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Paradox Interactive's record Q2 revenues marred by declining profits

Royalty payments to third-party devs and two cancelled projects dragged on the Swedish publisher's bottom line

Paradox Interactive saw profits dip in the second quarter, even as it posted record Q2 revenues.

In the three-month period ended June 30, 2018, the Swedish publisher earned SEK 298.8 million, down 3 per cent over the previous year. According to Paradox, this is the most revenue the company has ever earned in the second quarter.

However, net profit took a dive, falling 38 per cent to SEK 77.9 million. In a statement to the company's investors, CEO Ebba Ljungerud explained that the narrower profit margin was due to rising royalty payments, as third-party releases accounted for more of the quarter's total revenue. Paradox also cancelled "two unannounced projects" that resulted in one-time write-offs.

"This is nothing out of the ordinary," she said. "We always have many concurrent projects in early development, with regular evaluation points, and we prefer early cancellations for those projects that we do not feel are likely to meet our high-quality standards."

It was a busy quarter for Paradox in terms of games, with two expansions for Cities: Skylines, one for Stellaris, and Harebrained Schemes' Battletech all released in the three-month period. The company acquired Harebrained Schemes for $7.5 million in June.

Paradox also ran a "free-to-play promotion" in April, in which it made Crusader Kings 2 free to download for 48 hours on Steam.

"The promotion drove a significant influx of new players and a healthy increase in revenue from expansion sales," the company said. "At one point during the promotion, Crusader Kings 2 became one of the top 5 most played titles on Steam worldwide.

"Going forward we will see more experiments of a similar nature, as we continue to tweak revenue models and price points for the best possible results."

At the start of this month, Ebba Ljungerud took over as CEO of the company, with former CEO moving in to the role of executive chairman.

To mark the occasion, we spoke to both Ljungerud and Wester about the company's future plans and the transition in management.

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