INTERIM REPORT 2020-01-01 - 2020-06-30

INTERIM REPORT

2020-01-01 - 2020-06-30

*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 2020-01-01 - 2020-06-30

INTERIM REPORT 2020-01-01 - 2020-06-30

SECOND QUARTER 2020 • Paradox Publisher Weekend on Steam took place May 14 - May 18. • Revenues amounted to MSEK 464.9 (MSEK 387.2), an increase by 20 % • The Group’s employees work from home since mid-March to reduce the compared to the same period last year. spread of Covid-19. At present, there is no set date for employees to return to • Operating profit amounted to MSEK 199.0 (MSEK 154.2), an increase by 29 %. work from regular office premises. • Profit after financial items amounted to MSEK 197.7 (MSEK 154.0), and profit after tax amounted to MSEK 154.5 (MSEK 120.3). AFTER THE END OF THE PERIOD • Cash flow from operating activities amounted to MSEK 278.5 (MSEK 232.7), and • Paris-based development studio Playrion Game Studio was acquired cash flow from investing activities amounted to MSEK -148.4 (MSEK -104.9). July 1, 2020. • By the end of the period cash amounted to MSEK 637.2 (MSEK 396.4). • Finland-based development studio Iceflake Studios was acquired July 16, • Earnings per share amounted to SEK 1.46 (1.14) after dilution. 2020. • Revenues in the quarter are mainly attributable to Age of Wonders: Planetfall, • The release of Vampire: The Masquerade – Bloodlines 2 will be postponed Cities: Skylines, Europa Universalis IV, Hearts of Iron IV and Stellaris. until 2021.

FIRST HALF-YEAR 2020 • Revenues amounted to MSEK 865.3 (MSEK 625.4), an increase by 38 % compared to the same period last year. • Operating profit amounted to MSEK 364.9 (MSEK 217.0), an increase by 68 %. • Profit after financial items amounted to MSEK 362.4 (MSEK 217.2), and profit after tax amounted to MSEK 282.5 (MSEK 169.6). • Earnings per share amounted to SEK 2.67 (1.61) after dilution. ABOUT PARADOX The Paradox group today consists of both publishing and internal development of IMPORTANT EVENTS IN THE SECOND QUARTER 2020 games and brands. The game portfolio includes more than 100 titles and Paradox owns the most important brands, including Stellaris, Europa Universalis, Hearts of • Four expansions were released during the period; Invasions for Age of Iron, Crusader Kings, Cities: Skylines, Surviving Mars, Prison Architect, Magicka, Age Wonders: Planetfall, Emperor for Europa Universalis IV, Island Bound for of Wonders and the World of Darkness catalogue of brands. Prison Architect and Apocalypse for Stellaris: Console Edition. • The new mobile game Stellaris: Galaxy Command was released worldwide. 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 four million gamers play a Paradox game each month and the number of registered Paradox users exceeds 14 million.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 2 INTERIM REPORT 2020-01-01 - 2020-06-30

COMMENTS FROM CEO STRENGTHENING OUR FORCES FOR THE FUTURE

Closing the books for the first half of the year, I am This acquisition also provides additional develop- pleased to see that we have once again delivered ment competence and capacity within management a strong financial quarter while we have also laid games. several important building blocks for the future. The second quarter came with a major increase in our When we look at potential acquisitions, many capacity and competence to develop and publish aspects are taken into consideration in addition to games - both through organic growth and through the purely financial: we look for a company culture acquisitions. that is consistent with ours and a fit around our central game genres, but we are also searching In June, we presented our plans for a new game stu- for strong teams that have already achieved a lot dio in Barcelona: Paradox Tinto. Paradox Tinto is an together. Sometimes we make acquisitions based important step to further expand our capacity within on a need for increased resources and more talent in our central game genre - grand strategy. Johan An- areas we are already good at ourselves, while other dersson, who has been working as Game Director at times our purpose is to acquire new skill sets and Paradox Development Studio in Stockholm, will lead sometimes it is to broaden our brand portfolio with the studio onsite in Barcelona. new game titles.

During the quarter we also worked intensely on two Another important part of our acquisition strategy is acquisitions that were made public in July - Playrion to ensure we integrate our acquisitions into our eco- Game Studio and Iceflake Studios. Playrion Game system in a diligent way. We always strive to combine Studio is a mobile-first studio in Paris. Through this the help a studio receives from Paradox Interactive's acquisition we are enhancing our ability to develop structure and resources as a parent company with and publish mobile games, and we also welcome the creative freedom needed to create and build real- Airlines Manager to our game portfolio. Airlines ly good games. Integrating companies requires time Manager is a management game with a long lifespan and resources, and we are convinced that this tactic like many of our other games, but for mobile. generates greater value than the individual units on their own. Iceflake Studios, on the other hand, is a Finnish game studio with whom we already have a successful col- In addition to the new colleagues we have gained laboration regarding Surviving the Aftermath, which through acquisitions, we also prepared for the future is sold in early access through the Epic Games Store. in our existing operations through recruitments

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 666 Stockholm • www.paradoxinteractive.com 3 INTERIM REPORT 2020-01-01 - 2020-06-30

during the period. At the end of the second quarter, Covid-19 has continued to be a significant element our employee count amounted to 534 employees in during the period where our employees are working the entire group. Following the acquisitions of Playri- from home since March. During the latter part of on and Iceflake, which were completed after the end summer we have seen that the positive trend we have of the second quarter, and the start-up of Paradox noticed in regards to increased gaming has somewhat Tinto, our operations stretch to nine locations in six decreased. We have also noticed an impact on our countries around the world. productivity with the risk that primarily game titles which have not yet been communicated may be Our revenue and profit deliver on new records in the delayed. second quarter of the year. Our revenue increased by 20% compared with the same quarter last year and the In summary, we leave an operational as well as finan- revenue for the past twelve months increased by 29% cially successful quarter behind us with strengthened compared with the previous year. Our profit before tax relationships with our fantastic fans. Through the increased by 29% compared with the same quarter acquisitions and recruitments we have made in recent last year and, compared to the previous year's twel- months, we have many new colleagues to welcome ve-month period, profit before tax increased by 42%. when our summer holidays come to an end, which is While we are incredibly proud of the quarter I would something I am really looking forward to! like to mention, as so often before, that our quarters rarely can be compared to each other; instead it is the Ebba Ljungerud, CEO overall picture over time that gives the fairest indicator of our economic development.

One of our main growth factors is the game expan- sions we launch on an ongoing basis. During the quarter, we launched the expansions Emperor for Europa Universalis IV, Island Bound for Prison Archi- tect, and Invasions for Age of Wonders: Planetfall - all in line with our strategy to provide games with strong brands and longevity.

PC continues to be our largest platform by a good margin, but during the quarter we also continued to expand on other platforms: on console through the ex- pansion Apocalypse for Stellaris and on mobile through the launch of Stellaris: Galaxy Command globally. This way, we reach more players with our brands and can further diversify our sources of revenue.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 4 INTERIM REPORT 2020-01-01 - 2020-06-30

RELEASES DURING THE QUARTER

DLC

STELLARIS - GALAXY COMMAND STELLARIS - APOCALYPSE ANDROID & IOS XBOX ONE, PLAYSTATION 4 Get ready to explore and discover a spectacular and Apocalypse is a full expansion that redefines stellar real-time universe, where thousands of players meet warfare for all players with a host of new offensive and in a single galaxy with nearly a thousand star systems defensive options. Destroy entire worlds with terrifying to explore.Construct your space station, form and join planet-killer weapons, fight against (or alongside) ruth- alliances to occupy regions of space together, trade with less space pirates, and maybe discover a few non-violent other players, build-up your own powerful fleet, and features as well. wage war against other players in the galaxy!

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 5 INTERIM REPORT 2020-01-01 - 2020-06-30

RELEASES DURING THE QUARTER

DLC DLC DLC

PRISON ARCHITECT - ISLAND BOUND AOW: PLANETFALL - INVASIONS EUROPA UNIVERSALIS IV - EMPEROR PC, XBOX ONE, PS4, NINTENDO SWITCH PC, XBOX ONE, PS4 PC Prison Architect: Island Bound introduces more ways to In the stardust and disunity of the collapsed Star Union, Emperor focuses on improving the game experience for build and manage your prison. an insidious new race of conquerors has come to lay European nations, adding greater depth for the Catholic Use a variety of ferry and helicopter transports to deliver claim to the galaxy. Deploy and destroy as the merciless states and a more energetic and interactive Holy Roman supplies and inmates directly to docking areas around Shakarn, a vicious race of conniving lizardmen with Empire. Revolutions spread like wildfire, demanding ac- your compound. Maximize your prison’s efficiency by holographic disguises ready to deceive, disrupt and tion from kingdoms that don’t want to be swept up in the linking docks, helipads, and roads to specific deliveries. disintegrate the last strongholds of human power. feverish calls for reform. Old mechanics are reinterpreted New security objects make it easier to search deliveries Contend with new environmental catastrophes and and new options are available on a freshly redrawn map and prisoners. Additional emergency services can also brutal late-game invasions. Just be careful nothing of the continent. be called when things get out of hand. Shape the land followed you through the void… around your compound with moats, rivers, and lakes for security, or for style -- no access roads needed!

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 6 INTERIM REPORT 2020-01-01 - 2020-06-30

REVENUE AND PROFIT SECOND QUARTER

REVENUE AND PROFIT SECOND QUARTER Administrative expenses for the period amounted to Right-of-use assets for offices amounted to MSEK Revenues amounted to MSEK 464.9 (MSEK 387.2), MSEK 28.7 (MSEK 40.5). 211.9 (MSEK 35.8). Since last year Triumph Studios, an increase by 20 % compared to the same period Paradox Development Studio and Paradox Interacti- last year. Four expansions were released during the Other income amounted to MSEK 0.6 (MSEK 1.2), and ve have taken up new premises. period; Invasions for Age of Wonders: Planetfall, other expenses to MSEK 16.3 (MSEK 1.2). The nega- Emperor for Europa Universalis IV, Island Bound tive development is primarily driven by a weaker Shares in associates amount to MSEK 23.3 (MSEK for Prison Architect and Apocalypse for Stellaris: price performance of USD against SEK in the Group's 15.1) by the end of the period, relating to 33 % Console Edition. Revenues in the quarter are mainly liquid assets, operating receivables and liabilities of shares in Seattle-based development studio attributable to Age of Wonders: Planetfall, Cities: during the quarter compared with the same quarter Hardsuit Labs. The shares are valued at the equity Skylines, Europa Universalis IV, Hearts of Iron IV and last year. method. Stellaris. Operating profit amounted to MSEK 199.0 (MSEK Accounts receivable amounted to MSEK 130.3 (MSEK Cost of goods sold amounted to MSEK 163.0 (MSEK 154.2), an increase by 29 % 111.3) by the end of the period, mainly attributable 142.4), primarily attributable to game development, to sales during the last month of the period. development support, operation and maintenance Financial items amounted to MSEK -1.3 (MSEK -0.2). of games, as well as royalties to third parties. Costs Financial items primarily consists of interest on lease Cash and cash equivalents amounted to MSEK 637.2 for game development has increased following liabilities. (MSEK 396.4). game investments and releases of new games. Wri- te-downs within the function amounts to MSEK 0.0 Profit after financial items amounted to MSEK 197.7 Shareholders' equity amounts to MSEK 1,303.3 (MSEK 12.1). Work on development support as well (MSEK 154.0), and profit after tax amounted to MSEK (MSEK 919.9), consisting of MSEK 282.5 (MSEK 169.6) as operation and maintenance has since the begin- 154.5 (MSEK 120.3). accumulated profit for the year. ning of the year been mainly identified within the cost of goods sold function, which contributes to an FINANCIAL POSITION Long term lease liabilities amounts to MSEK 178.0 increase of the post. Cost of royalties is in line with Capitalised development amounted to MSEK 798.5 (MSEK 26.9) consisting of liabilities for office premi- the comparison period. Since the end of the year, the (MSEK 533.1) by the end of the period. ses. item is referred to as cost of goods sold, since it is considered to be a more accurate description of the Licenses, brands and similar rights amounted to Deferred tax liabilities amounts to MSEK 122.4 (MSEK function's content. MSEK 177.5 (MSEK 228.8). 107.6), where the majority is attributable to tax on untaxed reserves. Selling expenses for the period amounted to MSEK By the end of the period property and equipment 58.6 (MSEK 50.0). Selling expenses increased due to amounted to MSEK 27.5 (MSEK 11.8). increased investments in marketing and sales.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 7 INTERIM REPORT 2020-01-01 - 2020-06-30

Other long term liabilities amounted to MSEK 23.8 new games. Write-downs within cost of goods sold and liabilities are approximately equal to their book (MSEK 61.2) by the end of the period. Other long amounts to MSEK 13.8 (MSEK 15.0). Cost of royalties values. Financial instruments valued at fair value term liabilities consist of a contingent consideration is in line with the comparison period. Operating is comprised of contingent considerations. These relating to the acquisition of the rights to Prison profit amounted to MSEK 364.9 (MSEK 217.0), an in- are reported at fair value through profit or loss. The Architect which will be settled within a three-year crease by 68 %. Profit after financial items amoun- valuation is based on other observable data for the period from the transaction date. ted to MSEK 362.4 (MSEK 217.2), and profit after tax asset or liability, that is, level 3 according to IFRS. amounted to MSEK 282.5 (MSEK 169.6). Cash flow No reclassifications have been made between the Short term lease liabilities amounts to MSEK 35.5 from operating activities amounted to MSEK 524.7 different levels during the period. (MSEK 9.0) consisting of short term liabilities for (MSEK 388.9). Cash flow from operating activities office premises. amounted to MSEK 526.2 (MSEK 388.9). Cash flow RISKS AND UNCERTAINTIES from investing activities amounted to MSEK -314.8 Paradox is, like most companies, exposed to cer- Accrued expenses and prepaid income amounts to (MSEK -206.5). Cash flow from financing activities tain risks in its operations. The risks and uncer- MSEK 292.8 (MSEK 170.0). The change is mainly re- amounted to MSEK -127.9 (MSEK -113.6). tainties are described as a whole in the Annual lated to an increase in prepaid revenue from games Report for 2019, page 23. Risks to be specifically sold where revenue is accounted for at a later date. PARENT COMPANY SECOND QUARTER mentioned includes a dependency on key employ- The parent company consists of the publishing ees, dependency on a few sales partners, delays of CASH FLOW SECOND QUARTER branch, and the parent company provides adminis- game projects, low revenues from game releases, Cash flow from operating activities amounted to trational services to subsidiaries. The subsidiaries and foreign currency. These risks and uncertainties MSEK 278.5 (MSEK 232.7), primarily attributable mainly have intercompany revenue from game may have a direct or indirect impact on the group's financial position and results. to the operating profit and adjustments for items development invoiced to the parent company, why not included in the cash flow. Cash flow from the financial development of the parent company investing activities amounted to MSEK -148.4 (MSEK to a great extent follows the group's development. -104.9), mainly referring to investments in game Parent company revenues for the quarter amoun- development. Cashflow from financing activities ted to MSEK 464.7 (MSEK 384.4). Operating profit amounted to MSEK -118.8 (MSEK -109.7) and consists amounted to MSEK 203.0 (MSEK 168.8). Profit after of distributed dividend during the period, aswell as finanical items amounted to MSEK 202.9 (MSEK amortisation of lease liabilities for office premises. 168.8). Profit after tax amounted to MSEK 157.7 (MSEK 133.0). FIRST HALF-YEAR SUMMARY Revenues amounted to MSEK 865.3 (MSEK 625.4), ACCOUNTING PRINCIPLES an increase by 38 % compared to the same period This interim report has been prepared in accor- last year. Cost of goods sold amounted to MSEK dance with IAS 34, Interim Financial Reporting. The 334.4 (MSEK 244.4), primarily attributable to game parent company applies the Swedish Financial Re- development, development support, operation and porting Board's recommendation RFR 2, accounting maintenance of games, as well as royalties to third for legal entities. The same accounting principles parties. Costs for game development has increa- have been applied as in the latest annual report. It sed following game investments and releases of is judged that the fair values of all financial assets

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 8 INTERIM REPORT 2020-01-01 - 2020-06-30

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.

Interim report January - September 2020 2020-11-17 Year-end report January - December 2020 2021-02-23

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 August 11, 2020

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 August 11, 2020.

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 9 INTERIM REPORT 2020-01-01 - 2020-06-30

KEY FIGURES FOR THE GROUP 2020-04-01 2019-04-01 2020-01-01 2019-01-01 2019-01-01 2020-06-30 2019-06-30 2020-06-30 2019-06-30 2019-12-31

Revenues, KSEK 464,936 387,172 865,340 625,443 1,289,332

Operating profit, KSEK 199,033 154,214 364,918 216,958 473,530 Profit after financial items, KSEK 197,743 154,009 362,440 217,171 466,849 Profit after tax, KSEK 154,515 120,285 282,522 169,615 374,080

Operating margin 43% 40% 42% 35% 37% Profit margin 33% 31% 33% 27% 29% Equity/assets ratio 62% 65% 62% 65% 58%

Equity per share before dilution, SEK 12.34 8.71 12.34 8.71 10.66 Equity per share after dilution, SEK 12.31 8.71 12.31 8.71 10.66 Earnings per share before and after dilution, SEK 1.46 1.14 2.68 1.61 3.54 Earnings per share before and after dilution, SEK 1.46 1.14 2.67 1.61 3.54

Number of shares by the end of the period before dilution 105,600,000 105,600,000 105,600,000 105,600,000 105,600,000 Number of shares by the end of the period after dilution 105,857,950 105,600,000 105,857,950 105,600,000 105,600,000 Average number of shares before dilution 105,600,000 105,600,000 105,600,000 105,600,000 105,600,000 Average number of shares after dilution 105,837,887 105,600,000 105,718,944 105,600,000 105,600,000

Average number of employees 527 441 511 430 453 Number of employees by the end of the period 534 459 534 459 479

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 INTERIM REPORT 2020-01-01 - 2020-06-30

GROUP INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME (KSEK) 2020-04-01 2019-04-01 2020-01-01 2019-01-01 2019-01-01 2020-06-30 2019-06-30 2020-06-30 2019-06-30 2019-12-31

Revenues 464,936 387,172 865,340 625,443 1,289,332 Cost of goods sold -163,004 -142,424 -334,405 -244,359 -500,286

Gross profit 301,932 244,748 530,935 381,083 789,046

Selling expenses -58,552 -49,957 -105,500 -88,992 -193,582 Administrative expenses -28,698 -40,529 -64,920 -79,152 -173,665 Other income 620 1,186 21,192 5,264 63,553 Other expenses -16,269 -1,234 -16,789 -1,245 -11,821

Operating profit 199,033 154,214 364,918 216,958 473,530

Profit from shares in subsidiaries - - - - 34 Financial income 0 0 0 582 583 Financial expense -1,290 -205 -2,478 -369 -7,298

Profit after financial items 197,743 154,009 362,440 217,171 466,849

Tax -43,228 -33,724 -79,917 -47,556 -92,769

Profit for the period 154,515 120,285 282,522 169,615 374,080

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

Earnings per share before dilution, SEK 1.46 1.14 2.68 1.61 3.54 Earnings per share after dilution, SEK 1.46 1.14 2.67 1.61 3.54

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

Translation differences -6,380 -937 1,223 2,094 2,919

Total comprehensive income for the period 148,135 119,348 283,745 171,708 376,999

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 11 INTERIM REPORT 2020-01-01 - 2020-06-30

GROUP BALANCE SHEET (KSEK)

2020-06-30 2019-06-30 2019-12-31

ASSETS Non-current assets Capitalised development 798,516 533,106 580,736 Licenses, brands and similar rights 177,518 228,848 200,561 Property and equipment 27,485 11,753 32,583 Right-of-use assets 211,864 35,782 235,521 Investments in associates 23,269 15,109 18,835 Other long term assets 3,462 3,462 3,462

Total non-current assets 1,242,115 828,059 1,071,698

Current assets Accounts receivable 130,336 111,319 249,716 Other receivables 15,204 15,707 18,646 Prepaid expenses and accrued revenue 71,522 55,386 48,019 Cash and cash equivalents 637,237 396,350 554,227

Total current assets 854,298 578,762 870,609

TOTAL ASSETS 2,096,413 1,406,821 1,942,307

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 12 INTERIM REPORT 2020-01-01 - 2020-06-30

GROUP BALANCE SHEET (KSEK)

2020-06-30 2019-06-30 2019-12-31 EQUITY AND LIABILITIES Equity Share capital 528 528 528 Other capital contributed 27,994 27,994 27,994 Reserves 10,330 8,282 9,107 Retained earnings 981,947 713,467 713,467 Profit for the period 282,522 169,615 374,080

Total equity 1,303,322 919,885 1,125,176

Long term liabilities Lease liabilities 178,021 26,927 194,034 Deferred tax liabilities 122,362 107,620 126,078 Other liabilities 23,794 61,227 23,293

Total long term liabilities 324,177 195,775 343,404

Current liabilities Accounts payable 63,248 55,487 45,030 Current tax liabilities 62,272 45,145 40,467 Lease liabilities 35,527 9,006 42,247 Other liabilities 15,102 11,498 12,144 Accrued expenses and prepaid revenues 292,765 170,024 333,837

Total current liabilities 468,914 291,160 473,726

TOTAL EQUITY AND LIABILITIES 2,096,413 1,406,821 1,942,307

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 13 INTERIM REPORT 2020-01-01 - 2020-06-30

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 - - 1,223 282,522 283,745

At the end of the period 2020-06-30 528 27,994 10,330 1,264,469 1,303,322

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 14 INTERIM REPORT 2020-01-01 - 2020-06-30

GROUP CASH FLOW STATEMENT (KSEK) 2020-04-01 2019-04-01 2020-01-01 2019-01-01 2019-01-01 2020-06-30 2019-06-30 2020-06-30 2019-06-30 2019-12-31

Operating profit 199,033 154,214 364,918 216,958 473,530 Adjustment of depreciations, amortisations and write-downs 70,124 66,777 149,421 120,626 262,205 Other adjustments -633 1,222 -3,061 -760 -41,684 Interest received 0 0 0 0 2 Interest paid -1,290 -205 -2,478 -369 -7,298 Tax paid -22,027 -15,500 -62,017 -31,605 -63,104 Cash flow from current operations before changes in working capital 245,207 206,508 446,783 304,851 623,652 Changes in working capital

Change in current receivables 33,903 -36,775 122,822 22,603 -118,733 Change in current liabilities -585 62,920 -43,399 61,483 222,852

Cash flow from current operations 278,525 232,653 526,205 388,936 727,770

Investing activities Investments in capitalised development -145,937 -102,244 -299,358 -200,141 -421,986 Proceeds from capitalised development - - - - 80,000 Investments in licenses, brands and similar rights - - -10,578 - - Proceeds from licenses, brands and similar rights - - - - 350 Investments in equipment -1,323 -2,673 -3,717 -6,368 -32,806 Investments in subsidiaries -1,108 - -1,108 - 26

Cash flow from investing activities -148,367 -104,917 -314,761 -206,509 -374,416

Financing activities Received deposits - - 422 - - Amortisation of lease liability -13,189 -4,126 -22,733 -7,955 -23,464 Paid dividend -105,600 -105,600 -105,600 -105,600 -105,600

Cash flow from financing activities -118,789 -109,726 -127,911 -113,555 -129,064

Cash flow for the period 11,369 18,010 83,533 68,872 224,291 Cash and cash equivalents at the beginning of the period 625,051 378,749 554,227 327,044 327,044 Exchange rate effect 817 -409 -524 434 2,892

Cash and cash equivalents at the end of the period 637,237 396,350 637,237 396,350 554,227

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 15 INTERIM REPORT 2020-01-01 - 2020-06-30

PARENT COMPANY INCOME STATEMENT (KSEK) 2020-04-01 2019-04-01 2020-01-01 2019-01-01 2019-01-01 2020-06-30 2019-06-30 2020-06-30 2019-06-30 2019-12-31

Revenues 464,689 384,425 864,902 620,547 1,289,081 Cost of goods sold -159,691 -127,853 -326,011 -217,639 -463,661

Gross profit 304,998 256,572 538,891 402,909 825,421

Selling expenses -58,648 -49,515 -105,690 -88,165 -193,582 Administrative expenses -28,846 -39,479 -65,215 -76,960 -174,596 Other income 620 1,185 16,865 3,332 13,713 Other expenses -15,082 0 -15,597 0 -10,548

Operating profit 203,043 168,762 369,253 241,115 460,407

Profit from shares in subsidiaries - - - - 34 Financial income - - - - 2 Financial expense -173 -2 -189 -5 -7

Profit after financial items 202,870 168,760 369,064 241,111 460,436

Year-end appropriations - - - - -111,500 Income tax expense -45,180 -35,724 -82,746 -51,374 -77,745

Profit for the year and total income for the year 157,690 133,036 286,317 189,737 271,190

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 16 INTERIM REPORT 2020-01-01 - 2020-06-30

PARENT COMPANY BALANCE SHEET (KSEK)

2020-06-30 2019-06-30 2019-12-31

ASSETS Non-current assets Capitalised development 791,403 507,244 566,006 Licenses, brands and similar rights 99,158 90,162 111,464 Property and equipment 22,346 6,792 24,287 Shares in subsidiaries 107,562 145,109 106,454 Receivables from group companies - 50,301 - Investments in associates 16,766 16,766 16,766 Other long term assets 3,462 3,462 3,462

Total non-current assets 1,040,698 819,837 828,440

Current assets Accounts receivable 129,803 109,244 249,522 Receivables from group companies 11,759 30,614 20,426 Other receivables 14,126 14,890 16,437 Prepaid expenses and accrued revenues 72,242 54,412 48,602 Cash and cash equivalents 593,022 361,889 519,333

Total current assets 820,952 571,050 854,320

TOTAL ASSETS 1,861,649 1,390,887 1,682,760

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 17 INTERIM REPORT 2020-01-01 - 2020-06-30

PARENT COMPANY BALANCE SHEET (KSEK)

2020-06-30 2019-06-30 2019-12-31 EQUITY AND LIABILITIES Equity Restricted equity

Share capital 528 528 528 Capitalised development reserve 791,403 507,244 566,006 Non-restricted equity

Share premium reserve 27,994 27,994 27,994 Retained earnings -167,657 -49,334 -107,850 Profit for the period 286,317 189,737 271,190

Total equity 938,586 676,170 757,869

Untaxed reserves 472,875 361,375 472,875

Long term liabilities Other liabilities 23,794 61,227 23,293

Total long term liabilities 23,794 61,227 23,293

Current liabilities Accounts payable 60,988 52,302 38,539 Liabilities to group companies 28,385 37,997 27,859 Current tax liabilities 60,852 44,408 39,030 Other liabilities 3,564 2,441 2,353 Accrued expenses and prepaid revenues 272,604 154,968 320,942

Total current liabilities 426,394 292,115 428,723

TOTAL EQUITY AND LIABILITIES 1,861,649 1,390,887 1,682,760

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 18 INTERIM REPORT 2020-01-01 - 2020-06-30

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;

2020-04-01 2019-04-01 2020-01-01 2019-01-01 2019-01-01 2020-06-30 2019-06-30 2020-06-30 2019-06-30 2019-12-31

USA 390,546 324,160 728,887 517,872 1,090,842 Sweden 5,719 10,700 15,849 16,986 24,366 Rest of Europe 59,419 48,253 105,385 82,334 156,957 Rest of the World 9,252 4,059 15,219 8,251 17,168

Total 464,936 387,172 865,340 625,443 1,289,332

Group revenue divided into major product categories;

2020-04-01 2019-04-01 2020-01-01 2019-01-01 2019-01-01 2020-06-30 2019-06-30 2020-06-30 2019-06-30 2019-12-31

PC 391,058 324,738 727,838 517,763 1,071,588 Console 64,812 57,168 120,628 98,113 199,256 Mobile 3,441 2,053 6,404 3,860 6,597 Other 5,625 3,212 10,470 5,706 11,891

Total 464,936 387,172 865,340 625,443 1,289,332

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 19 INTERIM REPORT 2020-01-01 - 2020-06-30

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

2020-04-01 2019-04-01 2020-01-01 2019-01-01 2019-01-01 2020-06-30 2019-06-30 2020-06-30 2019-06-30 2019-12-31

Cost of goods sold 62,026 61,350 133,286 110,171 233,246 Selling expenses 1,313 - 2,625 - - Administrative expenses 6,786 5,427 13,509 10,455 28,959

Total 70,124 66,777 149,421 120,626 262,205

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 20 INTERIM REPORT 2020-01-01 - 2020-06-30

Paradox Interactive AB (publ) • Org.nr: 556667-4759 • Magnus Ladulåsgatan 4, 118 66 Stockholm • www.paradoxinteractive.com 21