Q2 2026 Paradox Interactive AB (publ) Earnings Call

August 6, 2026

Speaker #1: Hello, and welcome to the Q2 2026 stream for Paradox Interactive, with me, Fredrik Wester, and—

Fred Wester: Hello, and welcome to the Q2 Stream 2026 for Paradox Interactive with me, Fred Wester.

Speaker #2: And I'm Alexander Bricca, the CFO. Welcome, everyone.

Alexander Bricca: I'm Alexander Bricca, the CFO. Welcome, everyone.

Speaker #1: Welcome, good to have you back. So, we start by rushing through this with my name—that's me—and starting by saying that this is a solid first half of 2026. No big surprises, no big things that are upsetting in any way.

Fred Wester: Welcome. Good to have you back. We start rushing through this with my name. That's me. Starting by saying that this is a solid H1 2026. No big surprises, no big things that are upsetting in any way. It's been a typical quarter. We released 9 pieces of content for 7 of our franchises. The only exclusion is "Cities: Skylines." However, we see a very positive trend for "Cities: Skylines II" since Iceflake Studios took over by New Year's. We see "Cities: Skylines" actually having the best sales quarter since release without releasing any new content. That gives us a lot of reason to look forward to the future when we're going to release a lot more content for "Cities: Skylines II" and for "Cities: Skylines I," for that matter.

Speaker #1: It's been sort of the typical quarter. We released content for— we released nine pieces of content for seven of our franchises. The only exclusion is Cities: Skylines.

Speaker #1: But however, we see a very positive trend for Cities: Skylines II since Iceflake Studios took over by New Year's. So we see Cities: Skylines actually having the best sales quarter since release, without releasing any new content.

Speaker #1: So, that gives us a lot of reason to look forward to the future, when we're going to release a lot more content for Cities: Skylines II and for Cities: Skylines I, for that matter.

Speaker #1: Crusader Kings 3 and Stellaris launched new expansion passes, and Hearts of Iron 4 and Age of Wonders 4 were both at the end of their expansion passes.

Fred Wester: Crusader Kings III" and "Stellaris" launched new expansion passes, and "Hearts of Iron IV" and "Age of Wonders 4" were both at the end of their expansion passes. They're going to recharge, as we say now, and starting over with new expansion passes. We entered the main list of the Nasdaq Stockholm, marking a new milestone for the company, giving us new opportunities to do new things, like a share buyback program that we announced last night, just after our board meeting, and it's going to take place as soon as we can, right?

Speaker #1: So they're going to recharge, as we say now, and start over with new expansion passes. We entered the main list of the Nasdaq Stock Exchange in Stockholm.

Speaker #1: Marking a new milestone for the company, giving us new opportunities to do new things, like the share buyback program that we announced last night, just after our board meeting.

Speaker #1: And it's going to take place as soon as we can, right?

Speaker #2: Yeah.

Alexander Bricca: Yeah.

Speaker #1: So— and as we said in my words from the CEO, that we point out in the quarterly report, we have a very exciting Gamescom coming up in three weeks' time.

Fred Wester: As we said in my words from the CEO that we point out in the quarterly report, we have a very exciting Gamescom coming up in 3 weeks' time. We might just as well ask you to follow us on Gamescom as well for more news on future releases because we're getting a lot of questions on future releases, but we can't say anything in these streams. We have to keep it in a certain marketing schedule as well. The key releases, as you can see here, for all franchises, like I said, almost: Stellaris, Age of Wonders 4, Victoria 3, Hearts of Iron IV, Europa 5, and the last two pieces of content for Bloodlines 2 before we close that chapter of development. That was very quick, actually.

Speaker #1: So we might just as well ask you to follow us on Gamescom as well for more news—because we're getting a lot of questions on future releases, but we can't say anything in these streams.

Speaker #1: We have to keep it in a certain marketing schedule as well. So the releases—the key releases, as you can see here for all franchises, like I said, almost.

Speaker #1: Stellaris, Age of Wonders 4, Victoria 3, Hearts of Iron 4, Europa 5, and the last two pieces of content for Bloodlines 2 before we close that chapter of development.

Speaker #1: And that was very quick, actually. I think that's it. I don't get any more attention this time. But I think it was a good summary of what we've done so far on the product side.

Alexander Bricca: Was it this?

Fred Wester: I think that's it. Yeah. I think I don't get any more attention this time. I think it was a good summary of.

Alexander Bricca: Yeah. Of course.

Fred Wester: what we've done so far on the product side, but I'll probably interfere with your

Speaker #1: But I'll probably interfere with your—

Speaker #2: It wasn't little.

Alexander Bricca: It wasn't little.

Speaker #1: I'll interfere with your numbers instead.

Fred Wester: I'll interfere with your numbers instead.

Speaker #2: Sure. Let's go through them. So, revenues for the second quarter came in at SEK 524 million, which is 14% up compared to the same quarter last year, when we did SEK 459 million.

Alexander Bricca: Sure. Let's go through them. Revenues for the Q2 came in at SEK 524 million, which is 14% up compared to the same quarter of last year when we did SEK 459. Let's look into the drivers a bit. You that follow us know that there are mainly two things that impact the revenues. One is quite often the currency changes when we compare quarter to quarter. It's negative for us this quarter as well, but not that much. It's roughly 2% negative on the revenue side. It has been much higher the latest quarters we have been through.

Speaker #2: Let's look into the drivers a bit. Judith follows us, knows that there are mainly two things that impact the revenues. One is, quite often, the currency changes.

Speaker #2: When we compared quarter to quarter, it's negative for us this quarter as well, but not that much. It's roughly 2% negative on the revenue side.

Speaker #2: It has been much higher in the latest quarters we have been through, so now it has been fairly stable. But—so despite some 2% headwind on FX, we are still increasing 14%.

Fred Wester: Yeah.

Alexander Bricca: Now it has been fairly stable. Despite some 2% headwind on FX, we are still increasing 14%. That, of course, has to do with the main driver, and that is what we release in the quarter. If we look a bit Franchise by franchise, one of the biggest changes for Hearts of Iron IV, where we had a big release in the quarter. Last year, we had that one in Q1 instead. Therefore, Q2 versus Q2 comes with a substantial increase for Hearts of Iron IV. We released on Stellaris: Nomads, but there we had a big release last year as well. We did a lot of revenue this year for Stellaris, but we did actually even more last year.

Speaker #2: And that, of course, has to do with the main driver, and that is what we release in the quarter. If we look a bit franchise by franchise, one of the biggest changes was for Hearts of Iron IV, where we had a big release in the quarter—last year we had that one in Q1 instead.

Speaker #2: So, therefore, Q2 versus Q2 comes with a substantial increase for Hearts of Iron IV. We released on Stellaris, Nomads, but there we had a big release last year as well.

Speaker #2: So, we did a lot of revenue this year for Stellaris, but we actually did even more last year.

Speaker #1: And what's worth mentioning on the product side for Hearts of Iron is that "Peace for Our Time," that was releasing in Q2, has also been made with one of our modern teams, which also emphasizes our push for more user-generated content.

Fred Wester: What's worth mentioning on the product side for Hearts of Iron is that Peace for Our Time that was released in Q2 is also made with one of our modding teams, which also emphasizes our push for more user-generated content. We have a lot of talented community members among our 6 million gamers, and some of them are making a lot of quality content for our games as well, and this is one example of that.

Speaker #1: So, we have a lot of talented community members among our 6 million gamers, and some of them are making a lot of quality content for our games as well.

Speaker #1: And this is one example of that.

Speaker #2: Yeah, you're right. We had two releases on Hearts of Iron IV in the quarter.

Alexander Bricca: Yeah, you're right. We had two releases on Hearts of Iron IV in the quarter.

Speaker #1: Correct.

Fred Wester: Correct.

Speaker #2: Crusader Kings 3 released, as Fred mentioned—a smaller release. Last year, we had a massive release on CK3. So therefore, the revenues on Crusader Kings 3 are down if we just compare quarter to quarter.

Alexander Bricca: Crusader Kings III released, as Fred mentioned, a smaller release. Last year, we had a massive release on CK3, therefore the revenues on Crusader Kings III is down if you just compare quarters.

Speaker #1: Last year was Count to the Step, which was the major one. I don’t remember what was the name of the release this year.

Fred Wester: Last year was Khans of the Steppe, which was the major in that one. I don't remember what was the name of the release this year.

Speaker #2: It was Songs of the Realm.

Alexander Bricca: It was Sons of the Realm.

Speaker #1: Songs of the Realm, yeah. It was a smaller release.

Fred Wester: Sons of the Realm. Yeah, it was a smaller release.

Speaker #2: And as you mentioned, Fred, this is a bit strange for us. So Cities didn't have any huge revenue, because normally we push this message that if we don't have releases, we don't do much revenue.

Alexander Bricca: As you mentioned, Fred, this is a bit strange for us. Cities didn't have any release, but still made huge revenue because normally we push this message that if we don't have releases, we don't do much revenues, but this didn't apply for Cities. Of course, it has to do with the fact that we have a lot of players that have bought Cities: Skylines 1 and are fans of the franchise that now little by little are starting to buy Cities: Skylines II.

Speaker #2: But this didn't apply for Cities. And of course, it has to do with the fact that we have a lot of players who have bought Cities: Skylines 1 and are fans of the franchise.

Speaker #2: That now, little by little, are starting to buy Cities: Skylines II.

Speaker #1: Yeah, yeah. And that is—you can see the sales climbing, for sure.

Fred Wester: Yeah. You can see the sales climbing.

Alexander Bricca: Yeah.

Fred Wester: For sure.

Speaker #2: Age of Wonders 4 and Victoria 3 had releases this year, Q2, but they had releases in last year's Q2 as well. So not much movement there.

Alexander Bricca: Age of Wonders 4, Victoria 3 had releases this year, Q2, but they had releases last year's Q2 as well. Then, of course, if we compare quarter-to-quarter or year-to-year, Europa Universalis was higher this year because we have Europa Universalis IV and also Vampire: The Masquerade - Bloodlines 2 had some revenues in Q2 this year. As you mentioned, Fred, we released the two final DLCs for Bloodlines 2 in the quarter. I think it was April and June, right?

Speaker #2: And then, of course, if we compare quarter to quarter, and year to year, Europa Universalis was higher this year because we have Europa Universalis 5.

Speaker #2: And also, Vampire: The Masquerade – Bloodlines 2 had some revenues in Q2 this year. As you mentioned, Fred, we released the two final DLCs for Bloodlines 2 in the quarter.

Speaker #2: I think it was April and June, right?

Speaker #1: Mm-hmm.

Speaker #2: Top revenue contributors, the same ones as always: Cities: Skylines 1 and 2, Crusader Kings 3, Hearts of Iron 4, Stellaris, Europa Universalis 4, Victoria 3, Age of Wonders 4, and Bloodlines 2.

Alexander Bricca: Top revenue contributors, the same ones as always: Cities 1 and 2, CK3, Hearts of Iron IV, Stellaris, Europa Universalis V, Victoria 3, and Age of Wonders 4, and Bloodlines 2. No surprises there. Let's move to operating profit. 182 million SEK this year compared to 133 last year. That's up almost 50 million SEK or 37%, and that comes with the revenue increase, of course. Profit of the financial items or profit before tax, 188 million SEK compared to 139, and the profit margin 36% this year compared to 30%. We think we can do better, right?

Speaker #2: No surprises there. Let's move to operating profit. 182 million SEK this year, compared to 133 million SEK last year. So that's up almost 50 million SEK, or 37%.

Speaker #2: And that comes with the revenue increase, of course. Profit of the financial items, or profit before tax: SEK 188 million, compared to SEK 139 million. And the profit margin: 36% this year, compared to 30%.

Speaker #2: But we think we can do better, right?

Speaker #1: We think so, yeah. On the margin side, we can probably be a bit over 40%. At least, that's the long-term sort of strategy for us.

Fred Wester: We think so, yeah. On the margin side, we can probably be a bit over 40%. At least that's the long-term sort of strategy for us.

Speaker #2: Even though it's, of course, very strong with 36%. Equity-to-asset ratio: 76%, compared to 81%. Very solid company on the balance sheet. The reason for the decrease is that we prolonged the office lease agreement here in Stockholm for several years.

Alexander Bricca: Even though it's of course very strong with 36%. Equity through asset ratio, 76% compared to 81%. Very solid company and balance sheet. The reason to the decrease is that we prolonged the office lease agreement here in Stockholm for several years, and that is according to the accounting rules put on the balance sheet. It increases asset and it increases debt. Therefore, the solidity goes down. Employees, number of colleagues to us during the quarter, average 695. That's up significantly, I would say, from 640 last year. The main growth is in our studios. Iceflake percentage-wise makes the biggest, of course, taking over Cities during this year. Naturally, they are increasing. But we've increased in Haemimont that are working on, they have one live game, Surviving Mars, and they're working on other things as well. Paradox Development Studios in Stockholm have increased.

Speaker #2: And that is, according to the accounting rules, put on the balance sheet. So it increases assets and it increases debt. So therefore, the solidity goes down.

Speaker #2: Employee number of colleagues to us during the quarter averaged 695. So that's up significantly, I would say, from 640 last year. The main growth is in our studios.

Speaker #2: Iceflake, percentage-wise, makes the biggest, of course, taking over Cities during this year. So, naturally, they are increasing. But we've increased in Haemimont, who are working on—they have one live game, Surviving Mars, and they're working on other things as well.

Speaker #2: Paradox Development Studios in Stockholm have increased. They have several projects going on, and some increases on publishing as well, but mostly in the studios.

Alexander Bricca: They have several projects going on and some increases on publishing as well, but most in the studios.

Speaker #2: Let's move here.

Speaker #1: The next page.

Fred Wester: Next page

Speaker #2: Let's look at this chart. It shows revenues and our three main costs: cost of goods sold, selling expenses, and admin expenses. Cost of goods sold, we have discussed.

Alexander Bricca: Let's see this chart. It shows revenues and our three main costs: cost of goods sold, selling expenses, and admin expenses. Cost of goods revenue we have discussed, SEK 424 compared to SEK 459 last year. Cost of goods sold is up from SEK 232 to SEK 259. We will look into that in detail on next page. Let's save that. Selling expenses is very similar to last year, SEK 53 million compared to SEK 54 million Q2 of 2025. Almost the same. Movements within each game, depending on what has been released, of course, and what's about to be released. Last year, we had significant spending on E5 and Bloodlines, even though they weren't released, but we were starting to prepare. This year, it's up on HOI since we released and also on an unannounced game.

Speaker #2: 424 compared to 459 last year. Cost of goods sold is up from 232 to 259. We will look into that in detail on the next page.

Speaker #2: So, let's save that. Selling expenses are very similar to last year: SEK 53 million, compared to SEK 54 million in Q2 of 2025. So, almost the same.

Speaker #2: Movements within each game, depending on what has been released, of course, and what's about to be released. So, last year, we had significant spending on Year 5 and Bloodlines, even though they weren't released, but we were starting to prepare this year.

Speaker #2: It's up on HoY since we released, and also on an unannounced game, which sooner or later will be announced. So the marketing costs we need to take in advance.

Fred Wester: Right

Alexander Bricca: Sooner or later will be announced. The marketing costs we need to take in advance before we actually release the game, and some of them even before we announce the game. Admin expenses slightly higher than usual this quarter, SEK 33 million compared to SEK 27 million last year. Half of that increase roughly is due to this list change we had that came with significant one-off costs. We don't see any major cost increases from being on this list, but it came with the extra cost to do the list change. Roughly SEK 3 million in Q2 was due to that. That means that it's up SEK 3 million, small changes between each quarter. This year we had a summer party for all employees here in Stockholm in June. Last year we had it in.

Speaker #2: Before we actually release a game, and some of them even before we announce a game. Admin expenses were slightly higher than usual this quarter—$33 million, compared to $27 million last year.

Speaker #2: Half of that increase, roughly, is due to this lease change we had. That came with significant one-off costs. We don't see any major cost increases from being on this list.

Speaker #2: But it came with extra costs to do the lease change. So, roughly $3 million in Q2 was due to that. And then, so that means that it's up $3 million.

Speaker #2: Small changes between each quarter. So this year, we had a summer party for all employees here in Stockholm. In June last year, we had it in—

Speaker #1: I wasn't even there. I was invited, but I wasn't there. So it was not my fault, part of the cost there.

Fred Wester: I wasn't even there.

Alexander Bricca: No, you were invited, I'm sure.

Fred Wester: I was invited, but I wasn't there, so it was not my part of the cost.

Speaker #2: No, it was good. But last year, we had it in September when we had the big staff conference. So that means that...

Alexander Bricca: No. It was good. Last year we had it in September when we had the big staff conference.

Fred Wester: Right.

Alexander Bricca: That means.

Speaker #1: Moving costs around.

Fred Wester: Moving costs around quarterly

Speaker #2: It moves a bit. And then, so admin expenses normally stay quite flat. But with an increase of staff in general, and an increase of the business, admin expenses come up a little bit.

Alexander Bricca: it moves a bit. Admin expenses normally stay quite flat, but with an increase of staff in general and an increase of the business, admin expenses come up a little bit.

Speaker #2: So, let's—yes, let's dig into COGS, which is the biggest cost we have: 259 million, up from 232 million last year. It's made up of seven cost items—or that's how we describe them.

Fred Wester: Move on?

Alexander Bricca: Yes. Let's dig into COGS.

Fred Wester: There we go.

Alexander Bricca: which is the biggest cost we have. SEK 259 million up from SEK 232 million last year. It is made up of seven cost items, or that is how we describe them. The ones that is often the biggest one is amortization of capitalized development. That came in at SEK 103 million this year, Q2, compared to SEK 79 million last year. It is a SEK 24 million increase, and that is more than SEK 24 million is due to Europa Universalis IV and Bloodlines.

Speaker #2: The one that is often the biggest is amortization of capitalized development. So that came in at $103 million this year, Q2, compared to $79 million last year.

Speaker #2: So it's a $24 million increase, and that, more than $24 million, is due to Europa Universalis 5 and Bloodlines.

Speaker #1: Right.

Speaker #2: So only those two projects came with the higher amortization in Q2 that makes up this difference. So that means the rest is down.

Fred Wester: Yeah.

Alexander Bricca: Only those two projects came with a higher amortization in Q2 that then makes up this difference. That means that the rest is down.

Speaker #2: And it's especially Crusader Kings III that is down. They had a huge release last Q2.

Alexander Bricca: Especially Crusader Kings III that is down. They had a huge release last Q2.

Speaker #1: Right.

Speaker #2: Which has been almost fully amortized by now. Also, Millennia had significant amounts last year, but not this year. Write-downs: zero this year, zero last year, which is, of course, good.

Fred Wester: Right

Alexander Bricca: which has been almost fully amortized by now. "Millennia" had significant amounts last year, but not this year. Write-downs, 0 this year, 0 last year, which is of course good. We have amortizations of licenses, trademarks, and similar rights. This is down from SEK 19 million to SEK 8 million. The SEK 8 million, it refers to the acquisitions of Haemimont and the game "Stranded: Alien Dawn," which we didn't have full of it last year. What we do is when we acquire companies like Haemimont or assets like "Stranded: Alien Dawn," we prefer to put as much of the investment cost onto assets that we amortize.

Speaker #2: Then we have amortizations of licenses, trademarks, and similar rights. This is down from 19 million SEK to 8 million SEK. So, the 8 million SEK refers to the acquisitions of Haemimont and the game Stranded: Alien Dawn.

Speaker #2: Which we didn't have—well, we didn't have full of it last year. So what we do is, when we acquire companies like Haemimont or assets like Stranded Alien Dawn, we prefer to put as much of the investment cost onto assets that we amortize.

Speaker #1: Yeah.

Speaker #2: It pushes down the profit in the short and mid-term, but it's a prudent way to do it, and it helps us in the long term.

Fred Wester: Yeah.

Alexander Bricca: It pushes down the profit in short and midterm, but it's a prudent way to do it and it helps us in the long term.

Speaker #1: Yeah, it keeps the balance sheet clean.

Fred Wester: Yeah, it keeps the balance sheet clean.

Speaker #2: Exactly.

Speaker #1: From all goodwill, like items and stuff like that, I think our total goodwill now is under 20 million SEK.

Alexander Bricca: Exactly

Fred Wester: from all goodwill items and stuff like that. I think our total goodwill now is under SEK 20 million.

Speaker #2: Yes, yes, that's right. So it keeps it clean, for sure. And of course, take Haemimont, for example. We expect the value of Haemimont to actually increase over the years.

Alexander Bricca: Yes.

Fred Wester: It's somewhere around there.

Alexander Bricca: That's right.

Fred Wester: It keeps it clean, for sure.

Alexander Bricca: Of course, take Haemimont for example, we expect the value of Haemimont to actually increase over the years.

Speaker #1: Yeah.

Speaker #2: As being part of Paradox. But that's not how we account for it. We account as the value actually disappears over, I think it's fully after five years.

Fred Wester: Yeah

Alexander Bricca: as being part of Paradox, but that's not how we account for it. We account as the value actually disappears over, I think it's fully after five years.

Speaker #2: So it's a very prudent way to handle it. And why is it down? Well, last year we had amortizations of Playrion, that we acquired back in 2020.

Fred Wester: Yep.

Alexander Bricca: It's a very prudent way to handle it. Why is it down? Well, last year we had amortizations of Plarium that we acquired back in 2020, five years has gone, then all amortizations have gone.

Speaker #2: And five years have gone, and then all amortizations are done. So therefore, we have zero amortizations left to do there. Depreciation is 7 million, same as last year, slightly, slightly down.

Alexander Bricca: Therefore, we have zero amortizations left to do there. Depreciations, SEK 7 million, same as last year, slightly down. This is how you account for the rent, pretty much, for all the studios. We have non-capitalized development costs. This is a spending on game development project that we don't capitalize for different reasons. It can be high risk, it can be early stages. For example, we released, as we mentioned, 2 DLCs on Bloodlines 2 in the quarter. We have taken the full cost of that development.

Speaker #2: But this is how you account for the rent pretty much for all the studios. Then we have non-capitalized development costs. So this is spending on game development projects that we don't capitalize for different reasons.

Speaker #2: It can be high risk. It can be early stages. For example, we have—we released, as we mentioned, two DLCs on Bloodlines 2 in the quarter.

Speaker #2: We have taken the full cost of that development as they come, yeah. And the significant part of that development came in this quarter, so therefore, that is high.

Fred Wester: In this quarter.

Alexander Bricca: as they come. Yeah.

Fred Wester: Yeah.

Alexander Bricca: The significant part of that development came in this quarter, therefore.

Fred Wester: Yeah

Speaker #2: We have all the profit share, which is company-wise—it’s 66.5% of the quarterly profit. That is taken as a cost in the same quarter, and most of it ends up here because most of our employees are within the studios that are part of the cost of goods sold.

Alexander Bricca: that is high. We have all the profit share, which is company-wise, it's 6.5% of the quarterly profit. That is taken as cost in the same quarter, most of it ends up here because most of our employees are within the studios that are part of the cost of goods sold. Then we have some of the publishing costs as well for game development-related matters ends up here. Development support, operation, maintenance of games. It's pretty much the tech cost we have within the publishing unit. They do the launcher, mods, multiplayer functionality, and forums. It's up to SEK 30 million this Q2. It was SEK 24 million Q2 of last year. It fluctuates a little bit from quarter to quarter, it also increases or decreases with the business.

Speaker #2: And then we have some of the publishing costs as well for game development related matters. It ends up here: development support, operation, maintenance of games—so it's pretty much the tech cost we have within the publishing unit.

Speaker #2: They do the launcher, mods, multiplayer functionality, forums. It's up to 30 million SEK this Q2. It was 24 million SEK in Q2 of last year. These figures fluctuate a little bit from quarter to quarter.

Speaker #2: And it also increases or decreases with the business. So, if we do more projects, if we hire more people, this goes up a little bit.

Fred Wester: Yeah.

Alexander Bricca: When the business, if we do more project, if we hire more people, this goes up a little bit. Royalties, the final item here or sub-item, SEK 28 million in this year's Q2 and SEK 26 million last year, Q2. Two things that drives our royalties or historically, it has been two things. It's the revenues of Cities: Skylines and Age of Wonders 4.

Speaker #2: Royalties, the final item here, or sub-item: SEK 28 million in this year's second quarter, and SEK 26 million in last year's second quarter. Two things drive our royalties, or historically, there have been two things.

Speaker #2: It's revenue from Cities: Skylines and Age of Wonders 4.

Speaker #1: Yeah, the earn-out is from the Age of Wonders 4 purchase. Yeah.

Fred Wester: Yeah. They earn out from Age of Wonders 4 purchase.

Speaker #2: Yes, and that is fully paid now. So that means in Q2, we had much less, and in Q3, we won't have anything. Correct?

Alexander Bricca: Yes. That is fully paid now. That means in Q2 we had much less, and in Q3 we won't have anything.

Fred Wester: From Triumph Studios.

Speaker #1: All the games, yeah.

Speaker #2: Correct. So we can expect royalties to slightly go down, or they should go down on average. Let's move on to the next slide, I think.

Alexander Bricca: Correct

Fred Wester: All the games. Yeah.

Alexander Bricca: Correct. We can expect royalties to slightly go down, or it should go down on average. Let's move on to the next slide, I think.

Speaker #1: Yes, let's go.

Fred Wester: Yes. Let's go.

Speaker #2: So below our three main cost items, we have other income and other expenses—net SEK 4 million this year, and net last year minus SEK 13 million.

Alexander Bricca: Below our three main cost items, we have other income and other expenses. SEK 4 million this year, net last year, SEK -13 million. This is mainly currency movements within the quarter. Last year's Q2, if you remember, the dollar weakened significantly-

Alexander Bricca: Below our three main cost items, we have other income and other expenses. SEK 4 million this year, net last year, -SEK 13 million. This is mainly currency movements within the quarter. Last year's Q2, if you remember, the dollar weakened significantly-

Speaker #2: And this is mainly currency movements within the quarter. And last year's Q2, if you remember, the dollar weakened significantly, which impacted us negatively in that quarter.

Alexander Bricca: which impacted us negatively in that quarter. This year it hasn't moved much. It has actually gone up a little bit during the quarter, so therefore it's much less negative.

Speaker #2: This year, it hasn't moved much. It has actually gone up a little bit during the quarter. So, therefore, it's much less negative now.

Speaker #1: Fairly stable. Financial income is interest, basically on money in the bank.

Fred Wester: Fairly stable. Financial income is interest rate basically on money in the bank.

Speaker #2: Exactly. And that's stable. It's down very similar as last year—6 million last year. I think it was very much the same. Yeah, it was rounded off to 6 million last year as well.

Alexander Bricca: Exactly. That's stable. It's down, very similar as last year, SEK 6 million last year. I think it was very much the same. Yeah, it was rounded off to SEK 6 million last year as well. Slightly changes in interest rate and the amount of money we have on the bank account.

Speaker #2: So, slight changes in interest rates and the amount of money we have in the bank account.

Speaker #1: Sounds good. Let's move on. Move on.

Fred Wester: Sounds good. Let's move on.

Alexander Bricca: Move on. Rolling 12 months profit. This is to give you a better sensation of the trends, you can of course see that over a longer period of time, the growth trend of the revenue is very solid. There are ups and downs if you look at shorter periods of time, over time there has been a very stable increase, it varies with the releases. Profit is down a lot since Q4. Profit of course also depends on the releases, also if we release bad games or projects that comes with write-downs. We had one in 2023, we had one in 2024, and we had one in 2025. The 2025 one was Bloodlines 2. That will still push down the rolling 12 months.

Speaker #2: Rolling 12 months' profit—this is to give you a better sense of the trends. And you can, of course, see that, over a longer period of time, the growth trend of the revenue is very solid.

Speaker #2: There are ups and downs if you look at shorter periods of time. But over time, there has been a very stable increase. It varies with the releases.

Speaker #2: Profit is down a lot since Q4. Profit, of course, also depends on the releases. But also, if we release bad games or projects, that comes with write-downs.

Speaker #2: And we had one in '23, we had one in '24, and we had one in '25. The '25 one was Bloodlines 2, so that will still push down the rolling 12 months.

Speaker #1: Until Q4?

Speaker #2: Yeah, so next quarter it will still look like this, but then it will bump up again. And I think we said it on the last stream.

Fred Wester: Until Q4.

Alexander Bricca: Yeah. Next quarter it will still look like this. Then it will bump up again. I think we said it on the last stream, we have had three big negative projects. They are all gone now. Well, we have slightly little amortization left on Bloodlines, in terms of what we have in the development pipeline, we don't have any big high-risk projects like these ones. That's very good.

Speaker #2: We have had three big negative projects. They are all gone now. So, well, we have slightly little amortization left on Bloodlines. But in terms of what we have in the development pipeline, we don't have any big high-risk projects like these ones.

Speaker #2: So that's very good. Yes.

Speaker #1: It's very good news as well.

Fred Wester: That's very good.

Speaker #2: Yeah.

Alexander Bricca: Yes.

Fred Wester: Very good news as well.

Alexander Bricca: Yeah. Next.

Speaker #1: Next. Let's go.

Fred Wester: Yes.

Alexander Bricca: Let's go to next.

Speaker #2: Cash flow in the quarter. So, if we look at cash flow from operating activities, it was SEK 105 million this year. But that includes a SEK 185 million payment for the publishing rights.

Fred Wester: Let's go.

Alexander Bricca: Cash flow in the quarter. If we look at cash flow from operating activities, it was SEK 105 million this year. That includes SEK 185 million payment for the publishing rights to the game that we're co-publishing. Without those SEK 185 million, it would be significantly higher. I don't know exactly if we have said when the game is going to come.

Speaker #2: To the game that we are co-publishing. So, without those $185 million, it would be significantly higher. And I don't know exactly when we have—if we have said when the game is—no, we haven't said exactly when the game is going to come.

Speaker #2: But when it comes, it's basically...

Fred Wester: No

Alexander Bricca: when it comes.

Speaker #1: for publishing rights for games.

Fred Wester: It's basically for publishing rights for games.

Speaker #2: Yes.

Speaker #1: 185 million in this quarter, which would have made it 290 if those were left out. But it's money that hopefully is coming back, and hopefully quite soon.

Alexander Bricca: Yes.

Fred Wester: SEK 185 million in this quarter, which would've made it SEK 290 if those were left out. It's money that hopefully is coming back, and hopefully quite soon.

Speaker #2: Yes.

Speaker #1: Good point.

Alexander Bricca: Yes. Good point. Very strong cash flow.

Speaker #2: So very strong cash flow.

Speaker #1: Very strong. Very strong cash flow.

Speaker #2: Cash flow from—sorry, from investing activities was 166 million, compared to 161 million, so very similar to last year. And if you follow us, you know that this number fluctuates between the quarters.

Fred Wester: Very strong cash flow.

Alexander Bricca: Cash flow from investing activities, SEK 166 million compared to SEK 161 million, very similar to last year. If you follow us, you know that this number, it fluctuates between the quarters. I think it was like SEK 122 million or SEK 124 million in Q1, it differs a bit depending on when we get the invoices for the different projects.

Speaker #2: So I think it was like 122 or 124 in Q1. So, it differs a bit depending on when we get the invoices for the different projects.

Speaker #2: I think that was it. Yeah.

Fred Wester: Great.

Alexander Bricca: I think that was it.

Speaker #1: Yes, let's move over to the Q&As.

Fred Wester: Is that it?

Alexander Bricca: Yeah.

Fred Wester: Yes. Let's move over to the Q&As.

Speaker #2: Yes. We have received several questions during the morning and also during the stream, I think. The first one, I think, is for you, Fred. Do you see potential in working with third-party owned IPs?

Alexander Bricca: Yes. We have received several questions during the morning and also during the stream, I think. First one, I think it's for you, Fred. Do you see potential in working with third-party owned IPs?

Speaker #1: That's a good question. I mean, we prefer—at Paradox—we always have to own our own IPs and work with our own games, our own trademarks, intellectual properties, all of it.

Fred Wester: That's a good question. We prefer as Paradox, we always have, to own our own IPs and work with our own games, our own trademarks, intellectual properties, all of it. If we see an opportunity, though, with something that matches our philosophy, matches our target audience, matches what we do, and we can come in at a reasonable price, with a good deal for both us and the partner, we're not alien to doing that deal. The way the market looks right now, it's been a bit volatile out there. I think Paradox is still very stable. I think we're having a good growth path forward. I think we have a great strategy, great team. It also gives us a lot of opportunity to work together with talented teams that are looking for either a publishing partner or funding or other things.

Speaker #1: If we see an opportunity, though, with something that matches our philosophy, matches our target audience, matches what we do, and we can come in at a reasonable price with a good deal for both us and the partner, we're not averse to doing that deal.

Speaker #1: So, we’re getting—I mean, the way the market looks right now, it’s been a bit volatile out there. I think Paradox is still very stable.

Speaker #1: I think we're having a good growth path forward. I think we have a great strategy and a great team. But it also gives us a lot of opportunity to work together with talented teams that are looking for either a publishing partner, funding, or other things.

Speaker #1: So we can provide a lot of stability for a lot of gaming companies out there. So opportunities will come up, for sure. That was a very long answer.

Fred Wester: We can provide a lot of stability for a lot of gaming companies out there. Opportunities will come up for sure. That was a very long answer.

Speaker #1: But I think it was actually fulfilling to whoever asked the question. So, Alex, can you quantify the non-recurring main market listing costs and effects?

Alexander Bricca: Yeah.

Fred Wester: I think it was actually fulfilling to whoever asked the question.

Alexander Bricca: Yes.

Fred Wester: Alex, can you quantify the non-recurring main market listing costs and effects?

Speaker #2: Yeah, I think I did. The main marketing listing cost was 3 million SEK, roughly, in this Q2. It was roughly the same in Q1.

Alexander Bricca: Yeah, I think I did. The main marketing listing cost was three million SEK roughly in this Q2.

Alexander Bricca: Yeah, I think I did. The main marketing listing cost was SEK 3 million roughly in this Q2.

Speaker #1: Yeah.

Alexander Bricca: It's roughly the same in Q1.

Speaker #2: And we expect it to be close to zero in Q3.

Fred Wester: Yep.

Alexander Bricca: We expect it to be close to zero in Q3.

Speaker #1: Yeah.

Fred Wester: Yeah.

Speaker #2: Yeah. And I also touched upon the admin cost in general. For FX, I said we had roughly a 2% headwind. But these are estimates, and it's difficult to be exact for us when we talk about the FX.

Alexander Bricca: I also touched upon the admin cost in general. FX, I said we had roughly 2% headwind.

Fred Wester: Yeah

Alexander Bricca: Now these are estimates and difficult to be exact for us when we talk about the FX because we can of course see how much the different currencies have changed between the quarters.

Speaker #2: Because we can, of course, see how much the different currencies have changed between the quarters. And we can weigh that change with the currency mix we see from our products when we look at Steam, for example.

Alexander Bricca: We can weigh that change with the currency mix we see from our products when we look at Steam, for example. That gives us in this quarter 2%, if you look at the average.

Speaker #2: And that gives us, in this quarter, 2% if we look at the average—Q2 compared to the average of Q2 last year. But FX actually impacts us when the payments are happening.

Alexander Bricca: Q2 and compare it to averaging of Q2 last year. FX actually impacts us when the payments are happening. It depends when are Steam getting the payments from the players, and when are we getting the payments from Steam? That timing differs from when we recognize the revenues in our income statement.

Speaker #2: So it depends when Steam is getting the payments from the players and when we are, and when we are getting the payments from Steam.

Speaker #2: And that timing differs from when we recognize the revenues in our income statement. For example, due to expansion passes, we got the payments for the H1.

Fred Wester: Right.

Alexander Bricca: For example, due to expansion passes. We got the payments for the Age of Wonders expansion pass already last year.

Speaker #2: There was an expansion pass already last year, but some of it comes up now in the revenue. So, therefore, you can't just take this 2% and multiply it with the 459 million SEK, which I think was the revenue from last year's quarter.

Alexander Bricca: Some of it comes up now in revenue. Therefore, you can't just take this 2% and multiply it with the SEK 459 million which I think was the revenue from last year's quarter.

Speaker #1: Yeah.

Speaker #2: And just say that those are the impacts.

Fred Wester: Yeah

Speaker #1: But over time, it kind of balances out. So that's the point as well, because the expansion passes sell at different times as well.

Alexander Bricca: Just say that that is the impact.

Fred Wester: Over time, it kind of balances out.

Alexander Bricca: Yes.

Fred Wester: That's the point as well because the expansion passes sell at different times as well.

Speaker #2: Yes. Exactly.

Speaker #1: So, every day, you know, for the whole period of the expansion pass. So it's more complex than just saying 2%. That's the thing. But it balances out over time.

Alexander Bricca: Yes, exactly.

Fred Wester: Every day for the whole period of the expansion pass.

Alexander Bricca: Yep.

Fred Wester: It's more complex than just saying 2%.

Alexander Bricca: Yes.

Fred Wester: That's the thing. It balances out over time.

Speaker #2: Right. Here's one for you, Fred. Could you give an update on Prison Architect 2 and any other games in the pipeline? I have a follow-up question on that.

Alexander Bricca: Right. Here is one for you, Fred. Could you give an update on "Prison Architect 2" and any other games in the pipeline? Follow-up question on that, can we expect something at Gamescom? Can you comment on rumors circulating about future management games? Three questions in one.

Speaker #2: Can we expect something at Gamescom? Can you comment on rumors circulating about future management games? So, three questions in one.

Speaker #1: All right. Three questions in one. Let's start with Prison Architect 2. So, I played some Prison Architect 2 yesterday. The new planning mode is absolutely brilliant.

Fred Wester: All right. Three questions in one. Let's start with "Prison Architect 2." I played some "Prison Architect 2" yesterday. The new planning mode is absolutely brilliant. You can build plans that are transparent, and then you can say push play when you have the money in the bank. It's really good. It's getting there. We're going to come out with news during fall. That was "Prison Architect 2." Can we expect something at Gamescom? Yes, you can. It's going to be quite big for us this year. We already said in this stream, and I think I say that in the words from the CEO in the quarterly report as well. We really hope that you follow what we do at Gamescom basically, and the release that we have because it's going to be a lot of fun.

Speaker #1: You can build, like, plans. They are, like, transparent. And then you can, say, push play when you have the money in the bank, right?

Speaker #1: So it's really good. It's getting there. We're going to come out with news during the fall. That was Prison Architect 2. Can we expect something at Gamescom?

Speaker #1: Yes, you can. It's going to be quite big for us this year. And we already said this in the stream, and I think I say that in the words from the CEO in the quarterly report as well.

Speaker #1: So we're really hoping you follow our, you know, what we do at Gamescom basically, and the releases that we have. Because it's going to be a lot of fun.

Speaker #1: And can you comment on rumors circulating? And a future management game. No, I can't. I'm sorry. You have to wait until we do official releases.

Fred Wester: Can you comment on rumors circulating on a future management game? No, I can't. I'm sorry. You have to wait until we do official releases because if we comment on all the rumors out there, it's going to be a completely separate stream about that. Not today, but hopefully we can iron out some details in a couple of weeks from now. Alex, given quite a Q3 content schedule, how should we think about the sequential EBIT considering the higher headcount and ongoing amortization from Europa Universalis IV and Bloodlines 2?

Speaker #1: Because if we comment on all the rumors out there, it's going to be, you know, a completely separate stream about that. So, not today. But hopefully, we can iron out some details a couple of weeks from now.

Speaker #1: So, Alex, given the quieter Q3 content schedule, how should we think about sequential EBIT, considering the higher headcount and ongoing amortization from European Versailles 5 and Bloodlines 2?

Speaker #2: Right. So

Speaker #1: Good question.

Alexander Bricca: Right.

Speaker #2: Yes. What will EBIT be in Q3?

Fred Wester: Good question

Alexander Bricca: Yes. What will EBIT be in Q3?

Speaker #1: Exactly. Plus minus 2%.

Fred Wester: Exactly. Plus minus 2%.

Speaker #2: Yes. Yeah. You know, we don't give any guidance on EBIT or any other financials. But as the question points out, Q3 tends to be slower compared to Q2 if we count releases.

Alexander Bricca: Yes. We don't give any guidance on the EBIT or any other financials. As the question points out, Q3 tends to be slower compared to Q2 if we count releases.

Speaker #2: And it's likely going to be like that this Q3 as well. Now, so that, of course, impacts EBIT. Almost all Q3s are lower than the Q2s.

Fred Wester: Yep.

Alexander Bricca: It's likely going to be like that this Q3 as well. That of course impacts the EBIT. Almost all Q3s are lower than the Q2s.

Speaker #2: It's quite common for us as well, at least. Considering the higher headcount—yeah, we have had a significant headcount increase compared to last year. Most of that is in the studios.

Alexander Bricca: It's quite common for us as well. That's it. Considering the higher headcount, yeah, we've had significant headcount increase compared to last year. Most of that is in the studios. That means that it's for developing, which means that it's being capitalized and goes into the balance sheet. That doesn't impact the short-term profit.

Speaker #2: So that means that it's for developing, which means that it's being capitalized and goes into the balance sheet. So that doesn't impact the short-term profit; it will impact the quarter when we release a game.

Fred Wester: Right.

Alexander Bricca: It will impact the quarter when we release a game. The plan is that game's going to come with more revenues than amortizations, of course.

Speaker #2: But the plan is that that game is going to come with more revenues than amortizations, of course.

Speaker #1: Yeah.

Speaker #2: So it won't impact Q3 that much. And also, these are details, but when we speak about Q3, personnel costs tend to be significantly lower than other quarters because we have a lot of vacation.

Fred Wester: Yeah.

Alexander Bricca: It won't impact Q3 that much. Also these are details, but when we speak about Q3, personnel costs tend to be significantly lower than other quarters because we have a lot of vacation and that has an impact on the P&L. Yeah, there was also a three-part question. Amortizations from Europa Universalis and Bloodlines. Yes, good point. That is coming down. We released both games in Q4 last year.

Speaker #2: And that has an impact on the P&L. Yeah. There was also like a three-part question: amortizations from Europa, and Versailles, and Bloodlines. Yes, good point.

Speaker #2: That is coming down. We released both games in Q4 last year.

Speaker #1: Yeah.

Speaker #2: And we have a degressive amortization model, which means that we take much more in the beginning. Now, we are coming into the kind of final period where we have amortized the vast majority of both games.

Fred Wester: Yeah.

Alexander Bricca: We have the aggressive amortization model, which means that we take much more in the beginning. Now we are coming in in the kind of final period-

Fred Wester: Phase. Yeah

Alexander Bricca: where we have amortized the vast majority of both games. That is going to come down. Right. Next one is for you, Fred. Is the team in Iceflake still working on the console version for Cities: Skylines II? Can you give any additional color on a possible release?

Speaker #2: So, that is going to come down.

Speaker #1: Right.

Speaker #2: Next one is for you, Fred. Is the team at Iceflake still working on the console version of Cities: Skylines II? And can you give any additional color on a possible release?

Speaker #1: Short answer is yes. Any color on release? No. Because, like I said, we are going out with official releases whenever we are ready.

Fred Wester: Short answer is yes. Any color on release? No, because like I said, we're going out with official releases whenever we are ready, but the progress is looking good. I don't actually know when we're releasing more info on this, but I think it's fairly soon. We're in a good place with Cities: Skylines II on console. Alex: Is SEK 200 million the entire amount up until the AGM? If so, why is that considering SEK 1 billion of cash flows after dividend payment and the payment of the publisher contract?

Speaker #1: But the progress is looking good. And we—I don't actually know when we're releasing more info on this, but I think it's fairly soon.

Speaker #1: So we're in a good place with Cities: Skylines 2 on console. Alex, it's 200 million, the entire amount, up until the AGM. If so, why is that, considering a billion of cash post after dividend payment and the payment of the publisher contract?

Speaker #2: So, 200 million refers to the share buyback program.

Alexander Bricca: SEK 200 million refers to the share buyback program.

Speaker #1: I guess so. It sounds like the round number that we agreed upon in the board meeting yesterday.

Fred Wester: I guess so. Yeah.

Alexander Bricca: that we announced yesterday.

Fred Wester: It sounds like the round number that we agreed upon in the board meeting yesterday.

Speaker #2: Yes, yes. And that, we announced late.

Alexander Bricca: Yes.

Fred Wester: Yeah.

Speaker #1: And why is it only 200 million, is the question.

Alexander Bricca: Yes, that we announced late.

Speaker #2: Yes.

Fred Wester: Why is it only SEK 200 million is the question?

Speaker #1: Where?

Alexander Bricca: Yes. Well, the entire amount. Yes, it's a full amount that the board decided on yesterday.

Speaker #2: Yes, it's the entire amount. It's the full amount that the board decided on yesterday, so that's the total amount. But the board made this decision based on the mandate that was given at the AGM we had in May.

Fred Wester: Yes.

Alexander Bricca: That's a total amount. The board made this decision based on the mandate that was given on the AGM that we had in May, and that mandate is bigger. The board has only used a part of that mandate, and technically, there's nothing hindering the board to take a new decision later on.

Speaker #2: And that mandate is bigger. So the board has only used a part of that mandate, and technically, there is nothing hindering the board from taking a new decision later on.

Speaker #1: Yeah. I mean, if I understand correctly, we can buy back almost 10% of the total shares, and that just takes a new board decision.

Fred Wester: If I understand correctly, we can buy back almost 100% of the total shares. That just takes a new board decision. This board decision has the mandate of SEK 200 million.

Speaker #1: So this board decision has the mandate of 200 million.

Speaker #2: That decision was 200 million, correct. Why isn't it more? Well, so the buyback program is 200 million. Back in May, we distributed a little more than 500 million in dividend.

Alexander Bricca: That decision was SEK 200 million, correct. Why isn't it more? Well, the buyback program is SEK 200 million. Back in May, we distributed a little more than SEK 500 million in dividends. It is SEK 700 million this year if we complete the buyback program, a little more than SEK 700 million as shareholder distribution. Sure, we have more cash, but we think this is a good capital allocation for this year.

Speaker #2: So, it's 700 million this year if we complete the buyback program—a little more than 700 million—as shareholder distribution. Sure, we have more cash.

Speaker #2: But we think this is a good capital allocation for this year. As always, our main priority is to invest our cash in game development.

Fred Wester: Yep.

Alexander Bricca: As always, our main priority is to invest our cash in game development, and if the opportunity arises, acquisitions like we have done in the past.

Speaker #2: And if the opportunity arises, acquisitions—like we have done in the past. What is not needed for that should, of course, be distributed to the shareholders.

Fred Wester: Yep.

Alexander Bricca: What is not needed for that should, of course, be distributed to the shareholders. We have during the last years increased that distribution. It is not many years ago that we did SEK 100 million in distribution, then we increased it to SEK 200 million, then to SEK 3, then to SEK 500 million, and now with the complete buyback, it is at SEK 700 million. We are increasing it. Fred, when you think about releasing content more frequently across your main games, what is actually holding you back the most? Is it how much your teams can produce, how much players are willing to pay for, or something else entirely?

Alexander Bricca: What is not needed for that should, of course, be distributed to the shareholders. We have during the last years increased that distribution. It is not many years ago that we did SEK 100 million in distribution, then we increased it to SEK 200 million, then to SEK 300 million, then to SEK 500 million, and now with the complete buyback, it is at SEK 700 million. We are increasing it. Fred, when you think about releasing content more frequently across your main games, what is actually holding you back the most? Is it how much your teams can produce, how much players are willing to pay for, or something else entirely?

Speaker #2: We have, during the last years, increased that distribution. It's not many years ago that we did 100 million in second distribution. And then we increased it to 200, then to 300, and then to 500.

Speaker #2: And now, with the complete buyback, it's at 700. So we are increasing it. Fred, when you think about releasing content more frequently across your main games, what's actually holding you back the most?

Speaker #2: Is it how much your teams can produce, how much players are willing to pay for, or something else entirely?

Speaker #1: I would say it's all of the above, to different degrees. But first and foremost, the ceiling is quality. I mean, we've had uneven quality on some of our titles.

Fred Wester: I would say it is all of the above to different degrees. First and foremost, the ceiling is quality. We have had uneven quality on some of our titles, some titles that do only things that get super reviews and some that are a bit up and down. We need to be able to provide a strong player fantasy with quality content every time we release something. That is our goal. I would not say there is one dominant factor holding us back, but we strive to produce as much quality content as we can for our gamers. We do not hold back for other reasons than that, I would say. You could always argue we could have parallel teams and stuff like that, but it also increases complexity.

Speaker #1: Some titles do only things that get super reviews, and some are a bit up and down. But we need to be able to provide a strong player fantasy with quality content every time we release something.

Speaker #1: That's our goal. So I wouldn't say there is one dominant factor holding us back. But we strive to produce as much quality content as we can for our gamers.

Speaker #1: So, there is nothing we don't hold back for other reasons than that, I would say. I mean, you could always argue we could have parallel teams and stuff like that.

Speaker #1: But it also increases complexity. But I would say that our live teams work really hard to provide the content that we come out with every year.

Fred Wester: I would say that our live teams work really hard to provide the content that we come out with every year, and I think we've found a good model with the season passes. We might do some adjustments to that in the future, but I think we've found a good model. If we're describing the Paradox, if you want to call it flywheel, which is very popular to describe it as that, what we need to do now partly is finding more games to fit the Paradox model that already is working. As you can see, no new releases this year, still stable. We can see that our portfolio can still grow the company. It's just adding new games on top of that is going to be icing on the cake. Or maybe more than icing, maybe a fully new cake. You never know.

Speaker #1: And I think we've found a good model with the season passes. We might do some adjustments to that in the future, but I think we've found a good model.

Speaker #1: I mean, if we're describing the paradox—if you want to call it 'flywheel,' which is very popular to describe it as that—what we need to do now, partly, is find more games to fit the Paradox model.

Speaker #1: That already is working, as you can see. The "no new releases this year" is still stable. We can see that our portfolio can still grow the company.

Speaker #1: It's just that adding new games on top of that is going to be icing on the cake. Or maybe more than icing—maybe a whole new cake.

Speaker #1: You never know.

Speaker #2: Good.

Speaker #1: I have a really long answer today. I don't know. I just feel.

Alexander Bricca: Good.

Fred Wester: I have really long answers today. I don't know. I just feel.

Speaker #2: Good answer.

Speaker #1: Inspired. So, regarding the $30 million guarantee to an external developer, how are the advances recouped? And what are the margins and revenue sharing economics from an investment standpoint?

Alexander Bricca: Good answers

Fred Wester: inspired. Regarding the SEK 30 million you guaranteed to an external dev, how are the advances recouped and margins and revenue-sharing economics from an investment standpoint, and what protections exist if the project is delayed or underperforms?

Speaker #1: And what protections exist if the project is delayed or underperforms?

Speaker #2: OK, so, several questions. All right. To start with, we can't comment on the particular contracts, but we are happy to explain our standard procedure.

Alexander Bricca: Okay. Several questions. To start, we can't comment on the particular contracts, but we're happy to explain our standard procedure.

Speaker #2: So, when we publish games developed by other studios, the normal setup is that we, as a publisher, finance a full project. So we pay the full development costs.

Fred Wester: Yeah.

Alexander Bricca: When we publish games developed by other studios, the normal setup is that we as a publisher, we finance the full project. We pay the full development costs, sometimes with a markup, sometimes just as cost basis. Then upon release of the game, We take often the full revenue from day one, and then once we have reached a certain threshold, normally it's related to when our investment is recouped, sometimes it can be more than that, then we start to share the revenue with the development partner.

Speaker #2: Sometimes with the markup, sometimes just as cost basis. And then, upon release of the game, we often take the full revenue from day one.

Speaker #2: And then, once we have reached a certain threshold—normally, it's related to when our investment is recouped. Sometimes, it can be more than that.

Speaker #2: Then we start to share the revenue with the development partner.

Speaker #1: Yeah, it depends on when we come into the equation as well. If we start the funding from the beginning, the terms are in our favor.

Fred Wester: Yeah. It depends on when we come into the equation as well. If we start the funding from the beginning, the terms are in our favor, mostly, and it might be more balanced if we come in late and can evaluate the product.

Speaker #1: Mostly. And it might be more balanced if we come in late and can evaluate the product.

Speaker #2: Yeah.

Speaker #1: So it depends a bit on that as well.

Speaker #2: Yeah, and in this project, we came in quite late.

Alexander Bricca: Yeah.

Fred Wester: It depends a bit on that as well.

Alexander Bricca: Yeah. In this project, we came in quite late.

Speaker #1: Yeah. We actually have a couple of projects that we can't really, you know...

Fred Wester: Yeah. We actually have a couple of projects that we can't.

Speaker #2: Sure. Sure.

Speaker #1: Some that we can't talk about, either.

Speaker #2: Sure. But as you say, when we come in late, a lot of the risk is already taken. So, and that's, of course, when it's very beneficial for us.

Alexander Bricca: Sure

Fred Wester: some that we can't talk about either.

Alexander Bricca: Sure. As you say, when we come in late, a lot of the risk is already taken.

Fred Wester: Yeah.

Alexander Bricca: That's of course very beneficial for us, that the risk is smaller.

Speaker #2: The risk is smaller, and normally that is something that you need to pay for through the terms. So if you take less risk, it's likely that you get equally less upside.

Fred Wester: Yeah.

Alexander Bricca: Normally, that is something that you need to pay for through the terms. If you take less risk, it's likely that you get equally less upside.

Speaker #2: So with less risk, you could roughly expect slightly lower margins.

Fred Wester: Yeah.

Alexander Bricca: With less risk, you could a bit roughly expect slightly less margins.

Speaker #1: Yeah. But also, you have to remember that when you make a completely new product, it's quite high risk. When you come in later, the risk is significantly lower.

Fred Wester: Yeah. Also, you have to remember that when you make a completely new product, it's quite high risk. When you come in later, the risk is significantly lower.

Speaker #2: Yeah.

Speaker #1: As well. So it's always.

Alexander Bricca: Yeah

Speaker #2: And then there was a sub-question in it: what protection exists if the project is delayed or underperformed? Yeah, I think the best way to handle the risk is, of course, to come in late.

Fred Wester: as well. It's always like that.

Alexander Bricca: There was a sub-question in it: what protection exists if the project is delayed or underperformed? Yeah, I think the best way to handle the risk is, of course, to come in late. That reduces the risk the most.

Speaker #2: That reduces the risk the most. And another equally important thing is to work with studios that have a good track record, work with projects that have—is it a sequel that takes down the risk?

Fred Wester: The most, yeah.

Alexander Bricca: Another equally important thing is to work with studios that have a good track record, work with projects that have-- is it a sequel that takes down the risk?

Speaker #1: Yeah.

Speaker #2: Because it's a recognized brand. It already has a player base.

Fred Wester: Yeah.

Alexander Bricca: It's a recognized brand, it has a player base already.

Speaker #1: Yeah.

Speaker #2: So those things impact the risk much more than the contractual terms, I would say.

Fred Wester: Yeah.

Alexander Bricca: Those things impact the risk much more than the contractual terms, I would say.

Speaker #1: Also, a sequel to a previous game is a lower risk than a fully new game. If you have a lot of overlap with the Paradox current portfolio, it's a lower risk for us.

Fred Wester: Also, a sequel to a previous game is a lower risk than a fully new game. If you have a lot of overlap with the Paradox current portfolio, it's a lower risk for us because we know the target audience. There are a lot of factors that come into account when you make the decisions on what to publish.

Speaker #1: Because we know the target audience, there are a lot of factors that come into account when you make the decisions on what to publish.

Speaker #1: So Fred.

Speaker #2: Given how the EU5 launch has gone, including the issues along the way, how has it changed how you think about Paradox's focus on grand strategy games?

Alexander Bricca: Fred, given how the EU5 launch has gone, including the issues along the way, has it changed how you think about Paradox' focus on grand strategy games?

Speaker #1: No, not really. Grand strategy games are still our core, and it's also our deepest expertise. We will continue to invest in and expand that.

Fred Wester: No, not really. Grand strategy games is still our core, and it's also our deepest expertise, and we will continue to invest and expand that. We will continue to experiment a bit on what is considered grand strategy and maybe trying to reach certain new target audiences without leaving behind the core audience that we already have because I think that's a mistake a lot of people do. It means when we're looking at existing games and new titles, grand strategy is still at the core of what we do, even if we experiment with other things around it that fits the gaming formula and also the business formula of Paradox.

Speaker #1: We will continue to experiment a bit with what is considered grand strategy, and maybe try to reach certain new target audiences without leaving behind the core audience that we already have.

Speaker #1: Because I think that's a mistake a lot of people make. But it means that when we're looking at existing games and new titles, grand strategy is still at the core of what we do.

Speaker #1: Even if we experiment with other things around it that fit the gaming formula, and also the business formula of Paradox. So, Alex, how should we think about the net royalty cost trajectory, given the expiry of the H-104 earn-out but higher royalties from stronger Cities: Skylines and Cities II sales?

Alexander Bricca: Alex, how should we think about the net royalty cost trajectory given the expiry of Age of Wonders 4 earn-out, but higher royalties from stronger Cities: Skylines and Cities 2 sales?

Speaker #2: Good point. Short answer, it should decrease over time. As we already mentioned, we have two main drivers—as the question suggests—revenues from Cities: Skylines and H-104.

Fred Wester: Good point. Short answer, it should decrease over time. As we already mentioned, we have two main drivers, as the questions suggest: revenues from Cities: Skylines and Age of Wonders 4. We already said it, Age of Wonders 4 is from now on royalty-free, you could say.

Speaker #2: We already said that H-104 is, from now on, royalty-free, you could say. And Cities—yes, revenues have increased over the last quarters, but there we pay royalties on the sales of content developed by Colossal Order.

Alexander Bricca: Cities, yes, revenues have increased over last quarters, but there we pay royalties on the sales of content developed by Colossal Order.

Speaker #1: Yeah.

Speaker #2: And now, when we—and especially Iceflake—have taken over the development, it means that revenue and sales on content that is produced by us, we don't pay any royalties on.

Fred Wester: Yeah.

Fred Wester: Now when we and especially Iceberg have taken over the development, it means that revenue sales on content that is produced by us, we don't pay any royalties on.

Speaker #2: So, over time, the ratio of the revenue will likely swing towards own-produced content. So that will decrease royalty rates as well, even if the total revenue, as we hope for, will increase.

Alexander Bricca: Right.

Alexander Bricca: Over time, the ratio of the revenue will likely swing towards.

Fred Wester: Yeah

Fred Wester: Own produced content. That will decrease royalty rates as well, even if the total revenue, as we hope for, will increase.

Speaker #2: More questions. This one is for you, Fred. Why the choice to work with external developers? If I'm not mistaken, Paradox shifted its strategy more towards in-house development.

Alexander Bricca: More questions. This one is for you, Fred. Why the choice to work with external developers? If I'm not mistaken, Paradox shifted its strategy more towards in-house development. Does this studio have a strong, proven track record? Which measures are in place to evaluate the developer's progress?

Speaker #2: Does this studio have a strong, proven track record? Which measures are in place to develop and evaluate the developers' progress?

Speaker #1: Well, I think we explained it previously, but it's not a shift of focus. I would say that in 2021, we had, I think, nine or ten external developments.

Fred Wester: Well, I think we explained it previously, but it's not a shift of focus. I would say, in 2021, we had, I think, nine or 10 external developments, and we pretty much closed all of them. We've reevaluated who we work with and why we work with external developers. I've explained it before, it has to meet the Paradox criteria for what a good game is or how we see games. Also have a good overlap with how Paradox does business and what we value, including, for example, modding and other things that are important both to drive revenue, but also to drive player interest and make people more engaged in the game and basically drive player value.

Speaker #1: And we pretty much closed all of them. We've re-evaluated who we work with and why we work with external developers, and I've explained it before.

Speaker #1: It has to meet the Paradox criteria for what a good game is, or how we see games. Also, it needs to have a good overlap with how Paradox does business and what we value, including, for example, modding and other things that are important both to drive revenue, but also to drive player interest and make people more engaged in the game, and basically drive player value.

Speaker #1: So all the studios that we work with have a strong, proven track record. Typically, they work with franchises that have either been proven before or have seen some sort of first touch with the market.

Fred Wester: All the studios that we work with have a strong, proven track record, typically works with franchises that has been either proven before or has seen some sort of first touch with the market. We have a couple of studios that we work with right now on the games that we will co-publish, and we think that's an excellent way to figure out ways to find new partners to work with over longer periods of time and sort of expand the Paradox universe for our gamers and for ourselves as well at a limited risk. Which measures are in place to evaluate developer progress? Well, we monitor everything closely from a milestone schedule, just like we do with our internal games.

Speaker #1: So, we have a couple of studios that we work with right now on the games that we will co-publish, and we think that's an excellent way to figure out ways to find new partners to work with over longer periods of time and sort of expand the Paradox universe for our gamers and for ourselves as well.

Speaker #1: At the limited risk. So, which measures are in place to evaluate developer progress? Well, we monitor everything closely from a milestone schedule, just like we do with our internal games.

Speaker #1: So, I mean, we do have more than a quarter of a century of experience in making games, even if we fail from time to time as well.

Fred Wester: We do have more than a quarter of a century experience in making games, even if we fail from time to time as well, which is inevitable in the entertainment industry. I would say that we monitor all developments that we're a part of because we're invested in them. Good. Monthly active users in Q2. What is your reasoning behind no longer reporting these figures in the quarterly report?

Speaker #1: Which is inevitable in the entertainment industry. I would say that we monitor all developments that we're a part of, because we're invested in them.

Speaker #1: So, monthly active users in Q2—what is your reasoning behind no longer reporting these figures in the quarterly report?

Speaker #2: Six million, or six million in Q2—it's in the report, but unfortunately the reader has missed it. So, we have made several format changes to the report.

Alexander Bricca: Six million.

Alexander Bricca: MAU was 6 million in Q2. It's in the report, unfortunately, the reader has missed it. We have done several format changes to the report.

Speaker #1: Yeah.

Speaker #2: One is that we have brought forward and increased the KPI sheet that we used to have. So we have more KPIs in it now.

Fred Wester: Yeah.

Alexander Bricca: One is that we have brought forward and increased the KPI sheet that we used to have.

Fred Wester: Right.

Alexander Bricca: We have more KPIs in it. That has replaced the slide or the page where MAU was previously set out. Now you can find MAU in the company description in the report.

Speaker #2: That has replaced the slide or the page where Mao was previously set out. Now, you can find Mao in the company description in the report.

Speaker #2: Where we have a page that talks about Paradox. There you will find the memo. Fred, I was wondering if you could break down your thoughts slash rationale behind Transport Fever 3 in both qualitative fits in the context of the Paradox portfolio more broadly.

Fred Wester: Okay. Yeah.

Alexander Bricca: We have a page that talks about Paradox. There you will find the MAU. Fred, I was wondering if you could break down your thoughts/rationale behind Transport Fever 3 in both qualitative fits in the context of Paradox portfolio more broadly, and then how you think about ROI when you consider total sales of Transport Fever 2 so far. Several questions again in one.

Speaker #2: And then, how do you think about ROI when you consider total sales of Transport Fever 2 so far? Several questions again in one.

Speaker #1: I think we've kind of answered this in a lot of different ways. But you know what? I'll give it a new start. First of all, I think the portfolio fit for this game is great.

Fred Wester: I think we've kind of answered this in a lot of different ways, but you know what? I'll give it a new stab. First of all, I think the portfolio fit for this game is great, and we've done an extensive analysis on, for example, wishlist overlap in between this game, the Cities: Skylines series, Crusader Kings, and a lot of other games in our portfolio and come to the conclusion that there are very few games out there that has more Paradox DNA than specifically the Transport Fever series. The game looks great. We've all played it. We got the opportunity to play it when we signed it, and that was actually one factor that got us to sign it is actually trying out the game's quality.

Speaker #1: And we've done an extensive analysis on, for example, wish list overlap between this game, the Cities: Skylines series, Crusader Kings, and a lot of other games in our portfolio.

Speaker #1: And come to the conclusion that there are very few games out there that have more Paradox DNA than specifically the Transport Fever series. The game looks great.

Speaker #1: We've all played it. We got the opportunity to play it when we signed it, and that was actually one factor that got us to sign it—actually trying out the game's quality.

Speaker #1: Just like I have with Prison Architect 2, it's much easier if you sit down with the game and actually play it yourself. It gives a totally different sort of feeling to, "Is this game a good game?"

Fred Wester: Just like I have with Prison Architect 2, it's much easier if you sit down with the game and actually play it yourself. It gives a totally different sort of feeling to, "Is this game a good game? Can this game actually sell? Can it reach the audience it's supposed to reach?" This is a great game. It's exactly what this type of gamer wants, according at least to our own internal and to somewhat, to some extent, external user research tests as well, has indicated. That's obviously, it's a competent developer. They've done games before that is virtually the same thing. It has everything we want: depth, replayability, engaged player base, modding scene. Pretty much this is what we do. It's just made in a different location than in the Paradox office.

Speaker #1: Can this game actually sell? Can it reach the audience it's supposed to reach? This is a great game. It's exactly what this type of gamer wants, according, at least, to our own internal feedback.

Speaker #1: And to some extent, external user research tests as well have indicated. So that's obviously—is it a competent developer? They've done games before. That is virtually the same thing.

Speaker #1: And it has everything we want: depth, replayability, an engaged player base, and a modding scene. So pretty much, this is what we do—it's just made in a different location than the Paradox office.

Speaker #1: So, we never share details of contracts or partnerships like that, because we've never done that before. But, yeah, we think this is a good opportunity for us to find a new, good partner.

Fred Wester: We never share details of contracts or partnerships like that because we've never done before. Yeah, we think this is a good opportunity for us to find a new good partner, all in all.

Speaker #1: All in all.

Speaker #2: Good. No more questions.

Speaker #1: And with that long sort of explanation on Transport Fever 3, the Q&A session is over for this time. So, thank you, Alex.

Alexander Bricca: Good. No more questions.

Fred Wester: With that long sort of explanation on Transport Fever 3, the Q&A session is over for this time. Thank you, Alex.

Speaker #2: Thank you, and thank you for watching. If we have missed answering any questions, email us and we will answer them by email.

Alexander Bricca: Thank you. Thank you for watching. If we've missed to answer any questions, email us, and we will answer them by email.

Speaker #1: We will. And don't miss the Paradox announcement at Gamescom; it's going to be a lot of fun. See you, at the latest, at the Q3 report.

Fred Wester: We will. Don't miss the Paradox announcements at Gamescom. It's going to be a lot of fun.

Alexander Bricca: Of course.

Fred Wester: See you at latest at the Q3 report.

Speaker #1: Perfect. Bye.

Alexander Bricca: Yes.

Fred Wester: Perfect. Bye.

Alexander Bricca: Have a good day. Bye.

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Q2 2026 Paradox Interactive AB (publ) Earnings Call

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