Hello everyone, and welcome to the Paradox quarterly stream for the third quarter of 2022. I am Alexander Bricca, and I'm the CFO, and even not in the studio, but still very much with me, I have Fredrik Wester. Good to be with you for this Q3 report. We will jump straight into the action by, yeah, that's me, so that's my name. If we want to summarize this quarter, we've had a really good progress in the last 12 months. I would say not ending up in a strong third quarter because we have a long way to go, but at least we presented a strong third quarter. It's driven by a number of different factors. You have a strong DLC lineup for all the core games in our portfolio. We also have more sales on the core games themselves, and we see player numbers staying and increasing for a bit at least. We see good progression in our core pipeline, which makes us hopeful that we will start releasing more games than only one every two years, and the profit margins has a couple different reasons. It's obviously a really good sales, strong DLC sales, a bit above expectation, but also driven by strong currency tailwinds due to a weaker Swedish krona in which we report all our numbers, so that helped a bit as well. If we move on to which releases we've had, like I said, most of the core games, the core pipeline of games or the live games as we call them, have released DLCs this quarter. We have Europa Universalis, Hearts of Iron, Crusader Kings III, and Stellaris both on the PC and console has released DLCs this quarter, as well as Cities: Skylines in the management simulation genre. A couple of smaller Cities: Skylines expansion that we call content creator packs and radio stations or music packs as well. There's also been one release from our new experimental publishing label or the label if you wish, Paradox Arc, called Across the Obelisk, that has been successful and has shown really good numbers for us, good retention numbers, and we hope to grow this game over the coming five to 10-year period as well, just like we do with most of the games in our core portfolio. It was the first time in a very long while that we got to meet up for PDXCON 2022 together with our fans. It's been a while since 2019 the last time due to COVID, and as always, it's great to meet our fans and discuss with them. We had a number of different panels and chats and discussions that was just as appreciated by our fans as it was by the Paradox employees, including myself. As you can see in the picture here, we had a classical music orchestra who played, like, the best pieces of Paradox music live in front of the audience here. Like I mentioned before, the monthly active users are in the higher range of the 5-6 million people, and we hope to see a bit uptick in this now with the release of Victoria 3 that was outside of this quarter. As I mentioned, what happened after the quarter, we released Victoria 3, and we're super happy with the release. We know we've gotten some feedback on various things with the game as well, which is to be expected with the games of this complexity level, and we're obviously working hard to make the game better and more interesting, deeper, et cetera, like we do with all our games. You're going to see a lot of cool things coming to this game in the coming years. We released Airport Simulator: First Class, which is the second game from Playrion, our studio in Paris that makes mobile games, and the initial reactions have been good as well. We also released another Paradox Arc game, Stardeus, which is a game where you build your spaceship, your broken spaceship in space, and we released it in early access. I have about 30 hours in the game, and I recommend anyone to play it. It's a really good game. We released a couple of DLCs after the quarter's end as well, like Shattered Hope for Surviving the Aftermath and Undead for Prison Architect, and we have a couple of more to come as well, and we will tell you more about that in due time. With that, I will hand over to Alexander, who will take you through the numbers of the quarter. Thank you, Fred. Very pleasant to do that with these strong numbers. Let's start at the top. Revenues for the third quarter, SEK 458 million. That can be compared to the same quarter of last year when we did SEK 289 million, so it's a 58% year-over-year increase. There are two main drivers for the increase. Fred mentioned both of them. One is the foreign currencies. We report in Swedish krona, but we have 97%-98% of our revenues in foreign currencies, where of the dollar is the biggest, followed by euros and British pounds. I think the dollar has gone up more than 20% compared to the third quarter of last year. The euro and the pound not as much, but still around 5% each. All this helps our revenue quite a lot. Perhaps more importantly, we have released a lot more content in this quarter compared to a year ago. We actually had releases on all our five top franchises. By Blood Alone for Hearts of Iron IV, Lions of the North for Europa Universalis IV. Plazas and Promenades for Cities: Skylines. And as Fred mentioned, we also released a few smaller DLCs on Cities: Skylines, some content creator packs and some radio stations. We had Toxoids for Stellaris and Friends and Foes for Crusader Kings III, a smaller event pack, but was very much appreciated by our fans. Also a port for Stellaris console, Aquatics, and finally the new game, Across the Obelisk. Quite a lot of releases. If we compare that to the same quarter last year, we didn't have much at all, which we normally don't during this third quarter since we have a couple of summer months in the quarter. The biggest release was a DLC on Surviving Mars. That is pretty much it last year. And plus, as Fred mentioned, we had PDXCON in this year's Q3, and that also generates attention to us and our games, and it helps drive revenues a little bit. Several reasons why we outperformed last year. We always mention our top five contributors, the five usual suspects, as it often is, Cities: Skylines, Hearts of Iron, Europa Universalis, Stellaris, and Crusader Kings. Operating profit, SEK 221 million, a new record, quite an increase compared to last year's - SEK 45 million. Last year was a very particular quarter since we took a SEK 134 million write-off from canceling several games under development. Even without that write-off, we still would have doubled the profit this year compared to last year. Profit before tax, SEK 220 million still, and profit after tax SEK 176 million. That gives us a profit margin of 48%. Quite strong, and it's quite a lot of time since we performed these strong margins. We are of course very happy about that. Equity through asset ratio continues to go up 72%, which we're happy about, especially during these times, where we see some turbulence in the markets. We're very happy to have a solid balance sheet, of course. Number of employees, 654, so that's down from 742 in one year. This is due to us canceling several of our games under development, tightening our game portfolio, meaning that we have less requirement on staff. We are almost a little more than 90 people less in our staff, and we think this is a good staff allocation for us. Let's dig into the numbers a little bit more. This chart shows our revenue in the green line and our top three or our main three costs in yellow, blue and red. You can see on the green line we have three quarters with very similar revenues. We are actually having slightly less revenue now in Q3 compared to Q2. How is that possible if we released so much content? Because I think this is a record quarter in terms of DLC releases, for sure more than second quarter. Well, the answer is it's not effects, it's the summer months. We have a seasonal impact from July and August where we have normally less sales. And we did that this year as well. Despite that, we are almost having the same revenue as in Q2. The three costs, cost of goods sold in yellow, selling expenses in blue and administrative costs in red. All in all, SEK 264 million. That is almost exactly the same as in the second quarter, but it's less if you look back at Q3, where we did SEK 342 million, so quite a lot decrease. I just mentioned we had a SEK 134 million write-off in the third quarter last year, and that gives the whole explanation. Let's dig in a bit more into the cost of goods sold. This is, as a reminder, it's a cost for all our nine internal development studios, costs for our external development or the game development done by external studios. All our royalties that we pay, especially for Cities: Skylines. We have depreciation for acquired licenses and brands here. When we acquired the Triumph and Harebrained Schemes, Playrion, World of Darkness, we put that on the balance sheet, and we depreciate it. We have SEK 22 million every quarter as depreciation of these assets in our books. We also include costs here for our publishing organization that works with game development and development support, tech maintenance and so on. COGS SEK 197 million in this third quarter, down from SEK 278 last year's Q3, but very identical as Q2 as you can see, it's almost a straight line from the second quarter. Why did it decrease so much compared to last year? Well, again, it's the write-offs. Perhaps we can repeat this a little bit. Yeah. Previously, we used to have write-offs due to cancellations of somewhere around 1.5% and 2% of the capitalized development every quarter, on average. But in 2020 and 2021, this started to accelerate, so we started to cancel more and more expensive projects. That led us to back in Q3 last year, we had a thorough review of all the projects and decided to cancel several of them. We took a one-time hit of SEK 135 million, and that we are seeing the impacts from now. We haven't had any write-offs at all this year, so neither in Q1, Q2, and Q3. But we did something else as well last year which has helped us keeping the write-offs down, and that is our approach to high-risk projects. We always divide our projects now that we are launching into high risk and low risk. If it's considered a high-risk project, we don't capitalize our development costs during the early stages. Instead, we take them as cost directly. That is also something we do to keep the write-downs small. So far it looks like it's working, as I said, and no write-offs at all during these first three quarters. That doesn't mean that we haven't had any cancellations. The high-risk projects that we run under our new games team, there we continue to cancel with at least the same frequency as we have done before. Since you take those development costs directly in the P&L, they don't end up at any write-offs, so that's good. I'm sure, or I think it's likely that we will see write-offs in the future, but we are planning, and we have prepared ourselves to have less write-offs. That's why we have done these things. Okay, let's move on. Amortizations, that is our planned amortizations on the capitalized development, SEK 56 million in the second quarter, compared to, it's SEK 11 million higher than Q2 last year when we had SEK 45 million. It's fairly much smaller than Q2 this year when we had SEK 86 million. Why is this? Well, more than last year because we have released much more content, DLCs on pretty much all our big franchises. That of course means that we release more, and we amortize more. Why is it less than Q2? Well, two main reasons. One is that, for the games that we released back since Q3 2020, we have this degressive amortization model, which means that we take quite a lot up front, one third in the first month. That. Let's say little more than 18 months ago, we released a game called Empire of Sin. That, and then all the games, we amortize them over 18 months. We reached the 18th month back in June. That means starting Q3, we didn't have any amortization left to do on the base game of Empire of Sin. That helped us a lot. Also, we released in Q1 and Q2, we released a lot of content on Crusader Kings III, and that's another franchise that is released since third quarter 2020, meaning that we have this aggressive amortization model. In Q1, we released a big DLC, Royal Court. In Q2, we released another DLC, Fate of Iberia, and we also released a console edition for CK III. All that, we use this degressive amortization model, meaning that we had high cost in Q1 and Q2 for that, which we don't see the same of in Q3. Therefore, we are having less cost now compared to Q1. What else do we have in the COGS? I mentioned that we amortize or depreciate the acquired businesses, such as Haemimont Games, Triumph, Playrion, and so on, SEK 22 million this quarter. It has been SEK 21 million or SEK 20 million previous quarters, but that is only due to currency impacts, but it's fairly similar. Then we have royalties, tech costs for our publishing organization, and the development costs that we don't capitalize. That's another group that is included in cost of goods sold, and that is SEK 112 million in Q3. That can be compared to SEK 71 million back in Q3 last year. What has gone up? Well, royalty to start with. Since we had a lot of sales on Cities: Skylines, since we released DLCs on Cities: Skylines in the quarter, we also end up paying royalties, and to Colossal Order who has developed that game. Also equally important is the release of Across the Obelisk. That's a co-publishing deal where all the revenues that we have end up on our top line as revenue for Paradox, but then we share a large part of that revenue with the developer, and that ends up as royalties. The royalties in this third quarter reached SEK 30 million, compared to SEK 13 million Q3 last year. Quite an increase, but this is a cost of course we are happy to have since it's just a correlation with our revenues. Non-capitalized development cost also went up, and that has, to a large extent, to do with our new games team, as I mentioned, in order to not having to have the write-downs when we cancel high-risk games, we take this as costs from the start. Now we have several projects going on with the new games team. And we take all those project costs as cost during the early stages. That means that the part that we don't capitalize but take as direct cost has increased in this quarter compared to a quarter a year ago. That's about cost of goods sold. Let's move over quickly to selling expenses. SEK 44 million this quarter compared to SEK 38 million same quarter last year, so it's up. We released a lot of content, as we mentioned a couple of times now, that drives selling expenses, of course. We started to market Victoria 3 already back in Q3, so that drove selling expenses, and we were very happy to have PDXCON back in Q3 as well. That also came with a one-time cost. Nothing of this we had in the third quarter last year. This pushed up costs a lot. It pushed up costs more than the SEK 6 million that you can see. We have also balanced out the cost increase by several efficiency initiatives within the marketing organization. We are generating more sales with less money, I would say, in marketing. We are very happy about that. Administrative expenses stays fairly flat, SEK 23 million this year. This Q3 of this year compared to the same quarter last year, fairly flat. We have an item towards the end. It's not represented in the chart, but it is in the table to the right, other expenses and income, +SEK 27 million. This is mainly currency effects during the quarter. We send the invoice to our partners like Microsoft and Steam. We book that according to the SEK- U.S. dollar ratio it has when we send the invoice. The invoice is paid, and if we get in more money than we have booked because the dollar has increased, then it ends up here as other income. A very favorable quarter for us in terms of currency impact. Let's move on. Revenue and profit quarter by quarter. Think we can see two things here. One is we've had three quarters that look fairly stable, because they are very similar, high revenue and high profit. You don't have to look far to the left to see that normally our quarters results and revenues fluctuate quite a lot. Even though we have been stable for three quarters, I would expect it to continue to go up and down going forward because yet we have not found a release pace that is smooth and flat. It's normally very choppy. I think we're going to see, going forward the same trend as we had seen before, going down and going up. We are doing all we can to have the total trend pushing upwards. That we can see if we look at the next slide where we have lumped four quarters together, so we have a rolling 12-month. There we can see that we had a nice increase up until we released CK3 two years ago. Then we went in the wrong direction for a little more than a year. Then again, starting with Q4 last year, we have turned the revenue and the profit around. If we look at 12 months together, let's see how much we did. We did SEK 1,780 million in revenues over the last 12 months, and we did, almost SEK 800 million, SEK 790 million of profit before tax on the last 12 months. It's a nice development if you compare that what we did 1 year ago. Cash flow continues to be stable. Cash flow from the operating activities, nice and high. Let's say it was SEK 243 million, and we do as always, we take as much as we can of this cash flow and invest into new games development and DLC development. Some quarters we invest slightly more than the cash generation was, some quarters a bit less. All in all, we are still in a very much growth phase. We are pushing in considerable amounts in new games development. Total equity continues to go up. This is capitalized development. As Fred mentioned, at SEK 1.5 billion. It's an increase of 39%, which is included here. Here you can see the total non-current assets is not 1.5 billion, but more, and that's because we also have part of this, the acquired IPs, that we have acquired throughout the years, and also some right-of-use assets that that's rent agreements that we have. That's it. Let's see if we have got any questions. All right. This is one for you, Fred. What is the reasoning behind creating so many sub-brands for Paradox? I mean, SPEED5, Paradox Arc, et cetera. There's a second question here hidden. Why so many different studios in Stockholm instead of just one? Is this a direction Paradox will go into going forward? We can start with the studios, and it's basically the idea that each studio own their own game, so they get better focus and it's not as easy to just move people around in a, like a rob Peter to pay Paul kind of situation where you need all hands on deck on something, but rather have a more structured way to work on our games, on our live games and our upcoming games, more structured with its own game director and studio managers. You get more focus basically. When it comes to Paradox Arc and SPEED5, which is our new like event streaming joint venture that we have together with a company called Black Molly Entertainment. Paradox Arc is our way to experiment in a way that doesn't force us to spend a lot of money every time we want to make a new experiment or a new game. We work together with what we consider super talented developers who have a formula that fits really well with the Paradox portfolio to begin with, and then we can scale the game over time like we've done with most our games. Most our games are bigger today than the month they were actually released, so that's the way we work. When it comes to SPEED5 specifically, it's a good way for us to speed up, no pun intended, the way we do streams and events, and also being a bit more experimental. Maybe we'll do some eSports things with Paradox Games. Who knows? Like, it's a lot up to the people who are there to come up with new cool ways to present our games and to communicate with our community at Paradox to see what, where do we want to go from here, basically. Okay. Thanks, Fred. A long answer, but, it does it. Good. Okay. How much impact does a strong dollar have on your margins since you have most costs outside of the United States? Will you see pressure- Yeah, that's yours, Alex. I will take that on. Will you see pressure on the margins when the dollar will get weaker? Yes. We have, as I mentioned, 97%-98% of our revenues in non-Swedish krona, so mostly dollars, but also euros, pounds, and all other available currencies. On the cost side, we have roughly 50% of our cost in the Swedish krona, so that means that we are very impacted by the exchange rates. If the Swedish krona is weak and as it has happened during the last year, we are doing great financially, but of course, in a situation where it starts to strengthen, that will pressure the margins towards the other end. This is an environment that we, as any other exporting company, live in. Yeah, that's pretty much it. One for you. Do you plan to stick with your own IPs or will you see Paradox work with external licenses in the future? Yeah, it's a long time since we worked with an external license, and it takes a lot of effort to do that. Our focus will be, and always has been, to focus on our own IP. If a good opportunity comes along, we're not totally foreign to work with external IPs as well if they fit our portfolio and we see a win-win situation from it. Who knows? Maybe we'll actually do something on external IPs in the future. We'll see. Interesting. All right. This is one for me, I think. Can you explain what prepaid revenue is? It's there is a reference in one of the notes in the Q3 report. Well, mainly two things. One is payments from the player, so that's pre-orders. For example, when we released Victoria 3 last week, we opened up pretty much a month in advance so you could, as a player, you could start pre-ordering and pay. The payment we get through that, we put up in the balance sheet. We don't recognize it as a revenue until we release a game, but we put it as a pre-order. The same goes for different season passes and expansion passes. We had a big release of one of those pre-orders back in Q1 because when we sell new games, we often also sell some kind of a deluxe package which includes the following two, three DLCs. We have done that for Victoria 3 as well. Whatever of that payment that doesn't regard the base game, we consider prepaid revenue, so we don't take it as revenue until we release that DLC. That is one part of it. The other part is when we get different license fees and minimum guarantees from our distributing partners, for example, we have Microsoft and Epic where we get payments in lump sum, so then we put that on the balance sheet and recognize it over time when their players consume our games. Question for you, Fred. In the CEO comments- Mm-hmm. ... for the Q2 report, you talked about giving one or few updates for future releases. Is that still your ambition? Yeah, I mean, we always have high ambitions and I would love to talk more about our upcoming games. We mentioned 15 in the pipeline. That is excluding Paradox Arc, by the way. Even more important than ambition is not to overpromise and underdeliver. What we have to do is just wait until the games are actually ready to be presented, and then we will present them, and the ambition has been to present a couple on this side of the year. I'm not sure we can do that, but yeah, we'll do it as soon as we're ready to and obviously, it comes closer and closer. It's any month now will come with more information. Right. What do you think of that, Al? All right. Will you continue to tap into the mobile gaming market? If yes, do you expect to expand your mobile activities or do you prefer to focus on GSG and keep mobile activities as a hobby? Our main focus, our vast majority of our effort and resources goes into GSGs and city builders because that is where we have proven ourselves. We have a studio and publisher in Playrion in Paris who has just released Airport Simulator with strong success. Still early days. The numbers that we're seeing so far is very promising, so we are very happy about that release. They also have since many years back a very successful management games on mobile called Airlines Manager. Playrion will continue to do their thing, and we have of course high hopes for them. Meanwhile, the rest of Paradox is focusing on, to a large extent, GSGs and management games. Right. More questions. This is for you, Fred. Regarding your work with Paradox Arc, now that Across the Obelisk and Stardeus have become successful launches, will you scale up budgets and personnel who works with the titles or how will you tackle that task? Yeah. We hope to do that. We need to look at the numbers and see can these games grow over time and I would say that both these launches are successful from what it comes to gamer reception. We just need to see if they have the retention that we're looking for and that they have the potential to scale, and that the developer wants to continue working with us for a long period of time because it's also very hard to change in between different developers and whatnot. There are a couple of things that we need to figure out, but our hope is that both of these games are going to be able to scale over time and start making an impact. At the moment, they're not moving the needle so much when it comes to the revenue or profit, but we hope that in a couple of years' time, they will be able to do so. Absolutely, they're on the radar and we'll follow this up closely. All right. How much of the roughly SEK 1.5 billion in capitalized development is due to unreleased games and are DLCs capitalized? If so, how much are from DLCs? Can you provide any color on how large size is expected to be released next year? Okay. I can try to answer this one, several questions in one. The SEK 1.5 billion of capitalized development, that's right, it's a mix of unreleased new games and those new games are some of them are sequels and some of them are new franchises. Part of the capitalized development is also unreleased DLCs. We do, yes, we capitalize DLCs as well, and some of it this is released games and DLCs that are not just fully amortized. We do not provide an exact split between project and segments in our revenues or in our capitalized development, but can say that the vast majority of the capitalized development is from unreleased new games. DLCs is very important business for us, but it comes with a great benefit in that the development of them doesn't cost that much, so they don't generate that big part of the capitalized development share. More questions? Good. Profit margins are at very high levels. What are key initiatives in maintaining these margins? What are needed in terms of DLC activity and performance of new games looking into 2023? Yes. As you know, revenues and profits highly variable between quarters, because we release in big variation, and that is why so when we sit and do these streams, we of course do the year-on-year comparison, but for us, it doesn't make much sense, I think, to some extent, but not that much. If we look at the past quarters, we have been a bit uniquely positioned to attain these high profit margins. We have had no write-offs. We have had very strong currency impact. Almost the biggest part of our revenues comes from DLC, and DLCs are fairly inexpensive to develop, so that comes with very high margins. I think it's difficult to beat a quarter like this where we have strong FX and the revenue from DLCs. Yeah, when it comes to margin, right? Yeah. When it comes to 48% margin, it's going to be hard. Yeah. I think so too. You know, we don't provide any forward-looking statements and but of course a continued strong DLC lineup is necessary to continue to have these high margins and but we are mixing that up with trying to come out with new games and establish. I would say a six to start with, a six franchise. We always have these five usual suspects when we talk about revenue generation, but we are hoping that Victoria 3 is becoming the sixth one now. Later on we are hoping for a seventh of course as well. A question for you, Fred. Very high DLC release activity in Q3 2022. How much of this is an effect of your increased focus versus a catch-up from lower activity during the pandemic? What does it imply for Q4 and the following quarters? If it's partly due to a catch-up, how much of these catch-up effects remains to be seen? That's a very specific question. Yeah. I would say that, maybe a little bit of it is a catch-up from COVID, but the vast majority of it would be an increased change in focus and an increased focus on the live games and the DLC production. I would expect a higher level and a higher rate of DLC releases going forward, if you look at the company as a whole, and if you look at the dollar value in total that the company releases throughout the year because it's not only the cadence of DLCs, it's obviously it's not smaller DLCs like a music pack can't be really compared to, say, Royal Court for Crusader Kings III. I would estimate the dollar value year on year to grow. Yes. Questions keep coming in. Let's do a couple more. Working capital build-up this quarter, is it mainly related to DLC releases late in September or anything else worth mentioning? No, it's not. It's nothing in particular. It varies with our releases. If we have released something big, but invoiced but not yet received money, it goes in one way. So it's going to swing back and forth a bit from month to month and quarter to quarter. No real trend here. One more question: How should we think in the midterm? Will you invest in new game development or will you go into more of a harvest mode and manage the existing portfolio and invest in DLCs? Well, we are investing quite a lot in game development. As we mentioned, we have 15 games in the pipeline and we hope all of them sooner or later are going to come out. If you do the math on average, game development period is between three and four years, you can sort of count backwards and reverse engineer the idea on how many games we're releasing. We're going to continue to invest more in both full big games and DLCs and combine it with the efforts that Paradox Arc is doing with experimental games as well. It's not like we're just awaiting the cash flow avalanche of the released games, but that's going to go into new projects where we're going to do new cool things and we're going to reach new levels as a company as well. That's the whole idea. All right. That looks like all the questions. If we have missed any questions or if you come up with new questions, feel free to email us either directly to me or Fred, or you can email ir@paradoxinteractive.com and we will answer them via email. We will see you next time at the beginning of February when we have the full year-end Q4 report to share with you. Yeah. Until then, thank you very much for watching, and have a good day. Thank you very much. Take care. See you soon. Cheers.