Hello and welcome to the Paradox Q 2 2022 live stream. My name is Fred. I'm Alex, I'm the CFO. I'm the CEO, which the next slide will tell you. That's me. What we're gonna take you through is basically the releases and the numbers for Q2 of 2022. We had a pretty good quarter. We strengthen our core portfolio. We have some good releases, high quality, and quite a good attachment rate on the monthly active users as well. At the same time, we maintained and strengthened our cost control as well. We've reduced a lot of the operating costs and we continue to do so. Mostly our margins, 46%, which Alex will tell you more about, is due to obviously some good sales numbers, better operational efficiency than before, but also due to some currency tailwinds, namely the dollar and the euro has strengthened towards the Swedish krona. If you look at the core portfolio and what we released this quarter, it's mainly DLCs and some console adaptations for some of the older games, where you see Overlord for Stellaris performing really well. The Nemesis DLC for consoles. You have Shadowrun for consoles and also the release of Fate of Iberia, which is the last release in our pre-order pack or the season pack that we sold together with the release of Crusader Kings III. We also have some management simulation DLCs with Surviving the Aftermath, Prison Architect, and Surviving Mars. We have now established our core base in the upper 5-6 million range of monthly active users, which is slowly but steadily increasing month by month. We see this positive trend that we got during COVID to actually stay and actually increase a bit, not at the same rate, but it's still staying up there, increasing slowly. The number of active users is obviously crucial to Paradox to continue to have a high recurring revenue. What we'll do going forward on the marketing side and our main focus is gonna be on continuing to have a good player dialogue and strengthening on the communities that we build around our core franchises. As I might have said before, we have 14 projects in our core pipeline, and our focus right now is starting to deliver some of these games. We already know that Victoria 3 is gonna be released later on this year. We've also released earlier this year, Crusader Kings III for consoles and Shadowrun for consoles. Our ambition is to provide you with at least one more release date before the end of the year. Not a release this year, but for a release later on. We've also, after re-announcing Bloodlines 2 way too early, we're more restrictive in when we announce. We need to have a concrete and set release date or at least a release quarter before announcing anything. On the side of our core pipeline and our core business, our New Games team is continuing to operate by signing smaller and more experimental titles that still fit well with our core audience and our portfolio, but they're smaller, and the costs are also taken directly, which Alex will explain further, which has some effect on the numbers but will be different from before. We're gonna look forward to having some updates on this more experimental pipeline somewhere in the near future, but at least within a couple of months. Other events happening this year. We finally can meet our fans and gamers again in September for a new PDXCON. It's gonna be a bit smaller than it was last time, but we're really excited to meet people in person again. We have a good DLC lineup that we already announced, for example, By Blood Alone for Hearts of Iron IV and some stuff for console as well. We're gonna announce more, hopefully within soon for things to be released during this fall. With that, I will leave the word to Alex and the numbers. Thank you. Let's see what we did. Let's start with the revenues, SEK 459 million in the second quarter of this year. That is an increase with 14% compared to the same quarter last year when we did SEK 403 million. The main difference between these two quarters is the foreign exchange rates. Especially the dollar has increased significantly versus the Swedish krona since Q2 last year. I think it's up 17%. And that is where we have our largest share of the revenues in. Also the British pound and the euro has increased. I think it's 5% and 3% respectively. All in all, it's up quite a lot. Thanks to the weakened krona. It's what we release in terms of content that makes a difference. If you look, if you compare this second quarter with the same quarter last year, it's fairly similar in terms of releases. This year we had Overlord on Stellaris that performed very well, and we had Fate of Iberia for CK3. We had some smaller DLCs as Fredrik mentioned. Very similar to last year's Q2. We had Nemesis on Stellaris, we had Leviathan on EU4, and we had console port for Stellaris and a DLC on, I think it was Prison Architect. Very similar to this year. We had Publisher Weekend on Steam both this Q2 and last year's Q2. Last year's Q2, we also had PDXCON Remixed, so that generated some attention, which we didn't have this year. Still we managed to beat. Even if you would remove the currency effect, we still have a slight growth compared to last year's Q2. Top five contributors, if we look at franchises, the same as always. It's Cities: Skylines- Usual suspects The five usual suspects, Cities: Skylines, Stellaris, Crusader Kings III, Hearts of Iron, and Europa Universalis. Almost always those five. Operating profit SEK 214 million compared to SEK 111 million last year. That is up some 92%. Profit before tax or profit after financial items, SEK 213 million compared to SEK 110 million. That is 47 and 46% of profit margin compared to 28% or 27% last year. It's quite a significant increase. Should bear in mind this quarter is almost optimal in its setup for delivering high margin. We had a very strong U.S. dollar rate and pound and euro rate. We had no write-offs from canceled games and small ones because it's different now if we want to take that. Yeah. That's a good point. Because everything that is handled through the New Games team is being taken as costs directly, so we don't put it on the balance sheet at all. It's only for the core pipeline, if I understand correctly. That's right. We have actually canceled games in the second quarter. Yeah. None of those cancellations had led to any write-offs because we never capitalized them in the first place. Exactly. Finally, I think, which helps us with the margin is that the revenue this quarter comes from DLCs mainly, and DLCs are not that expensive to develop. It's quite some time since we released a new game, and with new game releases comes big amortizations, so a very favorable quarter. It's the most profitable thing we can do, release DLCs. Yeah. Not write any projects off. The equity-to-asset ratio has increased a bit, so it's 71%. Number of employees, we have continued with our efficiency actions, so it's down to 657 by end of Q2. We have continued throughout this year to be very selective with what replacements, recruitments we make. We have come down. I think the top was 742 or something like that back in September last year. We have managed to increase in publishing quite significantly. We are very happy that we are continuing to deliver strong revenues. Quite an efficiency improvement, especially in our marketing teams, I would say. Let's move on to the next slide. This is our classic slide where we show the trend of revenue and our three main costs. Revenue, you can see that we are not hitting any revenue record this quarter, but it's one of the top quarters. Maybe it's the third quarter or fourth quarter in history in terms of revenue. We are hitting a profit record, and that has to do with decreased costs. Increased revenues and decreased costs compared to the same quarter last year. We have three main costs. It's COGS, selling expenses, and administrative expenses. They all together end up at SEK 261 million in the second quarter of this year, compared to SEK 289 million same quarter last year. Slightly down, which is very good. Largest part is cost of goods sold. This includes all our development costs, so all the cost for all our nine studios, our external studios, royalties that we pay, especially for Cities: Skylines. What else is included? Well, we do amortize. When we have acquired companies and assets, we try to amortize them quite quickly, so that we take as cost that's included in COGS. Also as Fred mentioned, for example, the New Games team, that we take as immediate cost here. So, COGS is down from SEK 204 million second quarter last year to SEK 197 million this year. The main driver here, I think, is that last year's Q2, we took a write-off of I think it was SEK 42 million. We terminated a game that we had on the balance sheet and wrote it off. This is the second quarter in a row where we don't have any write-offs. We didn't have any in Q1 and in Q2. If you look historically, we have had, I would say three out of four quarters we have made write-offs, and on average, it has been some 1.5%-2% of the capitalized development. That started to accelerate in 2020 and 2021, we took some serious measures towards the end of 2021 and made a clean up of the portfolio. We canceled several games, and we also changed the way we work with the most risky game projects. I think we are seeing the benefits of that in Q1 and Q2. Let's hope this is a trend. It's definitely our ambition with the new setup to have less write-offs. I'm sure we will have the same amount of cancellations. It will happen earlier, and it will happen on the game projects where we haven't capitalized anything. If we look at just the amortization part of the COGS, that is up slightly compared to same quarter of last year, and that has to do with that we have released Overlord on Stellaris, we have released Fate of Iberia on CK3, the Gangs on Prison Architect, the Shadowrun Trilogy. All that costs, of course, and when we release it comes over the P&L. So more game releases this, more content releases this quarter slightly than last, so higher cost. I mentioned that we take when we acquire businesses, we take as much as possible over the P&L in terms of amortization. SEK 21 million of the COGS is that we are constantly amortizing of the acquisitions of Triumph, Harebrained Schemes, Playrion, World of Darkness. Royalties very similar to last year, but it's down. If you look at Q1, you can see if you look at the yellow line, we have decreased COGS from Q1 this year, and that is mainly to do with royalties. A large part of the revenues back in Q1 came from Cities: Skylines, so that meant higher royalties. Another reason why this second quarter is so optimal from a margin perspective is that a large part of the revenues came from our in-house games. Where we don't pay any royalties. What else do we have? We have our selling expenses. There I think we have done a good job decreasing it from SEK 56 million last year to SEK 40 million this Q2. These selling expenses tend to fluctuate a bit with the releases, but so you need to look at a few quarters together. Even if you do so, you can see that there is a clear trend over the last twelve months where we have been able to decrease selling expenses while maintaining good sales. It's a clear efficiency improvement. Selling expenses will go up once we start to release new games, of course, but with that should of course come even more revenue. We're looking forward to increase selling expenses at later point. Administrative expenses also down compared to last year, SEK 29 million to SEK 24 million. I think, again, they fluctuate a bit between the quarters, but also for this cost item, you can see there is a trend if you look at 12-18 months. Very good. If you look at our P&L or our income statement, you will see two items called other income and other expenses. We don't talk about them on each stream because normally they don't move that much, but this time it has. It has a positive impact this quarter, the second quarter of this year, and it had a negative impact the second quarter of last year. This is part of the currency impact that we see. This represent the currency movement during the quarter. If we send an invoice to Steam, we send it in US dollars. When we send out the invoice, we book the revenue in SEK according to the currency rate that we have on that day. When we receive the U.S. dollars from Steam, we do the exchange, the actual exchange, and get SEK. At that point, which has happened during this quarter, it has been more SEK than we took as revenue. All the difference end up as other income. As you can see, 16 million plus, it means that the SEK has been becoming weaker during the second quarter of this year. I think, let's move forward to the next chart. Here it shows revenues and the profit quarter by quarter, and it's difficult to see, but if you look at the yellow line, it's the top level all time. It's SEK 213 million. Previous record was Q1 or so one quarter ago, SEK 208 million. As you can see, it's not the top quarter in terms of revenue. It's a mix of strong revenues from the right product with controlled costs. Another thing that the chart shows is that our results and revenues are quite fluctuating. If you look at a few quarters together, only then you can see trends, but I think you should expect going forward, it will continue to swing up and down, both revenue and profit. But again, if you lump the quarters together, so we see twelve months rolling twelve months, then the trends are clearer and it's obvious that we have had a negative trend up until Q3 last year, and since then it has been going upwards, both revenue and profit. When we come to Q3 this year, for those of you who remember, we had a very negative Q3 last year in terms of result because we did this cleanup process. The yellow line is likely gonna continue up in Q3 as well. Cash flow, strong cash flow from our operating activities. I think it's SEK 262 million. Almost all that we invest as we do into game development. I think SEK 219 million went into the game development. We also paid our yearly dividend as always, SEK 1 per share, so SEK 105.6 million as dividends. Our equity-to-asset ratio is solid. Equity is increasing, and the total non-current asset is mainly capitalized development. That's our biggest part. It's SEK 1.4 billion now. That represents games, new games and DLCs that we will release over the next years. That's it, I think, for us. Perfect. Do we have a few questions? We have a couple of questions that came in through email, I think. I'll do like this. I'll read my questions and then I'll answer my questions just as it should be. The first one is the question is: Is there, in your opinion, a right amount of DLC for a Paradox game? Or is there a limit beyond which profits or technical state of the game become unsustainable? Obviously, it's a very good question. I don't think there's a right amount of DLC for a game specifically. It's three different things which are mentioned also in the question to a certain extent. One is obviously, is there a value for the gamer? More value that we can add to the game that people are actually willing to pay for and they see as actual value that adds to the gameplay. Second one is creative limits. Do we feel that we can do things internally that actually adds this value? The third one is obviously technical limitations and issues that lies within our own engine and our own code base. Every game will have its own personality and its own DLC structure and what is right and not, and we will continue to experiment with what we feel is the right way forward. Sometimes we'll make huge successes and sometimes they will not be as good, but we hope we'll improve over time, at least. That's the ambition. Good. Okay, it seems like there is a significant negative working capital effect on the operating cash flow of the company if you look at six months, page 15 of the report. Could you please explain? And also, why is the number so different than the same period last year? Yeah. Very good observation. If you compare cash flow during the first half of this year and the operating profit, the cash flow is not as good as operating profit. The largest explanation is that, when we released CK3, we had a lot of sales of what we call the Royal Edition, so it's an expansion pass. We got a lot of prepaid revenues back in 2020, and it continued during 2021. This prepaid revenue, even though we get the cash immediately, we don't recognize it as revenue until we have released the content that is included in these expansion passes. When we went into 2020, we had a debt on the balance sheet because we consider this as a debt, because in theory, if we wouldn't deliver the DLCs that are included in the package that the players have paid for, we would have to repay this. We had a big debt on the balance sheet. When we released first, it was Royal Court back in February, I think it was, and then now Fate of Iberia in Q2, that meant that we could recognize that revenue and remove that debt from the balance sheet. That decreased the prepaid revenue and had a, you could say, negative effect on the cash flow working capital-wise because this significant amount of money it showed up on the profit loss statement this year, but cash-wise, we had already got the money. The question is, are you still planning to have two published games released per year, or that is no longer the case? The plan is to have as many games as we can, both from a production standpoint and also from a publishing standpoint. You can count it as three releases this year if you count Shadowrun Trilogy and CK3 Console Edition together with Victoria 3, or if you only count new ones, it's obviously Victoria 3 if you wanna be very strict. I don't think we're not limited to two releases per year. No, I wouldn't say that. Some years it might be last year, for example, we didn't release any games, if I understand correctly, right? We have 14 games in the core pipeline that we're gonna release over the next four years. If you just divide it's gonna be three to four games a year. Some of them are internally developed, and some of them are externally developed. On top of that, we have the New Games team that we told you about that is working with smaller and more experimental titles. We'll let you know more about this within short. Like I said, the New Games team is gonna be pretty soon in time, and at least one more announcement before the end of the year. We'll see how many actually pops up. We wanna avoid a Bloodlines 2 situation where we announce a game and then we have to delay it for a couple of years before telling you more. We wanna be fairly certain of at least a release timing before we actually go out and announce a new game. Could you explain the currency benefits of the company's financial statements these past six months? Sure. We have 97% of revenues coming in external currencies, where the U.S. dollar is by far the largest, followed by euro and British pound. As I said, I think dollar was up 17% if you just look at Q2 versus Q2 last year, euro and pound 3%-5%. If you add that together, we haven't disclosed the exact number, but I think the estimations on the market are around 10%. It has at least in Q2, Q1 I think it was a bit less. It has a significant positive impact when it moves this direction on our P&L. One thing that is important, sorry for just cutting in here, one thing that is important to remember is that Steam also has. They charge in I don't know how many different currencies. It's probably over 50 local currencies. We get paid in those, but then they transfer the money to us in dollars. The underlying, like, balance is pretty global, if you say. Yes. Even if U.S. dollars is the biggest because the United States is a big market for us. Correct. Dollar territories in general. I replied to all questions. I like that one. Yeah. When will we hear something from your U.S.-based studios, Paradox Tectonic and Harebrained Schemes? When we are ready to tell you more about their games. I get reports every week, so I'm happy personally, and it looks good. When they're closer to release, we promise to tell you more. That's all I can say at the moment. With regards to the revenue breakdown, it seems like revenue growth from console somewhat stalled and from mobile more than halved. Why is this? It depends what you compare. If you just look at Q2 this year compared to last year or first half of the year this year compared to last year, it's quite similar. I think it's 10%-11%. It does vary from quarter to quarter, depending on what we release. But it was slightly higher. It was around 14%-15% 18-24 months ago. At that point, we had the back catalog of PC DLCs on Cities and Stellaris that we could port in in a fairly quick manner. I think on Stellaris and Cities, we have ported almost all the DLCs now, so the pace is a bit slower now. I think that explains why we have seen a slight decrease in the console part of the revenue. Mobile-wise, well, together with last autumn's refocus, where we focus on PC and console, now it's only our studio in Paris, Playrion, that develops and publishes mobile games. The revenue has come down over the last year. Also initially, when we published the report, part of the mobile revenues was classified in one of the notes under PC, but that has now been corrected. If you look at the website now, you will see that the mobile revenues for Q2 was SEK 8 million. I think it went from SEK 13 million-SEK 14 million last year. It is a decrease. Yeah. It's still less than 2% of total revenue. Yes. But still. Do you see a flattening demand of your games considering inflationary pressure? We have not, no. Sales has been stable, and we're not experiencing any downturn or flattening demand. In general, our games, I think, might be counter cyclical or like. I don't know. I'm not sure we are affected that much by a negative downturn in the general economy. I also think that one of the strengths of our game is the number of hours you can play it. People keep on playing and people keep on buying our games. We made a small regional adjustment to the prices a couple of months back. We haven't done any inflationary adjustment at the moment. We haven't seen a need for it. We'll see if the need arises going forward, if the inflation stays at this bit higher rate than we've seen recently in the U.S. and all across Europe as well. We haven't seen any need to do it at the moment, no. Okay. Long question. Investments in capitalized development keep increasing. Yes. More than half of your assets stem from capitalized development. Could you give some flavor on the split between new games and DLCs in that basket? And secondly, historically speaking, increased development means increased releases. So does that mean that we should expect higher cadence of not only DLCs, but also larger releases as well? Yeah. We don't share that much detail on what the capitalized development is split up on, but it's 14 projects. It's a mix of DLCs, sequels on existing franchises, and completely new IPs as well. Focus on grand strategy and management games. Vast focus on that. There is one RPG at least we know, Bloodlines. PC and console games only in those 14. Between what can we say? Between DLC and new games. Well, if you look at the money, or if you look at the capitalized development amount, the vast majority is on new games and not DLC, since DLCs are substantially less expensive to make. And then there was a second question towards the end of the sentence. Does it mean that we should expect higher cadence? Definitely higher cadence than the last two years. Yeah. That's the goal. For the sake of clarity as well, the 14 games that we're mentioning is not counting DLCs. Correct. It's full game releases. Yeah. Yeah. Can you also expect larger releases as well? Yeah, if we look historically, the last two, three, four, five years, I think the game projects have increased. Yeah. They are continuing to do so. The games that are being released are gonna be bigger. I think you also see it on the DLCs, for example, the Royal Court edition, quite a massive DLC. We don't know for how much longer it's gonna continue to just become bigger and bigger. I think at some point we will reach an optimum amount, I think. You see diminishing return on every dollar you put in. We'll see. We haven't reached that yet. No. Our games keep on having bigger budgets. You can conclude that at least. That's what you see in the balance sheet as well. Yeah. What is your long-term goal for Paradox and its games? That is a very, very good question. You know what? We wanna be the best at what we do. We wanna make a lot of super fun games that people keep on playing. We wanna have the best experience in the market for people who play games. We think our games matter. We think our games mean a lot to the people who play them. You can see that in the play time they have. We can see that in the attachment rate of DLCs as well. We believe we make an impact in people's lives, and we think it's important. Games are important, and the games that we make are important, and that's what we wanna continue doing. Can you explain what goes into setting the pricing policy for your game DLCs? Well, several different things. We look, of course, at how much time and value that has gone in from our side developing the content. Perhaps more important is a kind of end result. What do we think it amounts in terms of entertainment value for the players? I think especially recently, we have started to focus a bit more on what we think the entertainment value is than our actual cost. Of course, we have become much better at that now, but we look at what our peers price similar content in the different regions. All that, I would say that those are the main ingredients that goes into our pricing policy. No more questions? No more questions. That was good questions, though. Yeah. Really appreciate that. If you have any questions, whether you have already sent them in and we haven't responded, or if you come up with new questions, please continue to send them via email, and we will answer them via email. Perfect. We'll see you hopefully again at the next quarterly s tream in Q3. Yeah. In a couple of months. Yeah, at the beginning of November. Yep. Until then, keep on buying and playing our games. Thanks for listening. Thank you. Cheers. Bye.