Paradox Interactive AB (publ)
STO:PDX
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
159.1
221.4
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
This alert will be permanently deleted.
Q1-2025 Earnings Call
AI Summary
Earnings Call on Apr 24, 2025
Revenue Down: Paradox reported Q1 revenue of SEK 464 million, down 4% year-on-year due to fewer releases.
Stable Profitability: Operating profit for the quarter was SEK 147 million, slightly below last year, with a margin of 33%.
Strong Cash Flow: Cash flow from operating activities rose to SEK 266 million, up significantly from the previous year despite a slow release schedule and acquisition costs.
Currency Headwinds: The company faced negative currency impacts, with the Swedish krona strengthening against the dollar affecting reported results.
Haemimont Acquisition: Completed the acquisition of Haemimont Games, aligned with Paradox's management game strategy, and purchased the rights to Stranded: Alien Dawn.
Release Pipeline: Fewer releases in Q1, but major expansions and launches planned for the rest of the year.
Cost Management: Lower amortization and COGS thanks to fewer major releases and a more aggressive upfront cost approach.
Revenue for Q1 2025 fell 4% year-on-year to SEK 464 million, mainly due to fewer game and DLC releases compared to the same period last year. Management highlighted the seasonal pattern, with Q2 and Q4 typically stronger due to more releases and major Steam sales driving higher sales volumes.
Operating profit came in at SEK 147 million, with a margin of 33%, both slightly lower than last year reflecting lower revenue. Profit after tax was SEK 124 million versus SEK 127 million last year. Despite the dip, profitability remained solid and consistent with historical patterns.
Cash flow from operating activities was strong at SEK 266 million, up from SEK 137 million last year. Despite lower profit and slow releases, high cash flow was attributed to the timing of payments and strong sales in December 2024. The company also remained cash flow positive after the Haemimont acquisition.
Paradox was impacted by adverse currency movements, particularly as 97% of revenues are in foreign currencies. The Swedish krona strengthened against the USD during the quarter, negatively affecting results. Management expects continued currency headwinds in Q2 but plans more content releases to offset this.
The acquisition of Haemimont Games was completed, reinforcing Paradox's strategy in the management game genre. Additionally, they acquired all rights to Stranded: Alien Dawn. Management described these as both immediate and long-term revenue contributors, with amortization of purchase price spread over several years.
Q1 was described as a slow quarter for new releases, with only minor expansions and creator packs. However, management signaled a busier release schedule for Q2 and Q4, including expansion passes for key IPs and continued support for existing franchises. The company aims to launch 1 to 3 new titles annually in the coming years.
Cost of goods sold dropped to SEK 223 million from SEK 268 million, mainly due to lower amortization amid fewer major releases. Paradox continues to expense more costs upfront for unreleased projects, reducing balance sheet risk and improving decision-making on cancellations. Amortization models remain aggressive for new titles.
Paradox regularly updates regional pricing based on currency fluctuations and inflation, but changes are timed strategically due to platform constraints. The company is cautious with price increases and considers long-term value, especially as base game prices remained unchanged for many years.
Hello, and welcome to the Q1 2025 report for Paradox Interactive. With me, Fred.
And I'm Alex. Welcome, everyone.
And we're going to walk you through the -- what we've been doing during the quarter and the numbers for the quarter as well. So we can just jump right into it. That's me.
Good start.
Good start. Yes. So this is what we would refer to as a bit of a slow quarter, not a lot of releases, but still stable. So despite a few releases, we have a good cash flow. We've been facing for the first time in a couple of years, some currency headwinds, and we also had an acquisition. So that's probably the major thing that happened in the quarter. So we completed the acquisition of Haemimont Games, which is totally in line with the strategic intent we have to expand into the management segment of games. And at almost the same time, we also acquired -- this is outside the quarter though. We acquired Stranded: Alien Dawn, which is a game that Haemimont has developed together with Frontier Development. So we bought all the publishing rights and all other rights as well from Frontier, was effective date April 1.
And apart from that, focus on what's ahead, we announced 3 expansion passes for 3 of our key IP, and they're doing really well. So we're happy with that. And we have a lot more other things coming as well. But this quarter is what it is --
Yes.
-- business as usual. So the releases is -- key release is Graveyard of Empires for Hearts of Iron IV, and Wards and Wardens for Crusader Kings III on console, a handful of different content creator packs for Cities: Skylines II ahead with -- or together with 2 radio packs as well and a handful of content for our Deck Builder Across the Obelisk as well. So that was it.
Yes. We also have some content creator packs for Cities: I.
Yes, we did. I think it was 2 content creator packs for Cities: I as well, which is not shown in this slide. So that's what I think. And getting ready, we're ramping up for the rest of the year. Victoria 3 expansion pass 2, Crusader Kings III Chapter 4 and Stellaris is in Season 9. Yes, it's been on the market since 2016, so it sounds about right. And this is a bit of a new format that we're trying out to present bigger chunks of all the DLC packs to our gamers, and we're doing well. We're happy with this.
Yes.
Right.
Oh, that's it?
That's it for me.
Okay.
Speak of a business as usual quarter, right?
Yes. So let's try to go through the numbers a bit more in detail. So revenues in Q1 this year, SEK 464 million compared to SEK 482 million in the first quarter of last year. So it's a decrease by 4%. And as you know, the ones that follows us, what impacts our quarterly revenue is what we release in the quarter. And Q1 has during the last year, become a slow quarter. We tend to release quite a lot in Q2 and Q4 and then much less in Q3 and Q1.
Yes. Q2, Q4, you can always have the Steam summer sale, and you have the Steam winter sale. Also impacts sales, obviously, in a positive way.
Of course. And Q1 this year hasn't been an exception. It has been exceptionally slow, I would say, in terms of releases. Fred went through the releases. But if you compare to last year, we actually had more releases last year. We had a full game in terms of Millennia. We had Legends of the Dead for CK III, DLC and Trial of Allegiance for HOI. We had DLC for H1 as well. So we have less releases this year. And therefore, naturally, we make less revenue. We are also, as always, impacted by the currencies since we have, I think it's 97% of the revenues in foreign currencies.
And if you compare the average between Q1 and the average of Q1 last year, the difference isn't that much. The dollar is actually up a bit in average. But if you look at the movements within the quarter, it has gone the opposite way. And that will show on a separate row, which we will show you. But Q1 last year, the dollar has improved. Q1 this year, it has gone the wrong way.
It's basically from when we issue the invoice to the fact that we get the money, we've had some negative movements.
Yes, exactly. And so Q1 hasn't showed all effect yet. Q2, there we are going into the quarter with a SEK that is roughly 10% stronger against the dollar compared to last year. So we will see some headwind in Q2 for sure. But we're also planning to release more content. So that should make up for it for sure.
For sure.
Top 5 contributors in terms of revenue game-wise.
No surprises.
No surprises, both Cities I and II, CK III, Stellaris and Hearts of Iron IV. Operating profit for Q1, SEK 147 million this year compared to SEK 154 million last year. So as with revenue, slightly less. Profit after financial items, SEK 154 million compared to SEK 165 million. So we like that the profit after financial items is higher than the actual operating profit, which is not the case for every company. But we don't have any interest-bearing debt. Instead, we have interest-bearing assets in terms of bank holdings. So we get interest on that money. So that is good.
Profit after financial items margin in Q1 this year was 33% versus 34%. So it's very similar. It's very similar quarters, I'd say. Less releases this year pushes down revenue, profit and profit margin. Equity through asset ratio, 83% compared to 78% last year. So it's going upwards. I didn't mention, I see profit after tax, SEK 124 million this year compared to SEK 127 million last year.
Employees, almost the same, 596 in Q1 this year compared to 594 in Q1 last year. But this is average. Perhaps you expect it to be higher because of the acquisition of Haemimont with almost 60 new colleagues. But we implemented the acquisition in mid-February. So they kind of count only half for the quarter average. But I think the Q2 number should be up some 30 FTEs.
Sounds about right.
Right. Let's move on. This is our standard slide to show revenue over time, the green line and our 3 main cost items in yellow, blue and red over time as well. So revenue, we have already discussed, SEK 464 million compared to SEK 482 million same quarter of last year. But what this shows very clearly is the fluctuation between the quarters that we have spoken about. And it's -- if you go back -- you can go back 3 years, and you can see this very trend where we have a lot of releases in Q2 and Q4 and with that comes a lot of revenues. And then we have considerably less releases in the Q1s and the Q3s, and we see less revenues.
And I think it's worth pointing out that the only difference between Q4, where we had more than SEK 700 million of revenues and Q1 this year, where we had SEK 464 million, so much, much less revenues. It's all driven by less releases of expansions and less marketing activities. So nothing else. So this shows how volatile we are with the releases. And it --
But still stable --
Yes, of course.
-- even this quarter without major things happening. So --
Of course. Yes. I mean, we can't release much less than this, and it's still SEK 464 million. So --
Looking good. All in all.
Looking very good, I think, for sure. Let's dig in a bit more about the costs. So main cost item is cost of goods sold, SEK 223 million, so it's down from SEK 268 million last year, our biggest item. This is all the cost we have for making the games pretty much, everything that is necessary to make the games.
Then I got a question as well on the -- on how we -- the aggressive scale of our write-offs on the projects as well. So it might be worth mentioning in the stream that we do from all games that are -- were released after Kings III. I'm correct. We write off 33% or 1/3 first month, the next 1/3 the coming 2 -- coming 5 months. So in the first half of the year, 66% of the product is basically written off in the books and the final 1/3 throughout up until month 18, so month basically 7 to 18.
Yes.
So -- but everything -- all the DLCs released on games released before Crusader Kings, which is Stellaris, Hearts of Iron IV, Europa Universalis IV has just --
Linear.
-- a linear write-off over 18 months. So that's the difference. So we've changed our model to be more like aggressive on the write-offs since 2020.
Yes.
So that has impacted the results if you want to compare in before. But over time, it's going to be the same, right?
Yes. So the COGS item is split up over a few sub items. You mentioned the ones that is often the biggest one, that's amortization of capitalized development. So amortizations in Q1 this year was SEK 72 million compared to SEK 120 million in Q1 last year. So it's down quite a lot. And this is pretty much only driven by what we have released in the quarter and the previous quarters. And now we haven't released anything really big for a while. So that keeps the amortizations down. If we look more into games, comparing Q1 versus Q1 last year, we have Millennial making a huge difference because we released that in Q1 last year, and then we took 1/3 in March already. Now we have almost nothing left.
We had still some amortizations to do on Star Trek Q1 last year and also on the base game of Victoria 3, which we don't have anymore. Age of Wonders 4, we had more last year because we had the release. We didn't have one last this year and also Cities: II. So that's why amortizations are down. I can't say whether I should have looked this up before the stream. I can't say whether this is record low, but I think it's quite some time that it hasn't been this low.
But we should also mention that we take a lot more costs upfront today.
Yes.
So all games that hasn't reached -- I think it's alpha status. We take the costs day and date.
That's correct.
So that's no more adding to the balance sheet before we're certain that we're going to actually release the game at some point.
That's right.
So that's going to also take away a bit of the uncertainty around game releases.
Yes. Good point.
And some uncertainty on the balance sheet as well.
For sure. And we like that also because we think it helps us taking a tough decision to cancel game projects. And if you have a huge item on the balance sheet, it's normally a bit more challenging to do that, especially during the early stages.
Yes, avoiding the same cost balance basically.
Yes. In COGS, sometimes you have write-downs, 0 in Q1 this year. It was 0 in Q1 last year as well. We take cost -- when we acquired assets or businesses, we like to amortize the acquisition costs over time. So this quarter, we had SEK 16 million of such costs.
Yes, we started with Haemimont, right?
Yes. So it was SEK 14 million in Q1 last year, and the difference is pretty much Haemimont that we have started to amortize a part.
And it's a linear 5-year write-off for 7-year?
Yes. So if you look at the final note in the financial statement, you will find the purchase price analysis. And there, you can see that out of the initial purchase price, it's -- that is split up over mainly 3 items. One item is live games. So the royalty stream that comes from the live games. That one -- that kind of right, we amortize linearly over 5 years from the acquisition. Then we have rights to a game that has been in development for some time. It's not done yet, but it's going to come out the game that we like. That we're going to amortize 18 months aggressively once we release that game.
All right.
So we treat -- in that way, you can say that we treat the purchase price similar to as if we would have developed it ourselves. And then the final part is for the game engine that Haemimont has developed. And that we also amortized 5 years linearly from the acquisition. So that is in here. Then we have other amortizations of SEK 8 million, which is mainly the rent for a lot of s[indiscernible] 00:14:21 tudios in our publishing arm because since IFRS 16, you treat rent as an amortization.
Royalties is often a significant part. Royalties for Q1 this year was SEK 29 million compared to SEK 40 million of Q1 last year. And this is mainly Cities: Age of Wonders because Age of Wonders, we have the earn-out from the studio that we push in here. And the difference between Q1 this year and Q1 last year is mainly Age of Wonders. And then we have some royalties on the Arc games as well that make up a smaller difference.
Then we have in COGS, kind of the final item that you touched on a bit, that is noncapitalized development cost and tech costs that we have in the publishing. So that was SEK 97 million in Q1 versus SEK 86 million in Q1 last year. And it's 2 more changes. One is that we moved part of the central tech team from PDS into PDX. So part of the developers that don't work with actual game development, but more with game generic development. So that means that we capitalize every quarter, SEK 5 million, SEK 6 million less. So we are being a bit more aggressive there in terms of --
On the cost --
-- yes. And the rest is just changes in the game projects that you mentioned. The higher risk we have on the project, the lesser we capitalize and the more we take as cost directly. Selling expenses, SEK 48 million compared to -- this Q1 compared to SEK 55 million Q1 last year. It should be lower because we haven't released much, but it's still a significant amount.
No, but we're ramping up for a couple of other things that we're planning to do in the future.
Yes.
So not saying too much, but we've touched upon Bloodlines 2, for example. And yes, we have a couple of things in the pipeline that is getting ready for at least maybe starting to talk about.
Yes. And at least starting to pay selling expenses for. So that's a good sign. It means that we are getting close. Admin expenses tend to be the same quarter after quarter, and it's the same here, SEK 25 million Q1 this year versus SEK 26 million Q1 next year. And admin expenses is everything except game development and selling expenses.
Especially UNI.
It's UNI, some IT, HR, finance, legal, insurances, stock exchange fees, everything like that. Right. Then we have other income and other expenses, which differs significantly between the quarters. It was positive SEK 21 million last year and it's negative SEK 23 million this year. And this is what you mentioned. It has to do with this currencies. So when we send out the invoice to, let's say, V[indiscernible] 00:17:31 alve, let's assume it's $10 million. We send it, it says $10 million. And if at the time we send the invoice, the rate -- the SEK versus dollar rate is SEK 10.5, which it was not a long time ago, then we would book the revenue of SEK 105 million on the top line. Then a month later, we received $10 million from Valvevalve [indiscernible]00:17:54. But at that point, the dollar might be -- only give us SEK 9.5. So that means we only get the SEK 95 million.
So then we have a loss or an expense of SEK 10 million, and that ends up on this row. So this shows clearly how the dollar has moved during the quarter.
Within the same quarter.
Within the same quarter, and it was up Q1 last year, down Q1 this year. So quite a big change.
Kind of a big change.
And financial items, money in bmank.
Money in bank. Interest rates, a bit lower because interest rates have gone down.
Right.
All right. Let's move on.
Next slide?
Yes, let's go to the next slide. So this shows just revenues and operating profit grouped into 12 months in order to make it easier to see a trend and -- [indiscernible]it's very easy to see a trend in terms of revenue. It's going upwards. We have some temporary ups and downs where we increase more or less. But over time, it's a steady march upwards.
It's a steady growth.
Steady growth.
And we'll see where the margin goes here. We have been more aggressive on the cost side. So also -- yes, so the balance sheet now when it comes to activated projects is definitely lower than it was last year at the same time.
We are putting much less onto the balance sheet every quarter now than we did, especially 2, 3 years ago. So a very clear trend on the green bars. There is a clear trend as well on the yellow line, even though it's not as steep. I think there, we are -- so that's the operating profit. There we are being held down a bit by fairly massive write-offs that we have had over the years. You see a big one in Q3 2021. That's when we canceled several projects that were in development. Then we have a drop in Q4 of 20 --
Q3 of '24?
Q4 [indiscernible][indiscernible] and then Q2 '24 again. And since this is rolling 12 months, it means that -- so we just said that we didn't have any write-offs in Q1. But since it's rolling 12 months, the write-off of Lamplighters League back from Q2 last year still impacts us with more than SEK 200 million here. So coming into Q2 this year, we will remove that.
Oh, you mean like by Q2?
Yes, that is what I said. Sorry, sorry.
So next quarter, it's not going to be impacting the 12 months rolling.
Yes.
So it's going to hopefully take a big jump up --
Exactly.
-- without promising anything --
No.
-- no forecasting.
Exactly. But we're looking forward to that. All right. Cash flow, very strong, I think. So cash flow from operating activities, SEK 217 million -- no, sorry, that was from investing activities. Cash flow from operating activities, SEK 266 million in Q1 this year versus SEK 137 million in Q1 last year. So the profit were almost the same, even slightly better last year, but we're still getting higher cash flow this year.
And this includes the first payment on the Haemimont deal as well, and we're still cash flow positive in the quarter. So that's good news.
Yes. That shows up on the yellow bar. But just a short explanation why we see a big variance between cash flow from the operating activities versus the profit. And that has to do with timing because the payment or the cash flow from the last calendar month of each quarter comes in the next quarter. So for Q1, it will depend a lot on how are the revenues in March and December. And this time, we had -- so in 2024 December, we had massive revenues that is coming in, helping the cash flow Q1 this year. But December 2023, the sales weren't that high. So it didn't help Q1 of 2024 equally. So therefore, we see much --
December impacts Q1. March --
Exactly. But then what you touched upon was the yellow bar, cash flow from investing activities, where we had SEK 217 million this year versus only SEK 48 million last year. And yes, the SEK 217 million includes the investment in Haemimont of SEK 97 million. So if you exclude that, we are at SEK 120 million. Last year, SEK 48 million, but then it was extra low because we sold some of our bonds. Last year, we invested our excess cash, some of it in bonds. Now we have it on the bank account because it yields better interest. So we sold that Q1 last year, which pushed down the investment. So if you would remove that, it was SEK 178 million last year compared to SEK 120 million this year. So it's actually down SEK 58 million, and that is down to 2 projects. It's Life by You that last year's Q1 came with significant investment, but it's also down to Bloodlines because Bloodlines is getting closer to release. We have set a date now. We have set a month.
Yes. And actually, if you're looking online, you can see that PC Gamer has a 10-page preview [indiscernible][crosstalk] today.
Oh, nice.
We just got the magazine sent to the reception desk. So I've gone through it.
Cool. Yes. So Bloodlines doesn't come with much more investments. So that means that we are getting close. And as you mentioned, Fred, so if you add these bars together, you can see that we are positive. So the net cash flow of Q1 was positive. Despite that, we didn't release much in the quarter, almost nothing. Well, I wouldn't say almost nothing, but a very slow quarter release-wise. We had headwinds in terms of currency, and we bought and paid all the upfront part of the acquisition of Haemimont. So despite that, we are still getting more cash at the end of the month.
Good news.
I think so, very strong.
So it wasn't that bad of a quarter after all. It seems to be pretty --
Not at all. Not at all. And yes, we're looking at --
That's it.
-- Q2 and the rest of the year. Do we have any questions?
It seems like we do.
It seems like we do.
First one to you, Fred.
Right.
Is the DLC subscription model part of a broader move toward a game-as-a-service approach at Paradox? Or is it more of a stand-alone option for players?
Well, we've seen the subscription model as a way for our gamers to take a first step into the game and enjoy all the DLCs at the same time before maybe making a full purchase decision or because it can be a bit overwhelming when you're presented with a lot of DLCs for, say, a game like Europa Universalis IV that has been in the market for almost 12 years. So -- we -- games as a -- I think we are almost a games-as-a-service provider, if you want to use that word, because we constantly update our games. We release some content for free and some paid content. So I think we're already in that sort of niche, but it's a good way for people to try out, I would say, and first step into the Paradox universe.
So Alex, how is the current global currency situation, particularly with the U.S. dollar, affecting Paradox's financial outlook? Are there any anticipated impacts on pricing, especially for DLC or international markets?
Yes. We have talked about this. So we are largely impacted, of course, by foreign currency. We have -- I think it's 97% of the revenues coming in foreign currency. So that impacts us a lot. There it spread out over all currencies.
It's underlying currencies as well?
Yes.
We get paid in dollars, but underlying currencies are a big basket of difference.
Yes, almost everything that gets paid to us is in dollars, but the actual underlying purchase is done -- yes, dollar is the biggest, but we have euros, which is not that far away. We have pounds, we have yen, we have everything. So we're affected -- at the end of the day, we are affected by all movements against SEK. But then if you look at this specific line, other income and other expenses, there is the SEK versus dollar amount or exchange rates that impacts us.
Right. So 3% is SEK more or less.
Yes.
Sorry, was there something -- are there any anticipated impacts on pricing, especially for DLCs?
I mean, we do a big work every year where we adapt regional pricing, taking into account currency, inflation and everything like that. So it's an ongoing work. We tend to rarely do it throughout the year because it comes with limitations on the different platforms because after you have changed prices, you can't change it again for a certain period. So since we work a lot with discounts over the year, it's important to time it in the right way.
Of course.
Fred, how does Paradox view the long-term balance between launching new titles and continuing to expand existing ones through DLCs?
Well, we want to have a strong cadence of both free content and paid DLC every year to ensure that our players have new experiences and have a reason to come back to the game and keep the game experience up to date and add new features and systems and whatnot. But ideally, we would add 1 to 3 titles a year to our portfolio. We haven't really been able to do that so far. But I think with our kind of new way of working, I think we might have a more stable release pipeline in the coming 3, 4 years without promising too much. But 1 to 3 new titles a year, I think, is something that we should aim for. I think that's reasonable.
Alex, will the acquisition of the new EP, which is Alien Stranded Dawn, have short-term effect for the revenue, for example, by developing new DLCs in the coming quarters? Or is it a long-term investment in the IP only?
It's a bit of both. I mean, the game generates revenues already. So we will get revenues from the get-go from that game. Then of course --
Not a huge amount. It's not going to impact --
No, no.
You're not going to see like numbers flying away.
Correct. Correct. But there is a long play in it as well because now we have gathered the studio and all the publishing rights and all the IP rights together. So of course, it makes it easier to develop again on the game. But as of today, we have nothing to communicate regarding any such plans.
Good.
More questions. Fred, with some platform holders like Nintendo increasing prices beyond EUR 80 and tariffs potentially affecting cost, how does Paradox approach pricing strategy? It's a similar question as well.
Yes. I mean, we touched on that. So we do pricing adjustments every now and then, and we adjust local currencies depending on what Alex talked about, like inflation rates and a bit of everything taken into account. And the baseline prices, I mean, for 20 years between '99 and 2019, all our base games cost $40. It was effectively a reduction of the price year-on-year, accounting for inflation. But we adjust the baseline prices as necessary, you could say. I mean, it's a political answer, but I think that's the only correct answer I can give.
Alex, would be great if you could share some more color on how currency impacts your revenue. I can see that 80% -- 82% of your revenue are from Steam. How do they pay you in USD? Or how should we think about FX impact on the top line?
Yes, I think we've answered this one.
We've answered this because we issue an invoice and that month is where we're kind of impacted USD only, right? The rest is like a basket of currencies. I think hedging currencies for us, we've never done that because it's really hard with the mix of currencies that we have. I answer your question here, by the way.
I mean, yes, we have taken the decision to -- so far at least to not hedge it because at the end of the day, it's going to catch up to you anyway. And if you look at it over a longer term, we have still a weak SEK versus the dollar and the euros and the pounds. If you look -- not if you look a couple of years back, but if you look 10 years back, we have had --
You mean the bank wouldn't just help us be nice. That's how you're saying?
That's right. That's right. There's a business in it as well.
Oh, yes, I knew it.
Okay, Fred. Player retention is key for the success of ongoing DLC models. What are your main concerns or challenges when it comes to keeping players engaged over time?
That's a very good question. You might think I wrote this question and sent it to myself, but I swear, I didn't. But outside of DLC pipeline, which is obviously a major drive towards playing the game more and coming back and have a reason to play a new country or a new character or whatever. And the free updates, of course, we believe, for example, modding is a huge driver of retention. So we have a thriving mod community for all our games. And we're looking to expand that. We're looking to present, hopefully, be able to -- for the modders to use even more tools and be even more in-depth in the modding in the future. So we're putting a lot of effort into that.
Multiplayer obviously, is one of the drivers, a social layer, like meta layer sort of thing on our games. So we're kind of experimenting with a lot of different things to make the whole gaming experience into like not only when you're in the game, but things you do outside the game as well. So it's going to be interesting.
Alex, over how many years will the acquisition of Haemimont be amortized?
I think we answered this as well, but if you want to --
Yes, we did. So the upfront purchase price, we mentioned how it will be amortized. It's -- part of it over 5 years, part of it over 18 months from the release of the game that Haemimont has been working on. Then -- so that's in terms of the initial purchase price. Then we have a performance-based earn-out that will depend on certain criterias as being met like key steps staying home for a certain time, games being released, games selling over certain thresholds. And then we will take the cost for that earnout when those events are triggered pretty much. So it will come with an increased cost when we release the games when we reach certain sales targets and so on.
Sounds reasonable.
Fred?
Yes.
I think we have time for some more questions.
Yes.
Can you provide us with details on Haemimont's original IP? How far gone is it, which genre, et cetera?
Did we talk about an original IP?
I don't know.
Okay. I will do that now. So Haemimont are working with us on a couple of different projects. I would say one that you probably will recognize to a certain extent without saying too much. Two others that you probably won't recognize, but it's going to be great. And I mean, Haemimont, we bought the studio because they are one of the best studios, if not the best studio in the world at making management games. And that's what they're going to continue doing with us as well. So it's not going to be super surprising what the gameplay looks like. So it's going to have that Haemimont nice feel that you've been able to experience throughout there over 20 years of existence, but we hope to add like some extra flavor over the coming years.
And Alex, any financial -- significant financial effects in 2025 from this?
Not from this game specifically. It will end up on the balance sheet and on the cash flow as investments in game development, but nothing.
So some write-offs is what we're counting upon mostly?
No, not write-offs.
The write-downs on the acquisition price?
No. Yes, there will be some amortizations of the acquisition price. No write-offs planned. Some amortizations over time that we see. But from this specific project, nothing really. No. It will come when we release a game, then we will see amortizations on that game.
Fred? Victoria 3, what is your thinking about the state of the game and resources you allocate to it?
Another good question. So we have a full team working on Victoria 3, and we're looking to have it as one of our evergreen franchises as we call it, like a lot of the other grand strategy games like we're doing with Age of Wonders 4 is doing really well, too. City Skylines, obviously. We're not really quite there yet. On the Q3, we would like to increase reviews, for example, and some other things. In Q1, we announced the first expansion pass for the game, and it's been doing quite well. So that's -- it's a good sign that the game is really -- that people are starting to find it and they're really enjoying it. So that's good. And -- but we're continuing to create content and continuing to develop the game. So no other plans.
Awesome.
Alex, Cities: Skylines, do you plan to continue supporting Cities: I, the same way you've done with content creator packs? Also, what's the status of Cities: II expansion Bridges & Ports? I understand that you will not give a date, but is there any reason to expect that it will be significantly delayed again? Or do you feel confident in the time line you have presented?
Right. So 2 questions. Yes, we can say that we will continue to support Cities: I.
Has a big following?
Yes. So we continue to do that in different ways. And with Bridges & Port, the latest thing we have communicated is Q2. We haven't changed that. So we haven't -- nothing more to add on that one really.
No. So keep your eyes open to see what happens here.
Out of time, I don't see any questions coming up on the screen. Maybe if you have written questions that we haven't answered, we will go through the mail and answer them via e-mail.
Yes. And that's it from us for this quarterly report stream. Thank you for watching and see you again in beginning of the month. --
Yes, beginning of August, we will have the Q2 stream.
Perfect. Looking forward to it already. Thanks for watching and see you then. Thank you. Bye.