Year-End Report and Quarterly Report October - December 2020-01-01 - 2020-12-31

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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 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 Stockholm • 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 Hearts of Iron 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, 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. ABOUT PARADOX INTERACTIVE 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, Surviving Mars, Prison Architect, Magicka, Age of Wonders and the World of Darkness 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, China, Germany, France, 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 grand strategy 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 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 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, NINTENDO SWITCH, 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.
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