Fourth quarter 2019

Revenues amounted to SEK 381.3 (336.9) million, an increase by 13 % compared to the same period last year.

Operating profit amounted to SEK 163.5 (146.8) million, an increase by 11 %. Operating profit is positively affected by a reclassification of contingent considerations in connection to the acquisition of Harebrained Schemes, amounting to SEK 44.1 million.

Profit before tax amounted to SEK 156.7 (146.8) million, and profit after tax 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 % compared to the same period last year.

Operating profit amounted to SEK 473.5 (455.1) million, an increase by 4 %.

Profit before tax amounted to SEK 466.8 (455.2) million, and profit after tax amounted to SEK 374.1 (353.9) million.

Earnings per share amounted to SEK 3.54 (3.35).

Important events in the fourth quarter 2019

One new game was released in early access during the period, Surviving the Aftermath, developed by Iceflake Studios.

Three expansions were released during the period; Heavy Metal for BATTLETECH, Revelations for Age of Wonders: Planetfall and Psych Ward: Wardens Edition for Prison Architect.

Paradox convention PDXCON took place in Berlin.

The new game Crusader Kings III, developed by Paradox Development Studio, was announced with a planned release 2020.

Paradox Development Studio and the publishing branch moved to new premises at Magnus Ladulåsgatan in Stockholm.

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 develop­ment, 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 in Paradox’s portfolio was over 4 million, which is about 30% higher than at the end of 2018 and the highest figure ever in our history. At the end of 2019, the number of Paradox accounts registered in our ecosystem was just over 12 million, also an increase of 30% compared to the previous year.

Revenue for the fourth quarter increased by 13% compared to the same quarter in 2018 and revenue for full year 2019 increased by 14% compared to 2018. Profit before tax for the quarter was 7% higher than the fourth quarter 2018, while profit before tax for full year 2019 was 3% higher than 2018. Costs are increasing as we gradually develop and prepare the launch of more and bigger games. Revenue for the period, on the other hand, is strongly dependent on the number and size of the games we launch during the period, which varies from quarter to quarter and from year to year. At the start of the quarter, we had hoped to release some additional expansions and it is always sad to have to postpone launches. At the same time, we know from experience that quality is crucial and must come first – it always pays off in the long run.

A central part of our business is to offer our games through the distribution channels and business models that our players appreciate. Our most important distribution channel for over a decade is Steam, and we continued our close cooperation during the quarter through the annual Publisher Weekend, which always generates a lot of sales. At the same time, we know that player behavior changes over time and therefore it is important for us to continuously test new distribution channels. Since its launch in June 2019, we have participated in Microsoft’s subscription service, Xbox Game Pass for PC, and during the fourth quarter we expanded our participation by adding several of our most popular games, such as Stellaris, Hearts of Iron IV, and Europa Universalis IV. During the quarter, we also released the game Surviving the Aftermath in an early access version together with Epic Games. After the end of the quarter, we launched a test offer where our Europa Universalis IV players are offered 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: Pla­netfall. It is also gratifying to see how our continuous improvement work with Imperator: Rome now has be­gun 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 most­ly 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 de­velopment before expanding to more markets.

Ahead of us is an important year which will see the launches of Crusader Kings III, Vampire: the Masque­rade – 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

Presentation of report

Ebba Ljungerud and Alexander Bricca will host a live stream to answer report and financial related questions on our Twitch channel on February 18 at 12:00 PM CET https://www.twitch.tv/paradoxinteractive.

Submit your questions before via our forum https://forum.paradoxplaza.com/forum/index.php?threads/paradox-q4-2019-report-and-livestream.1327081/ by e-mailing them to ir@paradoxinteractive.com or directly in the Twitch chat. The Twitch chat is open for anyone to view but to post comments or question you will need to create an account.

For additional information, please contact:

Ebba Ljungerud, CEO Paradox Interactive

Alexander Bricca, CFO Paradox Interactive

Email: ir@paradoxinteractive.com

Phone: +4670-355 54 18

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 18, 2020.