Paradox Interactive Interim Report January – March 2024 (Revenue flat, Operating Profit Down 1%)

[TheSilentWombat]

Source: https://www.paradoxinteractive.com/investors/financial-reports/interim-report-january-march-2024

First Quarter

• Revenues amounted to MSEK 482.1 (MSEK 482.8), in level with the same period last year.
• Operating profit amounted to MSEK 154.4 (MSEK 155.7), a decrease by 1 %.
• Profit after financial items amounted to MSEK 165.0 (MSEK 157.1), and profit after tax amounted to MSEK 126.9 (MSEK 123.7).
• Cash flow from operating activities amounted to MSEK 136.9 (MSEK 244.6), and cash flow from investing activities amounted to MSEK -47.9 (MSEK -170.1). Cash flow from investing activities includes a positive effect of MSEK 130.5 (MSEK 0.0) from sales of short-term investments in bonds.
• By the end of the period cash amounted to MSEK 1,181.8 (MSEK 812.7).
• Earnings per share before dilution amounted to SEK 1.20 (SEK 1.17) and after dilution SEK 1.20 (SEK 1.16).
• Revenues in the quarter are mainly attributable to Cities: Skylines, Cities: Skylines II, Crusader Kings III, Hearts of Iron IV, and Stellaris.

Important Events in the First Quarter

• Millennia, developed by C Prompt Games, was released to PC.
• New downloadable content was released to games during the period; Legends of the Dead to Crusader Kings III, Trial of Allegiance to Hearts of Iron IV, Primal Fury to Age of Wonders 4 and Beach Properties to Cities: Skylines II.
• New ports were released during the period, Across the Obelisk to Nintendo Switch.
• The new game Prison Architect 2, developed by Double Eleven, was announced.

Comments by the CEO

Our core business has held a strong pace during the first period of the year, with good underlying sales, which gives a good result. We have a very strong foundation with a large cash position and a solid recurring cash flow. This gives us a good position for taking advantage of the opportunities that open up in a games market that is turbulent at the moment.

Fredrik Wester, CEO of Paradox Interactive

Important Graphs

 

[TheSilentWombat]

Once again offering commentary based on the report and their livestream, as well as some additional notes about events with individual games that have happened this quarter, as despite the boring financial results the quality issue has continued to bite Paradox and has created quite a bit of dissatisfaction in the community.

• Subscription service revenue loss was “significant” so these numbers are better than they look. A bunch of Paradox games left GamePass around this time last year so it seems like whatever deal they got from Microsoft was very good, but they aren’t getting it anymore. This is an interesting tidbit about Microsoft’s evolving strategy as well.
• Their position is good relative to the industry, they have 1 billion SEC or 91 million USD with zero debt and are benefiting from high interest rates.
• Marketing costs are rising due to the number of releases.
• Employee numbers are down by about 50. 100 were lost from studio closures with 50 gained from increased hires in Stockholm.
• Paradox’s own DLC subscription service for individual games is going well.
• The quality problem keeps coming up and needs improvement as it's negatively impacting several of their games.

Some individual commentary on games from most to least important.

• Cities: Skylines 2 DLC was delayed and the last DLC was given out for free, although poor sales mean this didn’t have much of an impact. Consoles release is still undated CS2 and CS1 are the top 5 revenue contributors, alongside Hearts of Iron 4, Stellaris, and Crusader Kings 3.
• Europa Universalis IV has a new DLC, and even more importantly EUV has been informally announced as Project Caesar with weekly developed updates coming out which has created a lot of excitement in the community. It seems to be one of the few bright spots compared to how everything else is going. It also is likely a major contributor to the rising costs of development and marketing.
• Prison Architect 2 was delayed again, I have my doubts about this game already and these delays aren’t helping.
• Millenia seems to be doing well and it has an update on the way to address some of the major issues with the game, and Paradox believes it is a strong foundation with lots of potential.
• The quality issue is affecting other games as Victoria 3 and Crusader Kings 3 have been facing trouble. Victoria 3 got its DLC delays and despite its launch has not done great maintaining its player count. CK3 also got quite poor reviews for its last DLC as well.

 

[StardustTraveler]

That tidbit about subscription services is interesting. Which PDX games were on Game Pass? I knew Cities Skylines was on there, but were there any others?

I have a crazy theory that the reason that they're calling their upcoming game "Project Caesar" instead of just saying it's EU5 is that they're gonna drop the "Europa" from the title. This would be in line with EU4 gradually stripping out its Eurocentric mechanics to better facilitate playing countries in the rest of the world. For example, the "Westernization" mechanic was replaced with the "Institutions" system which makes it easier for countries to not fall behind Western Europe in technological progress, and the Trade Companies mechanic was only available to countries in Europe but was later expanded to Asia and Africa as well.

 

[TheSilentWombat]

That tidbit about subscription services is interesting. Which PDX games were on Game Pass? I knew Cities Skylines was on there, but were there any others?

EU4 and HOI4 were on it until last year and Victoria 3 was originally going to launch on it as well but that was cancelled. Other games like CK3, Stellaris, and CS2 are still on it though. My guess is that they got a big payout from Microsoft to do a bunch of releases but for whatever reason the deal did not continue so we might see fewer games in the future on GamePass.

I have a crazy theory that the reason that they're calling their upcoming game "Project Caesar" instead of just saying it's EU5 is that they're gonna drop the "Europa" from the title. This would be in line with EU4 gradually stripping out its Eurocentric mechanics to better facilitate playing countries in the rest of the world. For example, the "Westernization" mechanic was replaced with the "Institutions" system which makes it easier for countries to not fall behind Western Europe in technological progress, and the Trade Companies mechanic was only available to countries in Europe but was later expanded to Asia and Africa as well.

I have heard this idea too. It does make some sense, but idk if they would want to shift the brand recognition too much by changing the name, but keeping Universalis might be enough for people to understand it. Plus, based on what has been revealed so far they are changing the game up a fair bit so it wouldn't be crazy to rebrand it slightly.

 

[Terrell]

The "Other" category is where they track their TTRPG sales, right? If so, seriously dropping the ball QoQ there.

 

[Andri]

There is some cautious optimism regarding Ceasar from the EU4 crowd, but ultimatively there is the giant elephant in the room of the impossible task to make a sequel to a game with a decade of dlc feature somehow not feeling barebones, which is what really hurt CK3, CS2 and Vicky 3 at launch, even ignoring the struggle to add meaningfull dlc afterwards.

For example, the "Westernization" mechanic was replaced with the "Institutions" system which makes it easier for countries to not fall behind Western Europe in technological progress

While the removal of westernisation and addition of institutions were a good add , they happened ages ago, and introduced other issues, because the way they work means to keep up you basically stamp out konstantinople sized cities within a day to magically make the institution appear in some random grassland province in asia, and the mechanic is just not aviable to „natives“ anyway.

The real eurocentrism in eu4 is that trade by the nature of how the system works flows in one direction, meaning it has a start and a endpoint, with all the endpoints being in europe.

The big hope for ceasar is that they redo trade in a way where that is gone.

 

[TheSilentWombat]

The "Other" category is where they track their TTRPG sales, right? If so, seriously dropping the ball QoQ there.

I would assume so but in their report, they state that the changes in other are primarily driven by changes in exchange rates. I doubt World of Darkness contributes much these days regardless of how it's classified.

There is some cautious optimism regarding Ceasar from the EU4 crowd, but ultimatively there is the giant elephant in the room of the impossible task to make a sequel to a game with a decade of dlc feature somehow not feeling barebones, which is what really hurt CK3, CS2 and Vicky 3 at launch, even ignoring the struggle to add meaningfull dlc afterwards.

This has been a big challenge for recent Paradox games. I do think Caesar does have an advantage in how different it is with the focus on pops and a more simulational game. If it's different enough and isn't busted at launch then some lack of flavor might be more accepted, although there is no guarantee of that with Paradox's recent track record. And personally, I think EU4 is a bit bloated these days so I'm looking forward to a more streamlined experience.

While the removal of westernisation and addition of institutions were a good add , they happened ages ago, and introduced other issues, because the way they work means to keep up you basically stamp out konstantinople sized cities within a day to magically make the institution appear in some random grassland province in asia, and the mechanic is just not aviable to „natives“ anyway.

The real eurocentrism in eu4 is that trade by the nature of how the system works flows in one direction, meaning it has a start and a endpoint, with all the endpoints being in europe.

The big hope for ceasar is that they redo trade in a way where that is gone.

Yeah, institutions are better than Westernization, but they are still railroaded to all spawn in Europe and only spawn outside of it when the player is messing around and nations like Korea getting silly modifiers to institution spread. I think that technology is something historical strategy games struggle to represent well. Also agree on trade, hopefully they get rid of end nodes and create a more dynamic system because as it exists it requires you to use one of 3 European nodes.

 

[Andri]

it requires you to use one of 3 European nodes

Technically you can make a variety of nodes outside europe into endnodes by fully controlling all land in all nodes one jump downstream from the quasi endnode, but thats more a strat players came up with, and not intended gameplay.
Ultimatively it comes down to what they want to represent.
Even with the reduction of focus on europe, it is still the region that gets the most focus, simply because people mostly play there, so new content gets planned for there.

And personally, I think EU4 is a bit bloated these days so I'm looking forward to a more streamlined experience.

EU4 has been bloated for ages, but that is also part of the charm.
Being able to go basically anywhere on earth and have more or less deep systems for any particular nation you want to play is something that is only possible due to years of work where one region after the other got focused work put in.

I do think Caesar does have an advantage in how different it is with the focus on pops and a more simulational game

On one hand i agree, but they dont call them pops because that has Vicky ties they dont neccessarily want, and i kind of question how strongly they want to lean into the simulation aspect.
Their games are generally on a scale of how close things are controlled, with the most character focused one being CK, then EU, then Vicky which is very focused on the economy simulation aspect.

I personally would welcome a deeper economy system, but a lot of EU4 players mainly play the game for the Mission Trees(as both guidelines on what to do, and a sense of narrative) and the conquest/expansion aspect, with economy and technology just being means to achieve said expansion or the requirements of the Mission Trees.

Edit: i wasnt up to date on their Tinto talks bout Ceasar, but from reading them after the talk here, it seems like Ceasar is going to focus way way more on economy and simulation than EU4 ever did, arguable to a degree more similar to a better version of Victoria 3, but set in the eu4 timeframe.


The main issue with Caesar or any new game grand strategy game from pdx is that it will have to limit itself to a few select countries to give them dedicated content due to having limited time to develop the game, which will make the ones that miss out feel barebones.

Its what happened with ck3 feeling very thin outside feudal lords in europe, with vicky 3 and 90% of countries having 0 journals.

The gamble is basically if the improvement to the base game can offset the lack of dedicated content long enough for them to spin up the dlc machine and start filling the world back in, before PDX pulls the plug on development like they did with Imperator or the StarTrek Stellaris spinoff.

As an example of what i mean by dedicated content, there are over 100 dedicated Mission Trees(for non eu4 players, basically guided missions which generally portray historical events, give general ideas of what to do, a narrative to keep people interested, and often contain dedicated mechanics) in eu4 currently, meaning almost all countries playable have one or at least a regional shared one.

To compare, tho it is a very different game, and there are less countires in its timeframe, victoria 3 launched with 7 nations that had dedicated journal entries, more or less the closest equivalent to Mission Trees.