Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Paradox Interactive AB (PRXXF, Financial) reported its fourth best quarter historically in terms of revenue, despite not releasing any major core games.
- The company maintains a strong cash flow and a stable financial position with no debt on the balance sheet.
- Successful expansions for core live games, such as Cities: Skylines 2 and Victoria 3, contributed positively to the quarter's performance.
- Paradox Interactive AB (PRXXF) continues to focus on production quality and risk assessment, aiming to release only high-quality games.
- The company has a strong market position and is cautiously optimistic about future opportunities, supported by a solid foundation and cash flow.
Negative Points
- The EBIT was significantly impacted by a SEK208 million write-down due to the cancellation of the game 'Life by You'.
- Profit margin dropped to 6% this quarter, compared to 42% last year, primarily due to the write-down.
- The average number of employees decreased from 674 to 594, partly due to the closure of several studios.
- The company faced challenges with its communication strategy, having announced and then canceled games, which is not optimal.
- There is a noted trend of uneven release schedules, with significant releases occurring every second quarter, leading to fluctuating revenue.
Q & A Highlights
Q: Aside from Prison Architect 2 and Bloodlines 2, are there any other remaining projects in the pipeline that were given the green light prior to you, Fred, coming back as CEO?
A: Yes. Except for the two mentioned titles, we don't have any projects outside of our core in the main pipeline. A few core projects were greenlighted before I returned, but they are within segments where we feel comfortable.
Q: Excluding the recent poor releases/write-downs, can you talk about how the core portfolio of the big five franchises and other smaller titles are faring?
A: We are very happy with the results of our big six games, which have contributed to a strong top line and cash flow. However, we believe several titles can perform even better, and we are constantly working on improvements.
Q: What actions are being taken to ensure that new game projects meet expected quality standards and are completed successfully?
A: We focus on ensuring projects have the right quality and risk balance. We are improving production risk assessment and quality efforts, especially for projects outside our core. This involves refining project management and feedback processes.
Q: Are there plans for Paradox to pivot to a subscription model instead of the current DLC model?
A: Our main focus is on models and platforms our fans prefer. The current base game and DLC model is popular, and we plan to continue with it. We have experimented with subscriptions, but they are not our primary business model.
Q: Is Paradox considering developing more original IPs in the business management genre rather than focusing on acquiring existing games?
A: We are exploring original IPs internally, considering both historical and new themes. We are also open to acquiring existing games and IPs to complement our business, especially given current market opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
