Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 2% compared to last year's Q3, reaching SEK434 million.
- Operating profit significantly improved to SEK143 million from SEK85 million in the previous year.
- The company has strengthened its publishing division by creating a dedicated team for third-party projects.
- Paradox Interactive AB (PRXXF, Financial) has a strong pipeline with eight main games in development, excluding Paradox Arc projects.
- The company has reduced development CapEx significantly, focusing on smaller, high-risk projects with a more prudent financial approach.
Negative Points
- The Swedish krona's performance negatively impacted revenue by 3-4% due to unfavorable exchange rates.
- The company experienced a big negative working capital outflow due to the Expansion Pass setup and vacation salaries.
- There were no major game releases in Q3, which is typically a slow quarter for the company.
- The company had to delay the release of Prison Architect 2 to ensure quality, impacting potential revenue.
- Challenges remain in the publishing side, with mixed results from third-party titles.
Q & A Highlights
Q: Paradox has seen strong success with its first-party titles but mixed results on the publishing side. What strategic adjustments are being considered to strengthen the publishing portfolio?
A: Frederik Wester, CEO: We have separated third-party operations into a dedicated team to focus on evaluating and launching successful projects. This approach aims to improve our publishing results and minimize financial impact by taking costs upfront.
Q: What caused the big negative working capital outflow effect this quarter, and is it structural or random?
A: Alexander Bricca, CFO: The outflow is mainly due to the Expansion Pass setup for Stellaris and Crusader Kings III, where revenue is recognized upon content release, not at the time of cash receipt. Additionally, vacation salaries and profit share taxes impacted the cash flow.
Q: Can we expect more than one core title release in 2025 to 2026?
A: Frederik Wester, CEO: While we aim to produce more and better games, we release them when ready without forcing them into specific timelines. We have a strong pipeline, but no promises on the number of releases.
Q: How much of the development CapEx reduction is due to not capitalizing certain titles and not continuing development on projects like Lamplighters League?
A: Alexander Bricca, CFO: The reduction is significantly influenced by halting development on Lamplighters League and Life by You. We are investing less in high-risk phases and not capitalizing these costs, taking them as expenses instead.
Q: How does the pipeline look for Paradox Arc?
A: Frederik Wester, CEO: The pipeline is promising, with several titles in development. We are secretive about specifics but expect to release a couple of games in the next year or so. Paradox Arc's high kill ratio makes it challenging to predict exact releases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
