Year-End Report 2019-01-01 - 2019-12-31
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YEAR-END REPORT 2019-01-01 - 2019-12-31 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER 2019-01-01 - 2019-12-31 *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 2019-01-01 - 2019-12-31 YEAR-END REPORT AND QUARTERLY REPORT OCTOBER - DECEMBER FOURTH QUARTER 2019 • Paradox convention PDXCON took place in Berlin. • Revenues amounted to SEK 381.3 (336.9) million, an increase by 13 % • The new game Crusader Kings III, developed by Paradox Development compared to the same period last year. Studio, was announced with a planned release 2020. • Operating profit amounted to SEK 163.5 (146.8) million, an increase by 11 %. • Paradox Development Studio and the publishing branch moved to new Operating profit is positively affected by a reclassification of contingent premises at Magnus Ladulåsgatan in Stockholm. considerations in connection to the acquisition of Harebrained Schemes, amounting to SEK 44.1 million. AFTER THE END OF THE PERIOD • Profit before tax amounted to SEK 156.7 (146.8) million, and profit after tax • No significant events have taken place after the end of the period. amounted to SEK 130.5 (114.3) million. • Cash flow from operating activities amounted to SEK 265.4 (151.3) million, and cash flow from investing activities amounted to SEK -135.4 (-167.9) million. • By the end of the period cash amounted to SEK 554.2 (327.0) million. • Earnings per share amounted to SEK 1.24 (1.08) per share. • Revenues in the quarter are mainly attributable to BATTLETECH, Cities: Skylines, Europa Universalis IV, Hearts of Iron IV and Stellaris. FULL YEAR 2019 • Revenues amounted to SEK 1,289.3 (1,127.7) million, an increase by 14 % ABOUT PARADOX INTERACTIVE compared to the same period last year. The Paradox group today consists of both publishing and internal • Operating profit amounted to SEK 473.5 (455.1) million, an increase by 4 %. development of games and brands. The game portfolio includes more • Profit before tax amounted to SEK 466.8 (455.2) million, and profit after tax than 100 titles and Paradox owns the most important brands, including Stellaris, Europa Universalis, Hearts of Iron, Crusader Kings, Cities: Skylines, amounted to SEK 374.1 (353.9) million. Surviving Mars, Prison Architect, Magicka, Age of Wonders and the World of • Earnings per share amounted to SEK 3.54 (3.35). Darkness catalogue of brands. IMPORTANT EVENTS IN THE FOURTH QUARTER 2019 From the start 15 years ago, the company has published its games all over • One new game was released in early access during the period, Surviving the the world, initially through physical distribution but since 2006 primarily in digital channels. Paradox games are developed primarily for PC and Aftermath, developed by Iceflake Studios. console platforms, but the company also releases games on mobile. The • Three expansions were released during the period; Heavy Metal for largest markets today include the US, UK, China, Germany, France, Russia BATTLETECH, Revelations for Age of Wonders: Planetfall and Psych Ward: and Scandinavia. Today, over four million gamers play a Paradox game each Wardens Edition for Prison Architect. month and the number of registered Paradox users exceeds twelve million. Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 2 YEAR-END REPORT 2019-01-01 - 2019-12-31 COMMENTS FROM CEO The stage is set for 2020 2019 was a year characterised by preparation for the future. During the year, we invested in game develop- ment, performed marketing activities, and built our organisation to give us the best possible conditions to develop and publish our upcoming games. The last quarter of the year is no exception. We invested SEK 121 million in game development, which is 34% more than the same quarter last year. We performed our biggest PDXCON ever, this time in Berlin, together with over 2,000 fans from over 40 countries (plus an additional 200,000 viewers of our live streams from the event). On site, all Paradox employees were gathered to spend this fantastic event with fans and partners, showing our games and announcing what is coming next. Our investments in organisation, marketing and game development are long-term and a foundation for the growth we want to achieve in the coming years. Investment also means higher costs and lower margins in the short term as revenues come in later periods. In 2019, we significantly increased both the quality and quantity of our marketing compared to previous years. This is, to a large extent, marketing for the upcoming games Vampire: the Masquerade - Bloodlines 2, Crusader Kings III, Empire of Sin and Surviving the Aftermath, with the purpose to reach new player groups, generate sign-ups and pre- orders. We also continue our spending on marketing for our existing gaming titles, to drive engagement and sales and to attract new players. At the end of 2019, the number of monthly unique active players Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 SStockholmtockholm • www.paradoxinteractive.com 3 YEAR-END REPORT 2019-01-01 - 2019-12-31 in Paradox's portfolio was over 4 million, which is period, on the other hand, is strongly dependent on during the quarter through the annual Publisher about 30% higher than at the end of 2018 and the the number and size of the games we launch during Weekend, which always generates a lot of sales. highest figure ever in our history. At the end of 2019, the period, which varies from quarter to quarter and At the same time, we know that player behavior the number of Paradox accounts registered in our from year to year. At the start of the quarter, we had changes over time and therefore it is important for ecosystem was just over 12 million, also an increase hoped to release some additional expansions and it us to continuously test new distribution channels. of 30% compared to the previous year. is always sad to have to postpone launches. At the Since its launch in June 2019, we have participated same time, we know from experience that quality is in Microsoft's subscription service, Xbox Game Pass Revenue for the fourth quarter increased by 13% crucial and must come first - it always pays off in the for PC, and during the fourth quarter we expanded compared to the same quarter in 2018 and revenue long run. our participation by adding several of our most for full year 2019 increased by 14% compared to 2018. popular games, such as Stellaris, Hearts of Iron IV, Profit before tax for the quarter was 7% higher than A central part of our business is to offer our games and Europa Universalis IV. During the quarter, we the fourth quarter 2018, while profit before tax for through the distribution channels and business also released the game Surviving the Aftermath in full year 2019 was 3% higher than 2018. Costs are models that our players appreciate. Our most an early access version together with Epic Games. increasing as we gradually develop and prepare the important distribution channel for over a decade After the end of the quarter, we launched a test offer launch of more and bigger games. Revenue for the is Steam, and we continued our close cooperation where our Europa Universalis IV players are offered Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 4 YEAR-END REPORT 2019-01-01 - 2019-12-31 access to all of the game's expansions through a monthly subscription. This is another way for us to test methods to reach more players and increase their engagement. In November, we released our first expansion for Prison Architect since we acquired the game and the brand in December 2018. In the same month, we also released our first expansion to Age of Wonders: Pla- netfall. It is also gratifying to see how our continuous improvement work with Imperator: Rome now has be- gun to yield concrete results. At the end of the fourth quarter, after a series of updates, Imperator: Rome reached its highest player numbers since launch, and the game has gone from mostly negative to most- ly positive user reviews on Steam. This is another example of our long-term strategy to methodically build and develop our brands and franchises, in close harmony with our player community. After the end of the period, we also launched the mobile game Stellaris: Galaxy Command. So far, the launch is limited to a few markets to test the game and gather feedback from our players for further de- velopment before expanding to more markets. Ahead of us is an important year which will see the launches of Crusader Kings III, Vampire: the Masque- rade - Bloodlines 2, Empire of Sin, and the full launch of Surviving the Aftermath. I, and the entire company, really look forward to 2020, with the biggest and most ambitious games in our history to date! Ebba Ljungerud, CEO Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 5 YEAR-END REPORT 2019-01-01 - 2019-12-31 RELEASES DURING THE QUARTER SURVIVING THE AFTERMATH PC & XBOX ONE Survive and thrive in a post-apocalyptic future — resources are scarce but opportunity calls. Build the ultimate disaster proof colony, protect your colonists and restore civilization to a devastated world.