Paradox Interactive Reports Steady Third Quarter with Revenue Increase

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Paradox Interactive Reports Steady Third Quarter with Revenue Increase

Paradox Interactive (PDX:Stockholm) reported stable performance in Q3 2024 with slight revenue growth and improving profit margins. CEO Fredrik Wester and CFO Alex Bricca presented the quarterly financial results, highlighting the company's calm performance amidst currency challenges and its focus on quality over quantity in game releases. The company experienced a significant increase in operating profit thanks to a 2% year-on-year revenue growth and effective cost management with successful game expansions.

Key Points

  • Q3 2024 revenue reached 434 million SEK, reflecting a 2% increase compared to Q3 2023.
  • Operating profit increased significantly to 143 million SEK, driven by lower marketing and development costs.
  • Post-tax profit rose to 120 million SEK, resulting in a profit margin of 35%.
  • Game releases such as "Roads to Power" and "Cosmic Storms" contributed to the quarter's performance, while the release of "Prison Architect 2" was delayed.
  • The company faced a negative currency impact of 8 million SEK.
  • Financial interest income rose to 8 million SEK.
  • Paradox Interactive aims to maintain profit margins between 35-40% while improving its publishing portfolio.

Company Outlook

Paradox Interactive plans to leverage its core games and effectively manage costs moving forward. The company has a strong future game lineup with a cautious approach to release schedules. Future investments are expected to gradually increase, with a focus on core games.

Negative Highlights

  • Operating profit was impacted by impairments from high-risk projects including Life by You and Lamplighters League.
  • Cash flow from operating activities was lower compared to last year due to the timing of Expansion Pass sales recognition.
  • Cash flow from investing activities declined due to decreased investments in bonds and game development.

Positive Highlights

  • Paradox Interactive has experienced a consistent revenue trend with an average annual growth rate of 35-36% since 2014.
  • The company reported a strong project portfolio, considered the best in its history.
  • Total equity has significantly increased over the years, and this trend is expected to continue.

Underperformance

  • The release of "Prison Architect 2" was delayed for quality assurance.
  • There was a negative working capital outflow of 81 million SEK in this quarter due to the Expansion Pass setup for Stellaris and Crusader Kings III.

Q&A Highlights

  • The Expansion Pass 2 for Age of Wonders 4 includes several DLCs that follow a revenue recognition process as content is released.
  • The company does not provide specific revenue forecasts but expects growth in 2025 and 2026.

Paradox Interactive's Q3 2024 earnings call reflected a company committed to growth and quality amidst industry uncertainties. With stable revenue growth and a focus on core games, the company appears ready to sustain profitability trends and make strategic investments in game development and publishing operations.