Interim Report 2021-01-01 - 2021-03-31

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INTERIM REPORT 2021-01-01 - 2021-03-31

Interim Report

2021-01-01 - 2021-03-31

*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 INTERIM REPORT 2021-01-01 - 2021-03-31

INTERIM REPORT 2021-01-01 - 2021-03-31

FIRST QUARTER 2021 • Revenues amounted to MSEK 364.5 (MSEK 400.4), a decrease by 9 % compared to the same period last year. • Operating profit amounted to MSEK 92.5 (MSEK 165.9), a decrease by 44 %. • Profit after financial items amounted to MSEK 91.6 (MSEK 164.7), and profit after tax amounted to MSEK 76.7 (MSEK 128.0). • Cash flow from operating activities amounted to MSEK 145.7 (MSEK 247.7), and cash flow from investing activities amounted to MSEK -189.2 (MSEK -166.4). • By the end of the period cash amounted to MSEK 717.6 (MSEK 625.1). • Earnings per share amounted to SEK 0.72 (1.21) after dilution. • Revenues in the quarter are mainly attributable to Cities: Skylines, Crusader Kings III, Europa Universalis IV, Hearts of Iron IV and Stellaris.

IMPORTANT EVENTS IN THE FIRST QUARTER 2021 • New downloadable content for games was released during the period; Going Green for Prison Architect, Lithoids species pack and Megacorp for Stellaris: Console Edition, Heirs of Alexander for Imperator: Rome and Northern Lords for Crusader Kings III. • The group’s employees continue to work from home to reduce the spread of Covid-19. ABOUT PARADOX The Paradox group today consists of both publishing and internal development of AFTER THE END OF THE PERIOD games and brands. The game portfolio includes more than 100 titles and Paradox owns the most important brands, including Stellaris, Europa Universalis, Hearts of • No significant events have occurred after the end of the period. 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 DELÅRSRAPPORTINTERIM REPORT 2021-01-01 - 2021-03-31

COMMENTS FROM CEO With increased focus on our core games

At Paradox, we have gradually created a portfo- long-lived games form the basis of our business and Age of Wonders, and Prison Architect. At the other lio of core games which, through many years and generate, quarter after quarter, the vast majority of end of our portfolio, we have not-yet-released games iterations, have grown popular, created loyal player Paradox’s player activity, revenue and profits. based on new brands that are partly outside our bases and built strong brands. We have also built up current core areas. The development of these games significant internal expertise around these games In recent years, the core games have consisted of Eu- is often associated with higher risk, but when they in terms of game development, marketing and ropa Universalis, Crusader Kings, Stellaris, Hearts of become successful, they attract new players and other publishing activities. This means that we can Iron and Cities: Skylines. We also have several fran- expand our core areas. For us, it is therefore impor- develop and release both expansions to the existing chises in our portfolio of management and strategy tant to have a good balance between building on our games and new sequels to the games with relatively games that have great opportunities to establish existing core games with new content and sequels, low risk and often high returns. These popular and themselves as core games, such as Surviving Mars, and at the same time growing the portfolio with new

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 3 INTERIM REPORT 2021-01-01 - 2021-03-31

games. We have recently adjusted the weighting with the result that we invest a larger part of our investments and resources in the core areas of strategy and management games. This means, for example, that we continue to develop Surviving Mars and could during the first quarter of the year announce that new content is being built by our partner studio Abstrac- tion Games, with several content releases planned for the coming year. Surviving Mars recently reached five million unique players and we see great opportunities for the game to establish itself as part of our core portfolio. To further increase our focus, we also chose during the quarter to cancel further development of two not-yet-announced games, developed by external studios.

Part of the increased focus on our core games is about securing the velocity with which we release new content for the games. The balance between publishing content as fast as our players want and keeping high quality in what we produce is difficult and important, and we continue to put a lot of time and effort into constantly getting better. One part of this focus is to increase the number of people and studios that build our grand strategy games. The work began in 2020 when our studios in both Malmö and Umeå switched to start developing content for our grand strategy games at the same time as we established a new studio in Barcelona - Paradox Tinto - with the same purpose. Over the years, we will be able to release more and at the same time ensure high quality of our expansions.

Revenue during the quarter decreased by 9% and profit before tax decreased by 44%, compared to the first quarter of 2020. For the last twelve months, revenue increased by 21% while profit before tax decreased by 2%, compared with a year earlier. Since a large part of

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholmtockholm • www.paradoxinteractive.com 4 INTERIM REPORT 2021-01-01 - 2021-03-31

our revenue is in USD and other foreign currencies, our games, not least in China. The Chinese market has tain areas due to working from home and I therefore revenue and result are affected by changes in exchange gradually increased in importance for us and during look forward to meeting all colleagues in the offices rates. The USD / SEK exchange rate has decreased by the first quarter of the year it was our second largest again soon. 13% from the first quarter of 2020 to the first quarter of market after the USA in terms of sales. this year, which has had a significant negative impact Next week, May 21-23, our annual PDXCON will take on the quarter's revenue. We are not satisfied with the For many reasons, I am glad that the vaccination aga- place, this time as a completely digital event, PDXCON quarter. Sometimes there are periods with fewer and inst Covid-19 is in full swing. For us at Paradox, this Remixed. I hope to see as many of you as possible smaller game and expansion releases - but we can do means that we will be able to start going back to the there! better than this and our ambitions are higher. offices in all countries in the not too distant future. Although player activity and growth have been strong Ebba Ljungerud, CEO In February, we participated in the Steam Lunar New during the pandemic, we have, despite great efforts Year Sale which contributed to increased sales of our from all our staff and partners, lost efficiency in cer-

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 5 INTERIM REPORT 2021-01-01 - 2021-03-31

RELEASES DURING THE QUARTER

DLC DLC DLC

PRISON ARCHITECT: GOING GREEN STELLARIS: CE - LITHOIDS STELLARIS: CE - MEGACORP PC, XBOX ONE, PLAYSTATION 4, NINTENDO SWITCH XBOX ONE, PLAYSTATION 4 XBOX ONE, PLAYSTATION 4 Prepare to get your hands dirty Wardens! The Lithoids Species Pack features a selection of new MegaCorp is an expansion pack for Stellaris: Console Prison Architect: Going Green brings agriculture to your rock-based species portraits and ship models for play- Edition, which has players ushering in an era of prospe- compound, introducing farming, produce exports, and a ers who take nothing for granite and are looking to une- rity and profit on a galactic scale. In this economy-fo- whole bunch of contraband. arth a more grounded civilization. Lithoids are a bigger cused expansion, players can become the CEO of a Fruits of Labor: Farming introduces a new type of Prison and boulder species type made entirely of sapient rock powerful corporate empire to expand operations across Labor, allowing prisons to grow potatoes, wheat, apples, who eat minerals for sustenance, are long-lived, and the stars. and more. Produce can be exported or used as ingredi- can colonize in almost any environment. ents for inmate meals.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 6 INTERIM REPORT 2021-01-01 - 2021-03-31

DLC DLC

IMPERATOR: ROME - HEIRS OF ALEXANDER CRUSADER KINGS III - NORTHERN LORDS PC PC The Hellenistic kingdoms of the Eastern Mediterranean and Asia take Best known as fierce raiders from a land of snow and legend, the Norse center stage in this Content Pack for Imperator: Rome. Heirs of Alexan- were a complex society where loyalty was based on more than a noble der add additional context and flavor to this rich and varied landscape, bloodline. Leaders had to prove themselves as warriors, yes, but also as as the great conqueror’s former generals and their descendants try to judges and governors. Northern Lords is the first Flavor Pack for Crusa- claim the mantle of the ancient world’s most legendary ruler. der Kings III, one of the best reviewed games of 2020. It offers new events and cultural themes related to Norse society.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 7 INTERIM REPORT 2021-01-01 - 2021-03-31

REVENUE AND PROFIT FIRST QUARTER

REVENUE AND PROFIT FIRST QUARTER games are amortised on a straight-line basis over cash equivalents, operating receivables and opera- Revenues amounted to MSEK 364.5 (MSEK 400.4), an 18-month period. The write-downs for the period ting liabilities during the quarter compared with the an decrease by 9 % compared to the same period in the item amount to MSEK 34.4 (MSEK 13.8) and same quarter last year. last year. New downloadable content for games was pertain to two yet unannounced games where the released during the period; Going Green for Prison development has been cancelled. In addition to Operating profit amounted to MSEK 92.5 (MSEK Architect, Lithoids species pack and Megacorp for depreciation, amortisation and write-downs within 165.9), a decrease by 44 %. Stellaris - Console Edition, Heirs of Alexander for the item, a total of MSEK 72.3 (MSEK 100.1) was Imperator: Rome and Northern Lords for Crusader expensed regarding non-capitalised development Financial items amounted to MSEK -0.9 (MSEK -1.2). Kings III. Revenues in the quarter are mainly costs, development support, operation and main- Financial items primarily consists of interest on lease attributable to Cities: Skylines, Crusader Kings III, tenance of games, and royalties. Non-capitalised liabilities. Europa Universalis IV, Hearts of Iron IV and Stellaris. development costs have decreased compared with the comparison period due to a reduced share of Profit after financial items amounted to MSEK 91.6 Cost of goods sold amounted to MSEK 202.8 (MSEK non-capitalised costs for the group's internally (MSEK 164.7), and profit after tax amounted to MSEK 171.4), attributable to game development, deve- developed games. Costs for development support, 76.7 (MSEK 128.0). lopment support, operation and maintenance of operation and maintenance of games have increased games, as well as royalties to external rights holders. compared with the comparison period as a result of FINANCIAL POSITION The costs for game development have increased as a an expanded game portfolio and increased player Capitalised development amounted to MSEK 1,006.4 result of investments in and launches of new games. activity. Costs for royalties have decreased compa- (MSEK 692.4) by the end of the period. red to the comparison period due to lower sales of Depreciation and amortisation for the period in the royalty-generating games. Licenses, brands and similar rights amounted to item amounts to MSEK 96.0 (MSEK 57.5), of which MSEK MSEK 290.1 (MSEK 195.6). 68.5 (MSEK 38.7) relates to amortisation of released ga- Selling expenses for the period amounted to MSEK mes and MSEK 20.3 (MSEK 12.1) relates to depreciations 55.9 (MSEK 46.9). Goodwill amounted to MSEK 20.6 (MSEK 0.0) attribu- of acquired licenses, brands and similar rights. table to the acquisition of Iceflake Studios. Administrative expenses for the period amounted to The games Crusader Kings III and Empire of Sin, MSEK 25.9 (MSEK 36.2). By the end of the period property and equipment which were released on September 1, 2020 and amounted to MSEK 25.4 (MSEK 33.4). December 1, 2020, are amortised using a degres- Other income amounted to MSEK 12.6 (MSEK 20.6), sive amortisation method where 1/3 of the games and other expenses to MSEK 0.0 (MSEK 0.5). The Right-of-use assets for offices amounted to MSEK 191.6 are amortised the first month after release, 1/3 is negative development for other operating income is (MSEK 225.5). amortised month 2-6 after release, and 1/3 is amor- primarily driven by a weaker exchange rate develop- tised month 7-18 after release. Previously released ment of USD against SEK on the group's cash and Shares in associates amount to MSEK 24.7 (MSEK 23.3)

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 8 INTERIM REPORT 2021-01-01 - 2021-03-31

by the end of the period, relating to 33 % of shares in CASH FLOW FIRST QUARTER RISKS AND UNCERTAINTIES Seattle-based development studio Hardsuit Labs. The Cash flow from operating activities amounted to Paradox is, like most companies, exposed to certain shares are valued at the equity method. MSEK 145.7 (MSEK 247.7), primarily attributable to risks in its operations. The risks and uncertainties the operating profit and adjustments for items not are described as a whole in the Annual Report for Accounts receivable amounted to MSEK 128.8 (MSEK included in the cash flow. Cash flow from investing 2020, page 22. Risks to be specifically mentioned 162.4) by the end of the period, mainly attributable activities amounted to MSEK -189.2 (MSEK -166.4), includes a dependency on key employees, depen- to sales during the last month of the period. mainly referring to investments in game developme- dency on a few sales partners, delays of game pro- nt. Cash flow from financing activities amounted to jects, low revenues from game releases, and foreign Cash and cash equivalents amounted to MSEK 717.6 MSEK -8.4 (MSEK -9.1) mainly relating to amortisa- currency. These risks and uncertainties may have (MSEK 625.1). tion of lease liabilities for office premises. a direct or indirect impact on the group's financial position and results. Shareholders' equity amounts to MSEK 1,591.8 PARENT COMPANY FIRST QUARTER (MSEK 1,260.8), of which MSEK 76.7 (MSEK 128.0) Within the parent company is the publishing opera- DIVIDEND PROPOSAL consists of accumulated profit for the year. tions, which acts as the main publisher for all of the The Board proposes a dividend of SEK 1.00 per group's games. The parent company also to some share. The Board proposes Thursday, May 20, 2021 Long term lease liabilities amounts to MSEK 160.0 extent provides administration services to the subsi- as record date. If the annual general meeting of the (MSEK 187.6) consisting of liabilities for office premises. diaries. To a large extent, the subsidiaries only have shareholders approves the proposal, the dividend intra-group sales for game development invoiced to will be distributed by Euroclear Sweden AB on Tues- Deferred tax liabilities amounts to MSEK 191.1 (MSEK the parent company. All in all, this leads to both re- day May 25, 2021. 125.7), mainly relating to untaxed reserves and venues and costs for the parent company to a large intangible assets from acquisitions. extent following the group's development in general. Parent company revenues for the quarter amounted Other long term liabilities amounted to MSEK 0.4 to MSEK 362.0 (MSEK 400.2). Operating profit amoun- (MSEK 25.6) by the end of the period. ted to MSEK 99.3 (MSEK 166.2). Profit after financial items amounted to MSEK 99.3 (MSEK 166.2). Profit Short term lease liabilities amounts to MSEK 34.5 after tax amounted to MSEK 78.8 (MSEK 128.6). (MSEK 39.1) consisting of short term liabilities for office premises. ACCOUNTING PRINCIPLES This interim report has been prepared in accordan- Other current liabilities amount to MSEK 86.4 (MSEK ce with IAS 34, Interim Financial Reporting as well 25.7), and mainly consist of short-term commitments as RFR 1 and the annual accounts act. The parent for acquisitions. company applies the Swedish Financial Reporting Board's recommendation RFR 2, accounting for legal Accrued expenses and prepaid income amounts to entities. Accounting principles and calculation bases MSEK 364.9 (MSEK 278.2). The change is mainly re- are in accordance with the principles applied in the lated to an increase in prepaid revenue from games company's most recent annual report. sold where revenue is accounted for at a later date.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 9 INTERIM REPORT 2021-01-01 - 2021-03-31

CONTACT Additional information about the company can be found on the corporate 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.

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 interim 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 May 11, 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 May 11, 2021.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 10 INTERIM REPORT 2021-01-01 - 2021-03-31

KEY FIGURES FOR THE GROUP 2021-01-01 2020-01-01 2020-01-01 2021-03-31 2020-03-31 2020-12-31

Revenues, KSEK 364,529 400,404 1,793,794

Operating profit, KSEK 92,508 165,885 632,108 Profit after financial items, KSEK 91,574 164,697 628,030 Profit after tax, KSEK 76,733 128,007 490,575

Operating margin 25% 41% 35% Profit margin 21% 32% 27% Equity/assets ratio 64% 62% 60%

Equity per share before dilution, SEK 15.07 11.94 14.28 Equity per share after dilution, SEK 15.04 11.94 14.24 Earnings per share before and after dilution, SEK 0.73 1.21 4.65 Earnings per share before and after dilution, SEK 0.72 1.21 4.64

Number of shares by the end of the period before dilution 105,600,000 105,600,000 105,600,000 Number of shares by the end of the period after dilution 105,853,350 105,600,000 105,889,000 Average number of shares before dilution 105,600,000 105,600,000 105,600,000 Average number of shares after dilution 105,919,844 105,600,000 105,839,159

Average number of employees 690 496 567 Number of employees by the end of the period 696 503 662

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 11 INTERIM REPORT 2021-01-01 - 2021-03-31

GROUP INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME (KSEK) 2021-01-01 2020-01-01 2020-01-01 2021-03-31 2020-03-31 2020-12-31

Revenues 364,529 400,404 1,793,794 Cost of goods sold -202,752 -171,401 -805,644

Gross profit 161,777 229,003 988,149

Selling expenses -55,908 -46,948 -215,138 Administrative expenses -25,877 -36,222 -120,422 Other income 12,550 20,572 25,612 Other expenses -33 -521 -46,094

Operating profit 92,508 165,885 632,108

Financial income 101 0 698 Financial expense -1,035 -1,188 -4,775

Profit after financial items 91,574 164,697 628,030

Tax -14,841 -36,689 -137,455

Profit for the period 76,733 128,007 490,575

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

Earnings per share before dilution, SEK 0.73 1.21 4.65 Earnings per share after dilution, SEK 0.72 1.21 4.64

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

Translation differences 6,944 7,603 -13,896

Total comprehensive income for the period 83,677 135,611 476,679

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 12 INTERIM REPORT 2021-01-01 - 2021-03-31

GROUP BALANCE SHEET (KSEK)

2021-03-31 2020-03-31 2020-12-31

ASSETS Non-current assets Capitalised development 1,006,448 692,356 920,467 Licenses, brands and similar rights 290,127 195,622 304,587 Goodwill 20,621 - 20,218 Property and equipment 25,367 33,409 26,529 Right-of-use assets 191,591 225,471 199,440 Investments in associates 24,669 23,345 24,669 Other long term assets 1,258 3,462 1,234

Total non-current assets 1,560,082 1,173,665 1,497,146

Current assets Accounts receivable 128,758 162,446 176,979 Other receivables 31,652 16,997 23,777 Prepaid expenses and accrued revenue 54,539 47,172 52,606 Cash and cash equivalents 717,637 625,051 767,561

Total current assets 932,587 851,665 1,020,923

TOTAL ASSETS 2,492,669 2,025,330 2,518,068

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 13 INTERIM REPORT 2021-01-01 - 2021-03-31

GROUP BALANCE SHEET (KSEK)

2021-03-31 2020-03-31 2020-12-31 EQUITY AND LIABILITIES Equity Share capital 528 528 528 Other capital contributed 27,994 27,994 27,994 Reserves 2,156 16,711 -4,788 Retained earnings 1,484,423 1,087,547 993,849 Profit for the period 76,733 128,007 490,575

Total equity 1,591,834 1,260,787 1,508,158

Long term liabilities Lease liabilities 159,955 187,599 167,775 Deferred tax liabilities 191,073 125,723 193,396 Other liabilities 422 25,615 422

Total long term liabilities 351,450 338,937 361,594

Current liabilities Accounts payable 61,133 43,461 66,667 Current tax liabilities 2,534 39,119 50,819 Lease liabilities 34,484 39,137 34,129 Other liabilities 86,365 25,716 65,446 Accrued expenses and prepaid revenues 364,869 278,173 431,257

Total current liabilities 549,385 425,606 648,317

TOTAL EQUITY AND LIABILITIES 2,492,669 2,025,330 2,518,068

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 14 INTERIM REPORT 2021-01-01 - 2021-03-31

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

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

At the beginning of the period 2021-01-01 528 27,994 -4,788 1,484,423 1,508,158 Profit for the period and total income for the period - - 6,944 76,733 83,677

At the end of the period 2021-03-31 528 27,994 2,156 1,561,156 1,591,834

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 15 INTERIM REPORT 2021-01-01 - 2021-03-31

GROUP CASH FLOW STATEMENT (KSEK) 2021-01-01 2020-01-01 2020-01-01 2021-03-31 2020-03-31 2020-12-31

Operating profit 92,508 165,885 632,108 Adjustment of depreciations, amortisations and write-downs 133,882 79,296 412,674 Other adjustments - -2,428 7,136 Interest received 101 - 698 Interest paid -1,035 -1,188 -4,775 Tax paid -67,206 -39,990 -113,560 Cash flow from current operations before changes in working capital 158,250 201,575 934,281 Changes in working capital

Change in current receivables 40,345 88,919 73,781 Change in current liabilities -52,937 -42,814 118,243

Cash flow from current operations 145,659 247,681 1,126,305

Investing activities Investments in capitalised development -188,822 -153,422 -613,948 Investments in licenses, brands and similar rights - -10,578 -22,970 Investments in equipment -404 -2,394 -4,639 Investments in subsidiaries - - -119,999 Investments in other financial assets - - 3,186

Cash flow from investing activities -189,226 -166,394 -758,370

Financing activities Received deposits - 422 422 Amortisation of lease liability -8,443 -9,544 -43,062 Paid dividend - - -105,600 Repurchase warrants - - -242

Cash flow from financing activities -8,443 -9,122 -148,482

Cash flow for the period -52,010 72,165 219,452 Cash and cash equivalents at the beginning of the period 767,561 554,227 554,227 Exchange rate effect 2,086 -1,341 -6,119

Cash and cash equivalents at the end of the period 717,637 625,051 767,561

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 16 INTERIM REPORT 2021-01-01 - 2021-03-31

PARENT COMPANY INCOME STATEMENT (KSEK) 2021-01-01 2020-01-01 2020-01-01 2021-03-31 2020-03-31 2020-12-31

Revenues 362,014 400,213 1,781,416 Cost of goods sold -196,101 -166,320 -774,299

Gross profit 165,913 233,893 1,007,116

Selling expenses -52,778 -47,043 -211,417 Administrative expenses -26,295 -36,370 -116,757 Other income 12,487 16,245 17,824 Other expenses - -515 -43,004

Operating profit 99,327 166,210 653,762

Financial income - - 730 Financial expense -27 -17 -225

Profit after financial items 99,300 166,193 654,267

Year-end appropriations - - -150,225 Income tax expense -20,456 -37,566 -112,532

Profit for the year and total income for the year 78,844 128,628 391,510

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 17 INTERIM REPORT 2021-01-01 - 2021-03-31

PARENT COMPANY BALANCE SHEET (KSEK)

2021-03-31 2020-03-31 2020-12-31

ASSETS Non-current assets Capitalised development 1,000,006 681,132 913,222 Licenses, brands and similar rights 79,610 105,692 86,090 Property and equipment 18,116 23,539 19,406 Shares in subsidiaries 305,812 106,454 305,812 Investments in associates 16,766 16,766 16,766 Other long term assets 60 3,462 60

Total non-current assets 1,420,370 937,045 1,341,356

Current assets Accounts receivable 124,278 161,913 174,229 Receivables from group companies 3,305 19,856 3,845 Tax assets 113 - - Other receivables 22,702 15,890 16,536 Prepaid expenses and accrued revenues 53,597 47,923 52,245 Cash and cash equivalents 641,977 589,231 688,427

Total current assets 845,971 834,813 935,281

TOTAL ASSETS 2,266,341 1,771,858 2,276,637

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 18 INTERIM REPORT 2021-01-01 - 2021-03-31

PARENT COMPANY BALANCE SHEET (KSEK)

2021-03-31 2020-03-31 2020-12-31 EQUITY AND LIABILITIES Equity Restricted equity

Share capital 528 528 528 Capitalised development reserve 1,000,006 681,132 913,222 Non-restricted equity

Share premium reserve 27,994 27,994 27,994 Retained earnings 27,153 48,215 -277,573 Profit for the period 78,844 128,628 391,510

Total equity 1,134,525 886,497 1,055,681

Untaxed reserves 623,100 472,875 623,100

Long term liabilities Other liabilities 422 25,615 422

Total long term liabilities 422 25,615 422

Current liabilities Accounts payable 56,451 42,205 63,904 Liabilities to group companies 67,425 40,257 57,373 Current tax liabilities - 37,945 46,228 Other liabilities 58,421 7,507 50,115 Accrued expenses and prepaid revenues 325,997 258,958 379,815

Total current liabilities 508,294 386,871 597,434

TOTAL EQUITY AND LIABILITIES 2,266,341 1,771,858 2,276,637

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 19 INTERIM REPORT 2021-01-01 - 2021-03-31

NOTES (KSEK) NOTE 1 SEGMENT REPORTING Group Management has determined the operating segments based on the information processed by the CEO 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;

2021-01-01 2020-01-01 2020-01-01 TSEK 2021-03-31 2020-03-31 2020-12-31

USA 292 574 338 341 1 526 282 Sweden 7 848 10 130 50 055 Rest of Europe 27 337 45 966 189 231 Rest of the World 36 770 5 966 28 227

Total 364 529 400 404 1 793 794

Group revenue divided into major product categories;

2021-01-01 2020-01-01 2020-01-01 TSEK 2021-03-31 2020-03-31 2020-12-31

PC 291,049 336,780 1,544,096 Console 54,544 55,816 212,413 Mobile 15,061 2,963 26,244 Other 3,875 4,845 11,040

Total 364,529 400,404 1,793,794

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 20 INTERIM REPORT 2021-01-01 - 2021-03-31

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

2021-01-01 2020-01-01 2020-01-01 2021-03-31 2020-03-31 2020-12-31

Cost of goods sold 130,441 71,260 385,750 Selling expenses 1,409 1,313 5,295 Administrative expenses 2,032 6,724 21,629

Total 133,882 79,296 412,674

NOTE 3 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 subscription 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 employees of the Group. The number of issued warrants amounted to 259,850 with the right to subscribe for the same number of shares in Paradox Interactive AB (publ). In total, 6,500 of these warrants have been repurchased from employees in connection employee resignations. 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 reported 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 2019/2022 The Annual General Meeting on May 18, 2018, decided to introduce a warrant scheme aimed at employees the Group. The number of outstanding warrants amounted to 229,500 with the right to subscribe for the same number of shares in Paradox Interactive AB (publ). In total, 18,500 of these warrants have been repurchased from employees in connection employee resignations. 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 21 INTERIM REPORT 2021-01-01 - 2021-03-31

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 22