Paradox Interactive AB (publ)

Hello and welcome to the year end report and quarter four report for Paradox Interactive. My name is Fred. I'm Alex Brycka. I'm the CFO. Welcome everyone. Welcome. So we'll take you through the releases and the numbers for the quarter.

Yes, let's roll.

And that's my name. And as you know, we had a very eventful last quarter. It was intense for many reasons. We had a lot of releases, first and foremost, so we released DLCs for all our major franchises. We created a good cash flow and a strong top line, where the results were hampered by a big write-off in the quarter. So we had a great release of Europa Universalis V, which took this franchise to the next level, and it also celebrated 25 years last year, so it was a good time to release it as well. And we had some good results for a wider range of DLCs as well. Worth mentioning is the All Under Heaven DLC for Crusader Kings III that expanded the map all the way to Japan. And as I said, the profit line or EBIT is affected by a big write-down of the game Vampire the Masquerade Bloodlines 2. And we were also facing some foreign exchange headwinds with a stronger krona and a weaker dollar, among other things. So we'll move on. If you look at the year as a whole, we had a year on year improvement of cash flow, which is always a great sign. We strengthened the balance sheet as well during the year and got a new balance on the balance sheet. We released, like I said, a new base game in Europa Universalis 5 and strengthened all the core of our IPs by having a constant flow of releases. We established two new franchises as well, so Victoria 3 and Age of Wonders 4 are now both part of our catalogue with growing player numbers and we hope to continue these games for a long time, typically 10 or more years. So, we also strengthened our foundation for building up the management games capabilities. We acquired Hememont Games in February, creators of, among other games, Surviving Mars and Tropico 3 and Tropico 4, and we took the Cities Skylines franchise in-house, and we can already see the positive effects in the community of Cities Skylines 2. So, those are all great news. If we want to look specifically at the releases this quarter, I mentioned Europa Universalis V, I mentioned All Under Heaven, we released Stellaris Infernals, we released Age of Wonders Thrones of Blood, Hearts of Iron IV, No Compromise, No Surrender, Victoria III, Iberian... Twilight. Twilight, thank you very much, and a smaller DLC for Victoria III during the same chapter of the game. On the management segment, we did a relaunch of the game Surviving Mars. It's been very popular in the community. We see great retentions. We hope to keep developing this game for a long time as well. And we released finally the first big DLC for Cities Skylines 2, Bridges and Ports, which had great results, great reviews and also good sales. At the same time we released for Cities Skylines 2 two content creator packs and two audio packs. So talk about a very busy quarter. Other releases I touched briefly upon Vampire the Masquerade Bloodlines 2 and we also for our deck builder across the obelisk we released Necropolis of the Damned which has been quite well received and also good sales for the franchise. We'll see what happens if we can build that franchise over time together with Surviving Mars. They're a bit smaller at the moment. And I'll leave to Alex for the numbers, a walkthrough.

Yeah, let's do it. So revenues for the quarter came in at 875 million SEK. Quite impressive. It can be compared to the 709 million SEK of Q4 of 2024. So that's an increase of 23%. Let's look at the drivers of that difference. Mainly three things that make up the difference. Foreign currencies, so dollar was down, I think, 12%, if you look at quarter average. Euro down 5-6%. So all in all, it impacts our top line quite significantly in the wrong direction. Then the other two positives is the releases of EUR5 and bloodlines too.

But it's also on revenue. It's our second best quarter ever.

It is.

The record is still the quarter we released Cities Skydance 2. Correct, two years ago. Two years ago.

So these three explains the difference I would say between 709 and 875 million. Then we have released content on pretty much all our major franchises during Q4 2025. So that helped the revenue significantly. But Q4 2024 was also a very huge release quarter in terms of live game. But all in all, the live games have performed similar over those two quarters if you remove FX impact. Some better in 2025 and some better in 2024. So you mentioned Crusader Kings III. They did a fantastic Q4 in 2025 and increased revenues. Hodge of Iron, on the other hand, they did a fantastic Q4 in 2024 when we released the Götterdämmerung expansion, which was very, very popular. So we couldn't really match that in Q4 of 2025. Right. Victoria III did a little bit. Better in 25, Stellaris a little bit better in 24. It varies with each expansion. Is it a popular expansion and do we get it right or less so? So that difference. But all in all, live games performed very similar on the revenue level.

Solid performance from the core portfolio, you could say.

Correct. So top revenue contributors, we normally call them the usual five suspects. Cities, EU, Crusader Kings, Heart of Iron, Stellaris. Now I've added two to that list, Victoria and Age of Wonders. So the usual seven. It will be the usual seven. But good to see both Cities 1 and Cities 2 are on this list if you break out the franchises and separate them. And in Q425, we also had an eighth, and that is bloodlines. Even though it had a negative impact of profit, it had significant revenues. Let's move on. Operating profit, minus 245 million compared to 395 million in the previous year's quarter. 395 million was record profit. So it's a difference of 640 million. And The ones of you that followed our press releases in November when we took the write-down of bloodlines, you know that we had 701 million sec in amortizations and write-downs of bloodlines too in Q4-25, which we had zero of course in 24. So those 701 explains more than the difference of the 640, you could say, if you want to do it super high level.

Yeah, we chose to clean out the balance sheet, so it looks completely different today, starting in 26.

Correct. So if you would disregard our bloodlines too, we would be at these record-breaking levels of EBIT despite the FX headwind.

That's great news because the dollar is down significantly.

It is. So profit after financial items 242 million compared to 404. Profit after tax 201 million compared to 311. And of course profit margin is minus 28% compared to 57 which was record high Q4 of 2024. Asset or equity through asset ratio, very solid, 79%. It has gone down a little bit from 82%. It's mainly driven by we prolonged the lease contract for the office here in Stockholm. And then with the accounting rules, you put the whole contractual agreement, the value of it on the balance sheet as a debt and as an asset. All the years into the future. All the years, exactly. Employees, average number in Q4 of 25 was 663, so that's up almost 90, 89 from 574 the year before. The main driver is of course adding Helmut to the team. Yeah, 55 people there. 55 people at the orchestration and then we have increased a little bit in Hemimont. Iceflake we have increased in order to be ready to support city skylines. We have increased here in Stockholm studio as well. Triumph has increased a bit as well. So a solid number. Let's move on. Right, so this is a breakdown. Revenue, green, and the three cost items in yellow, blue, and red. Let's go through them and break them out a bit so we can all understand what has happened. So cost of goods sold, biggest item, 1 billion pretty much exactly in Q4 2025, up from 263 million the previous quarter. So a super quick explanation would be to say it's the 701 million sec in amortization and write-down of bloodlines that makes up the difference. Then there is something left, and that's of course amortizations on EU5. So that is a very high level, but let's go down a bit further.

You see the selling expenses in blue, right?

Selling expenses in blue, they're the same drivers.

It goes up when we release a lot of content, as you can see on the line there as well.

Yes, so it was 59 million in Q4 of 2024 and it goes up to 84 million in Q4 of 2025. And the big explanation is releasing U5 and bloodlines that drove more marketing cost. The rest was very stable. But 59 million is a decent number and that's because we have had a lot of releases on the live games, both in 24 and 25 years Q4. But let's go back a little bit to COGS and break it down for you who are interested in that. Amortizations is the biggest item, 510 million in Q4. Last year's or the previous year's Q4 was 91 million SEX, so it's up 419 million and we have written in the report bloodlines 346 million of that increase and the rest is pretty much EU5 too. Then we have movements up and down on all the other titles but mainly it's the releases of bloodlines and EU5 that has made up the difference. Write-downs is another item in the 1 billion COGS. Write-downs was 355 million, 100% regards bloodlines. The previous year's Q4, zero write-downs. Then we take, in COGS, 8 million SEK as cost for amortizations of the acquired businesses and assets. So this is down from 14 million in the previous year's Q4. The reason it's down is because in 2020 we acquired Plerion. And that was last summer, that was fully amortized from the books. We added, we acquired Heimemont in the beginning of the year and in Q2 we acquired Stranded. So what we have done with the purchase price for those two assets is that we have fully allocated that to assets that we amortize.

Yeah, so Stranded, Alien Dawn, the game. Yes. Just to clarify for everyone. Yes.

So that is being amortized, I think, over five years. Hemimont, there we amortize it quicker. The fixed purchase price, it's amortized according to plan. Then we have an earn out for Heimemont as well that goes I think over three years roughly and that is being driven by certain milestones being achieved. In 2025 we have taken 32 million SEK as earn out so that is all included in the COGS. So, of course, we believe that the value of this studio is going to increase when we work together. But in our books, we're taking this as a cost. So it's kind of an aggressive way to do it. It pushes down our profits, but it's a very prudent way to handle it. Perhaps overly cautious, but this is how we've always done things in Paradox, and we like to do it that way.

Yeah, we have, I think, around 20 million in Goodwill.

Yes, SEC. Very little. All right, what sells in COGS? Other depreciation, 7 million. That's pretty much how the rent is being accounted for. We have royalties. That's mainly regarding Age of Wonders and Cities Skylines. That has gone down from 45 million SEC in Q4 2024 to 35 billion SEC Q4 2025. Then the remaining item, if you have memorized the numbers, then you will find out that we have 85 million left in Q4, which is for non-capitalized development and tech costs in the publishing, so kind of support functions for the game development. So 85 million in Q4 compared to 105 million in Q4 the previous year. And here we have We have items that move both ways. But the main reason why this is lower is that when we have a negative profit, like we had in Q4, which is very rare, that has an opposite impact on the personnel cost because we share all the profits with the personnel. So a quarter when it's negative, we release previous balance sheet items. Right. So it works like a bit of a hedge.

As a small positive.

Yes, this is more positive. Correct. Selling expenses, we have already gone through. And admin is? Admin is everything else. That tends to be quite fixed. So it was 29 million SEK Q4 2025 compared to 25 million the previous quarter. It might vary from time to time. Here we have the reason why it's 4 million higher this period is one of things. We had a very massive, popular staff conference in September. Right. And part of those costs went into Q4. And then there were some other one-off items that made up one or two million SEK. So it differs from quarter to quarter.

Other income, I guess, is interest rate on Money in the Bank.

And other income is mostly currency movements on the working capital. So it's the movements on the foreign currencies during the quarter. But last year we also sold back the game Macabellum to the developers. Yes.

About 13 million, I think, something in there.

Yes, that's right.

That's one of the points of comparison to Q4 last year. Or Q4 24.

Exactly. So 13 million or something, 12, 13 million Macabellum. And the rest building up. So then we had some 20 million positive effect last year's Q4 or 24 year's Q4. We had a very strong dollar increase during that quarter. And this, the Q4 2025, we have seen the opposite, especially in December. I think the dollar has come down. So the net, if you add income and expenses together, you have 6 million negative. So that's the difference. Interest, that's financial items. Oh, yeah, yeah, yeah. There you go. And the reason why it goes down from 9 to 3.7 is lower interest rates. Good if you have financed the company with debt, less good if you have cash positions.

If you have a house with a big mortgage, that's perfect.

Yes, but I rather take a company with a lot of cash than debt, even though… I agree. What else? Let's move on then, I think.

I say it's good. It's not very good. The result is not very good, but it's good to clean out the balance sheet, as we will see in the next slide here.

Well, here we have a rolling 12 months of revenue and profit. It shows how volatile it is, but it also shows, especially if you look at the revenue line, there is a steady up-growing trend. Some accelerations and some falling downs, but over time it's a very strong growth. Profit-wise, it's more difficult to see it because when you have such a massive write-down and amortization like we had in Q4, it distorts the picture a bit.

It impacts a lot. And as you can see in Q4 23 there, we released Cities Skydance 2 with a peak on revenue on rolling 12. It's sliding down a bit and now we're turning back up.

Yeah. let's see now cash flow so this is it yeah yes so profit was or the result ebit was minus 245 million but the cash flow is super strong in q4 so cash flow from operating activities 513 million sec it's not quite the record but very close to the record we had Two years ago, when we released it is two. So 513 million SEC, very strong. Cash flow from investing activities, that was 145 million SEC. That is what we have invested in game development. It's down from 159 million SEC Q4 of the previous year. And if you look a bit further, or if you remember our report from two, three years ago, When we had Lamplighters League in production, Bloodlights in production, Lifebuoy in production, then we have come down significantly in cost for development. And now we are at 145 million SEC. I think that's a good representation of the new level that we're with. It fluctuates a bit between a quarter, but I would say 145 million is a good representation of the new normal.

Unless something extraordinary happens, a big investment or equivalent.

Sure, like you see it in Q1, the yellow bar is a bit bigger and that's when we acquired Hemimon, so the upfront acquisition price went in there as an investment. Do we have any more? No, I think that's it. So we'll open up for questions.

We've got a lot of questions. So I hope you have time to listen to our answers.

So the first one is for you, Fred. Yeah, let's do it. Could you share how Paradox is thinking about growth opportunities in Asia and whether there is a clear marketing or market entry strategy for that region?

Yeah, I mean, we've seen a very good growth, especially in China, but all over East Asia, actually. And that's also one of the reasons we expanded the map in Crusader Kings 3, to actually get more of the Asian users as well. Not only make the gameplay more interesting, but we do have specific strategies to get into the Chinese market and the Asian market in general. We have All localized content, for example. We work with specialized PR agencies locally. We work with influencer networks locally. So we're really putting an effort into growing in these markets. And it has paid off for the past seven, eight years. And we continue to see strong growth. I think China is our second biggest market when it comes to number of gamers. I don't know on revenue, but it's up there as well, at least top five. So yeah, we're seeing a lot of positive movements on the Asian market. So Alex, how does Paradox view currency fluctuations such as recent dollar depreciation and what's your general approach to managing currency risk?

Yes, it's a big impact for us as we could see this quarter. It's a big part of our business and kind of a risk factor for us. We have roughly 97-98% of the revenues in foreign currencies. And there it's a little more than one third that is in US dollars. Almost the same, a little bit less. So roughly one-third, a little bit more, is in euros. And the rest is in Chinese yuan, British pounds, Canadian dollar, Aussie dollar, SEC, and everything else. So that's the revenue split. Cost-wise, it's a bit different. There we have roughly 50% in Swedish krona. We have maybe... A fourth, so maybe 25% in euros. So that's mainly our foreign studios in Finland, the Netherlands, Bulgaria, Spain, France. And so roughly 25% of the cost is in euros. Roughly 20% has been in dollars over the last year. Marketing, all the tech tools we buy is in dollars. A lot of the external costs are in dollars. And then it's a mix, but the pound has been a big cost the last years because mainly the Chinese room that has developed bloodlines. So if you add it all together, we depend on the dollar movement has the biggest impact on us. But we have decided to not hedge this. We have a strong cash flow, strong profit margins. So we have taken the decision that we rather live with the direct impact of the dollar.

Yeah, I mean, we've been doing this for the past 50 years.

Yes, and it has gone, if you look at over a 10-year period, this has gone in our favor. One more for you, Fred. How is Paradox currently thinking about reinvesting its revenues into existing games and future projects?

Well, obviously there's a mix in between these things. We've cut down a bit on third-party investments, for example, focusing more on the internal studios. We have more internal studios now, so we have more games that we want to make. Obviously, we reinvest in four different areas. One is more content for the current games, the live games that we have. One is new titles and sequels within the core segments of what we, grand strategy games and management games. And the live share there goes, as I said, to internally developed projects. A minor part is allocated to experimental projects and smaller projects in adjacent sectors, games that could be similar to Paradox games, but not necessarily GSGs or management games. And last, unless frequently occurring or that we buy things, IP or studios like Hemimont last year. However, the core should come from the investments that we make and not from the acquisitions that we do, is probably generally the ground rule. Alex, are share buybacks something Paradox consider as part of its capital allocation strategy?

No, it's not now because our shares are listed on Nasdaq First North and there you can't do buybacks, at least not in... in a good way. So as long as we are on that list, we can't do buybacks. No, it's limited too. Yeah, we are using dividends instead. In a situation where we would change list, then of course that is a tool that would open up. Yeah, theoretically in the future.

Yeah. More questions for you.

The size of your catalogs can create a high entry barrier for new players. Are you exploring alternative long-term approaches to improve accessibility to legacy content such as price restructuring or bundling strategies?

Yeah, yeah, yeah. We're well aware that if you go in and see a barrage of DLCs, it might be a bit off-putting to buy the game directly if you're a new gamer. But like mentioned, we do bundlings to get different types of starter packs to make it easier to get on board. We also work with prizing in different territories, but also... deep discounting and publisher weekends and whatnot. We also have DLC subscriptions on either the majority of our games or at least maybe half of our games. So that's an option as well. So you pay a smaller sum to try everything out and you can do it on a monthly basis. So those are the strategies we've tried so far. They're working really well, but we continue to try to make our offerings more appealing to more gamers. That's for sure. Right. Alex, do you see a capital markets day as something that could be relevant for Paradox in the future?

I think so. I think it's about time that we do one. Is it three years ago? It was a couple of years ago, yeah. May 23, we had one. I think now it makes good sense. We have cleaned up the balance sheet. We are finally at the position strategically that we have been talking about for a few years where we want to take the company to, where we have a solid balance sheet. Strong cash flow. Strong cash flow and raise our focus on what we're doing. So it's a good idea. Yeah, for sure. I think we should plan for one. I agree. Let's do it. Let's do it. Fred, I feel like I've heard this sentence from Paradox before. There's a quote, strengthening our strategic focus. I think it's from the CEO award. Oh, yeah. What's different this time?

It is not different this time. That's the thing. So this is what we've been working for in the past three, four years, at least, to see focus on what we do best, continue to do that, and also released the projects that we still had in pipeline, and then we have sort of a new slate to start with. So, I mean, we start with almost, not a blank paper today because we have a great pipeline of games coming out, but it's a different balance sheet and it's a different new year. So still, proof is in the pudding. So we have to continue to deliver great stuff, both for our live games and for the games coming out. And I think we have Prison Architect 2 is the one that we announced. We're going to be happy to show more of hopefully this spring, but we'll see exactly the timeline for that. But nothing changes. Everything is new. Is that how they say? I think that summarizes it. Alex, with a more focused release pipeline compared to previous years, how is Paradox thinking about capital expenditure and the use of increased free cash flow going forward?

I think you have touched a bit upon it already Fred, but what we spend most of our cash to is development. Development of new games and new content for the live games. That's how we've been doing it the last years and that's how we're going to continue to do it. And the second best part we can do, I think, is if we find attractive assets that we can acquire, studios or IPs. But we have high requirements on both. So if we're going to acquire something, we have high requirements on the risk reward offering. When we invest in new projects, We have now very strict requirements on the risk reward offering as well. And we have a very strong cash flow from our operating activities. So that means that we are generating more cash than we like to spend. And that excess cash, it should go out to the shareholders. That's right. And we set out in the report five SEC as proposed dividend to the annual shareholders meeting in May. Yep. So great. More questions? Yes, Fred, this is for you. Many companies are expanding their IPs beyond games into other products and media. How does Paradox think about brand extension and additional revenue streams outside of traditional game development?

Yeah, I mean, we've been experimenting a bit with this. We do merchandising, we do board games, we do licenses to other video games companies for some of our IP, most notably White Wolf IP. but um it's it's a great way to strengthen ip recognition it hasn't had any significant impact on revenue or profit but it's still a good way to keep the ip alive and to reach new target audiences so this is something we're going to continue i mean there are no uh just i i think what they're after here is like a tv dealer equivalent there's nothing like that on the table at the moment but who knows in the future you know but i think we need to work more on deepening and strengthening our IP as they are. We work a lot with history in our grand strategy games. We work with the fantasy IP in Age of Wonders. We work with Stellaris, for example, that are very strong. Or Stellaris and Age of Wonders are their own IP where we own everything. When you use history as your background, it's harder to sort of work with the IP, if you like. But also the White Wolf Catalog offers a wide range of really interesting ways to expand into new universes of opportunities. Exciting. Yeah. Alex, last year Victoria 3 had many very well received DLCs and updates. The team behind the game is doing great work. Maybe this is from the Victoria 3 team. It sounds like one of our colleagues. Especially with communications lately, in my opinion. Do you see a positive effect of the well-received DLCs and updates financially? And is the game generally on a positive trajectory?

From someone that works in communications. For Victoria 3. Yeah, exactly. But it's a great question, regardless of who it's from. Yes, we have seen a strong positive effect since... Q2, when we released, I forgot the name of it, but... The trade expansion.

Chambers of Commerce, thank you very much, our cameraman, he knows his games. So with that release especially, there were signs before... Charters of Commerce, sorry, not Chambers of Commerce, Charters of Commerce, sorry to interrupt.

So with that release, something happened with the monthly active users. And so we got up to a healthy level. And also the studio has made good work efficiency-wise. So now that game has reached a level of healthy profit margins. And good retention. Good retention. And with that comes a very stable, strong revenue level as well. And we foresee that it's going to continue like that. So we very much look forward to treat this as like a staple in our portfolio for 26 and for the following years. That's right. It's a great game. Go play it. Fred, will the TintoTalk method used in the development and lead up to EU5 become the standard for future Paradox releases as it seems to have worked with great success with EU5? Or will it be up to the individual studio leads discretion as to how to handle community outreach and feedback?

As a ground rule, we prefer that the studio handle their own way of communicating, the way they feel is the most comfortable and best way to explain and talk about their game, but we always encourage direct talks to the community because it's a great way to receive feedback and to change things in the game that might need some feedback from people who love our games and spend a lot of time with our games. So I think Tinto Talks is a great framework on how to operate, but we will continue to encourage the studios to find their own way to connect to the community. But it's great. I really like that. I really enjoyed it personally to watch. Alex, how has Paradox monthly active users developed?

It's 6 million. It varies from time to time. We have sometimes been up well above 6 million. But we only talk about full millions. So we want to be stable at 7 million before we start to say 7 million.

Can we say that we've been above 7 million as well? I think we have.

You just said it. I just said it.

But not until it's a stable level. We want to communicate it.

Yes, yes. Because the number we communicate is where we are, stable.

We don't count spikes as something that we want to communicate.

Correct. I said it. Good. Okay, more questions. Fred, where do you think growth will come from versus last year? Will it be higher DLC velocity, new game releases, pricing, player base increasing?

If the answer can be all of the above, I choose to answer all of the above. But I think, say, we have a couple of examples here that will grow over a couple of years coming. As we mentioned, Victoria 3 and Asia 1-4 are now more stable, have better retention. They have stable release schedules. So our view is that they're going to continue to grow. You can see that the Europa Universalis franchise has been declining over a couple of years because we made less DLCs and material for Europa Universalis 4 because we were working on 5. So we're looking for 5 to grow over the next couple of years, sort of not automatically because we can't just sit on our assets and wait for it to happen. We actually have to work actively with it but that's something that we see as one of the core growth things with the live games. But we will also continue to grow our live games both on number of releases hopefully and the number of gamers by attracting people more often to come back and play the game. Of course, I mean, the larger jumps in revenue can come from a new release. If we get more games out this year, you know, it's spiking in revenue as well. But we want to have it from actually several different sources, the revenue growth. So it all adds up. Alex, how should we view a risk for a write-down in ES5?

That's a low risk. When we look at the write-downs we have made over the last years, it has been on projects where we are kind of far outside of our core. Yeah. Europa and Chalice 5 is as in the middle as you can get in our core. And now we don't break up normally and share revenues and profits by game, but Europa and Chalice was highly profitable already in its release quarter, so in Q4. Yeah. And we expect that it's going to continue to be highly profitable for many, many years.

And as you can see, I mean, initially you get a huge spike of gamers. It slows down a bit, which is natural. And then we continue to grow from the sort of slope there. And that's true for all our games. If you take Hearts of Iron is going into its 10th year in June. It's going to turn 10. And we have more gamers than ever on a monthly basis for Hearts of Iron. So that's basically how we operate. So we focus on the retention and the retention brings revenue with it. So that's it. Alex again, could you maybe quantify the FX hit on the P&L? Would you break out the sales from the new releases in the quarter in order to get a feel for the performance in the back book?

The short answer is no. Do some math in your head. Yes, so we got another question to what extent we're impacted by FX and I gave you the rough split of the revenues and the costs in currency. You do your own math. Exactly. But of course as any exporting company we are doing great when the Swedish krona is doing less great.

Yeah, so 3% is krona and the rest is foreign currency.

In the revenue, yeah. Something like that. Exactly. And there was a sub-question, would you break out the sales from the new releases in the quarter? No, we don't go into that level of detail. No.

So that was the final question. So thank you for watching. It was, like we said, a very intense quarter with not a great outcome due to different reasons that we have explained now.

Profit-wise.

Profit-wise, but cash flow-wise, exceptional, actually, even by our standards. Just to summarize, I think we're in a great place to do great things in the coming years. I hope you continue to follow us and thanks a lot.

Thanks for watching and see you in, when is it? End of April. End of April. For the Q1 report. See you then. Take care. Bye. Bye.