MSEK 4.0 was reported during the third quarter of 2020. In the event of full subscription of these warrants, the parent company's equity will be increased by MSEK 51.0.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 22 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2020-01-01 - 2020-12-31

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 23