It was only three months ago we covered Paradox Interactive’s (FRA: ETA 7.69 2.51%) first financial year report as a traded company. The basic facts of the company haven’t changed, they are a small, but growing publisher. A large core of their revenue revolves around expansions of successful titles, with a select few releases each year.
Paradox have revealed their first quarter results of the 2017 financial year and it’s looking positive for the company. You are able to watch the company’s financial round up on Twitch, which certainly has a little more flair than the average report.
The Paradox Way: Is it Working?
A simple argument would say yes. Information from the report indicates a huge year on year user growth, jumping from one to two million monthly players. This is from a registered base of a little over five million, highlighting a large percentage of return users. Not only that, but the company was also ranked as the best mid-size publisher according to Metacritic ratings.
To be precise, revenues have increased year on year from SEK 93.3 million to SEK 121.3m. Running in line with this is an increase of profit after tax by 50%, from SEK 19.4m to SEK 29.2m. There is also an increase of the profit margin by 3%, from 21% to 24%. This leaves the company in a cash rich position, where they can invest in the future of the company.
The size of the revenue may surprise, primarily because Paradox only released one expansion. With no core game releases and only one expansion, Monks and Mystics for Crusader Kings II, it highlights the long tail that Paradox Games tend to have. The majority of sales have come from what appear to be the company’s five core titles: Cities: Skylines; Stellaris; Crusader Kings II; Hearts of Iron IV and Europa Universalis IV, two of these titles being four or more years old.
Q2 Onwards: The Future’s Looking Bright
Paradox certainly have a few large titles either released after the end date of the first quarter, or not yet released. Cities: Skylines saw its release on the Xbox One and two games saw large additions. Stellaris with the Utopia expansions and Europa Universalis with Mandate of Heaven. In addition to this, Q2 will see the benefits of the Paradox Publisher Weekend, a two day sale on Steam – potentially Paradox’s largest revenue source.
What is interesting, particularly for the future of the company, is just how much they are investing on future products. In 2016 the company invested SEK 129.9m on new games. This quarter saw an investment of SEK 44.6m, up nearly 300% from Q1 2016’s SEK 15.2m. Of course, with how game development works, a small portion of this investment in games may never see a release. The company estimates two of five titles never see a release, being cancelled very early in development. Of the rest, it could be spread across both this and next year. What it highlights is the intentions Paradox have in supporting and expanding on products, placing them into a strong position for the future.
As previously covered, the purchase of White Wolf allows Paradox to benefit from the company and its intellectual properties. In 2018 the title Werewolf: The Apocalypse is expected to release. This is the result of a partnership between White Wolf and publishers Focus Home Interactive. In addition, Paradox are making inroads into the Chinese market, working with Tencent (HKG: 0700 277.40 1.46%) who own a 5% stake in the company. Once further advanced, it will give their games access to a huge market of potential customers.
What is certain, with the release of Cities: Skylines on the Xbox One, two expansions for current large titles and the upcoming release of Steel Division: Normandy 44 at the end of this month, the second quarter will likely be a strong one for Paradox Interactive. As investment increases, you can likely expect to see even more movement and releases from the top mid-size publisher in games.