Earnings Call: Q4 2020

Feb 23, 2021

Quarterly report

Hi, everyone, and welcome to the year end report for 2020 as The Q4 report for 2020. My name is Eba, Eba Jungirud and I'm CEO. And I'm Alexander Brica. I'm the CFO. Yes. How are you today? I'm good. Busy time of the year as always. How about you? Yes. Good also, very good. Lots of snow in Stockholm, it's starting to slip away, but it's been very snowy, so that's very nice. But if we move Over to our report. That's great. Let's do it. Yes. So 2020 has been the best year in the history of Paradox actually. We have grown a lot during the year And we've also built a foundation for the future. If we look at revenue, year on year, it's up 39%. For Q4, it was 14%. If we look at the profits, it's up 35% year on year. Q4 was down almost 50%. Yes. And there are a few reasons for this, whereas we will go into detail on them during the presentation, but we still feel that it's a good and solid quarter for the future to build for us future. And this I would like to connect to the fact that we have grown our accounts by 50% year on year. So that means that we now have 18,000,000 Paradox accounts And we also have a MAU, which means monthly active users or players that has grown 25% year on year, so now over EUR 5,000,000. And the reason the accounts are very important to us is that this is a way for us to build our network for the future. As you know, we sell our games anywhere where our anywhere where our players want to buy them. We are not so concerned if you want to buy them through your Xbox or through Steam or GOG or something else. But for us then it means that we also want to have a connection to you as a player. So that's why the accounts become super important for us. So we do spend a lot of energy making sure that we give something back to anyone who signs for an account for the future. And this is, of course, then also what we use for the future. The last circle here that I would like to mention is our capitalized development, which is also a very, very important measure for us. This is up 59% year on year, which means that we have SEK920 1,000,000 in capitalized development. And this basically investments into games that are yet to be released mainly and that we, to a very large extent haven't announced either yet. So things that are going to come for the future. And if you look at how that grows over time, you can also see that it's an increasing investment for the future for us. Yes. So this shows a bit of an indication of the assets we have built that we have not yet consumed on? Yes, exactly. Yes. If we move on, I think the year and the quarter has been strange in many with COVID, but it has also been for us a year where we've continued to build on our strategy and and continue to build on our strength. We had Crusader Kings III launching in Q3 and of course, continuing through the quarter. We also launched a new game, Empire of Sin. If you Alex is in charge of switching slides, so that's why. So Empire of Sin is a game that we have made with a studio based in Ireland called Romero Games. It launched on December 1. We are a little bit disappointed in the release, especially the critical reception from players. That's nothing we never want to release a game where the players aren't happy with the game. So it's a failure on our part and my part to do that. When this happens, which it did in this case, we continue to build on the game. So we have made several small releases and one larger release to fix some of the issues. So it's getting to a better state and we will continue to work on again to make sure that it gets to a stage where we're happy with it and also our players are happy with it. So a big thing for the quarter. And then we've had 2 DLCs. Star Kings for Planetfall performed very well. It's not Planetfall isn't one of our biggest games, so but it still performed super well. Same for Battle for Bosphorus, which smaller expansion of $10 it cost performed extremely well for Hearts of Iron. Our Hearts of fans are very loyal and stick around and play for a very long time. So anything we release there, we always see very good return. We didn't have a steam publisher weekend this year, which we did the year before, but we did have the steam winter sale. It started on 22nd December. We have changed our amortization model for the full We announced this already for Q3. Basically, previously, when we have started amortization on the development costs for game, we have split the cost evenly over 18 months. And we decided to be a bit more aggressive from that perspective because we want to match the revenues of the game a bit better, which means we take a full third in the 1st month And then we take another third between month 2 6. So this, of course, affects the profits quite substantially for a quarter now when we had both Crusader Kings and Empress and Sin being affected here. It doesn't really change from how we did things before in the long run, but in the short term it does. We canceled the project. This is also something we do quite Regularly, I would say we cancel 2 to 3 projects a year, which we have for many years. If you look at the percentage of CapEx, it's actually quite stable over time. I think last year, we ended up on 6.1% Yes, in 2020. In 2020 and before it's varied between 6% 8% over the So this is nothing strange. It's always very sad to do it because the games are built with a lot of love and heart. But it is a lot better for us to cancel than to continue to develop something we don't I think will last. This project specifically was done by an internal studio, our studio in Umea and they have now they're called Arctic. They have now or we in the Umea studio have now sort of turned a little bit to support to a much larger scale to support the Grand Strategy games, which I think is great for the future to give more people working on the grand strategy games and make it possible for us release more content and just build for the future because as you know, the Grand Strategy games live on for such a time. So we want to make sure that we have the capacity to deliver all the content that our players want really. And for us, a big part of our task is to allocate capital in the most efficient way. So sometimes we have these projects that we can Perhaps wouldn't be failures, but we see that the money would be money and time would be That's very true. Last but not least, we're still in the COVID-nineteen world, we and everyone else. It has had mixed impact on our business. It's both short term, especially during the spring, it had very good effects on our player numbers. But if we look a bit longer term, we also see that it is disturbing our development pace and our speed. So We have made the decision to push some releases further into the future. Also normal, also something we do continuously, but now we've and for us it's also very important that we work with all our studios and all our teams to make sure that we have all the tools we need to get over this hurdle, but we also see something around Bloodlines this morning. So Bloodlines 2 is a game that we've been working on for a long time, and we announced it also a long time ago. We have had a really tough couple of months here deciding what to do with the game. We are very committed to the game. So we definitely want to release it, but we have decided to switch studios and Hardsuit Labs won't be leading We are working with a new studio. We are yet to announce what studio that is, but we hope, of course, to be able to do it Soon. It's been a really difficult decision, I have to say, but we are convinced that this is the right way forward to give the game what it needs. And HSL has done a really great job in building the foundation. So now it's more about getting it over the end line, so to speak. So more information will come around this continuously, absolutely. Other things that we've done This quarter in Q1, Going Green for Preston Architect was released and also MegaCorp for Stellaris console, both of them were released in January. Last week, we released a content pack for Imperator Rome, heirs of Alexander. It's been going really, really well. It's fantastic to see how Imperator has really increased in popularity over time and the reviews have increased, etcetera. So that's fantastic. We've announced 2 new expansions, Leviathan for for AU4 and also Nemeziz for Stellaris that are going to come later on. And last but not least, we also last week actually launched a subscription on Crusader Kings 2, which is now live. This is something we've tried on EU4 in a smaller test version. And Crusader Kings 2, the base game is free these days, but now you can buy all of the content. It's like it's 100 of dollars of content if you would not buy it on sale. So we think it's a very good way for someone who's new to the game to try and see what you like and what you don't like in terms of DLC see an extra content. So that's super exciting and we're going to and that will be live from last week going forward So that's a little bit about the quarter. Do you want to talk more about the numbers? I definitely do. So let's dig into them. So revenues to start with for the quarter came in at SEK434 1,000,000 That is a 14% year on year increase compared to Q4 2019 when we did SEK381 1,000,000. And top 5 grossing games we can disclose, Cities:Skylines, Open Visuales, The Kings, Stellaris and Heart of Iron. So the 5 usual suspects, they're often on the top five list. We actually did We did a free weekend with Cities: Skylines in December, which was very popular as well. So it's cool to see those how a game that's been around for so long can also get a lot of new players when doing something like that. Operating profit for the quarter came in at SEK80 1,000,000 compared to SEK163 1,000,000 Q4 2019, so That's a 51% decrease. This decrease comes from, 1st of all, as we have said many times, our quarters Vary financially because they vary in the business. I think we say it every quarter. We say it every quarter. Very important to remember. And the financial outcome always have to do with what we release in the quarter and how much we release and how well received those games are. But if we compare Specifically, these two quarters, there are 2, I would say, bit of distorting factors to consider as well or keep in mind. One is, as Eeva mentioned, we are since September applying this aggressive amortization model, which we didn't last year. And that means that we take on much more costs in Q4 2020 than we would have done if we would have used the same modules last year. The other thing is that in Q4 2019, we had a positive impact from a one off Contingent liability release, it regarding Very financial term there. Yes. It was debt on our balance sheet for a possible additional price to pay, but we realized that it's not going to be paid, so we could release it. So that had a positive SEK44 1,000,000 impact on 2019 Q4 results. So if we look away from those to impact, then we are almost at the same level in Q4 on an operating profit Q4 2020 as we were And then there are, as always, several things that impact the profit development. The most striking things, I think, if we compare these two quarters are the FX impact. We have almost all our revenues coming in, in external currencies and the U. S. Dollar is I think a little more than 10% weaker Q4 2020 compared to Q4 2019, British pound similar and euros almost the same. So this impacts us quite a lot, of course. Eber, you mentioned Steam. In Q4 2019, we had this publisher weekend with Steam, which always generate a lot of additional revenue profit. We didn't have it in Q4 2020, but we had Q2 2020 and these things add up quite a lot. Ebo also mentioned the write down on canceled game. This is something we do now and then. Some quarters, we do it a lot like this and also Q3. Some quarters we don't do it at all. Q4 2019, I think we wrote off SEK8 1,000,000 and this quarter SEK24 1,000,000. So It's quite a lot more. So there are many reasons why the profit for Q4 2020 is less than the quarter before. And again, I think it's I mean, it varies over time, and that's why we always look at rolling 12 months rather than the and especially the year. So when we summarize this report, I mean, we look at the 2020 year. 1 quarter is a very short period for Paradox to look at. But let's move on. Profit after financial items for the quarter, SEK79 1,000,000 compared to SEK157 1,000,000 the year before profit after tax SEK60 1,000,000 compared to SEK131 SEK1 1,000,000 the year before. And you can see in the column to the right, there we have the yearly numbers. So more than SEK1.7 billion in revenues and €628,000,000 in earnings before tax. Operating margins, 18% For Q4 2020, this is low compared to Peradoc standards and this is the effects I think of having this new amortization model, if we release a new game that doesn't sell immediately well, then the operating margins and profit margins are going to go down for that quarter. And I think this is a fair way to show it, but you should all be aware of that this profit margin will swing between the quarters for this reason. And also, of course, the write down that we did also impacted profit margin. Equity through asset ratio 60% and Number of employees, 479 when we started 2020. Now we are at 662. So that is Almost 190 new colleagues that we've added on in a year. Partly due to Playreon and Ice Lake joining the family, the studios that we bought in Q3. Exactly, yes. But a lot of organic growth as well. So this is kind of a main chart for us where we show our 3 cost and our revenue item in green. And as you can see, it fluctuates a lot from quarter to quarter. We have discussed and I think if you look at the last three quarters, The revenue didn't fluctuate that much. It had an ongoing trend. But as we mentioned already on that stream, we said that is an anomaly for Paradox if you look historically. And we think it's going to be an anomaly also looking forward. Going forward, we're going to see that we have been seeing for most of the years an up and down in revenues and even more up and down in profit, so very similar to what we have seen before. So we mentioned if we look at the revenues first, we mentioned the reason why it differs from Q4 2019 to Q4 this year. If you want to analyze a bit what differs from Q3 to Q4 to help you a bit understand the business a little bit. So in Q3 2020, we released Crusader Kings III and that sold almost one in 1 month. That, of course, as you can derive from our new amortization model, That gives you a guidance of what we expect the revenues to be distributed roughly over the 18 months. So there if you want to estimate what the revenues are likely to be in Q4 and in Q1, you can take lead from that. And of course, the Q4 revenues from Crusader Kings III are much lower than they were in Q3, even though it was just 1 month live in Q3. So And then of course, we release a new game Empire of Sin, but that has not sold, I mean, far, Not close to Crusader Kings III. So I think it's I mean, I think it's fair to add also that our games vary a lot in size even in the planning. So it's normal that they Varies over time. Definitely. And also FX impact, the dollar was quite strong, especially in September when we made most of the sales from Crusader Kings III compared to what they were throughout Q4. So those are the reason why the revenues goes down from Q3 to Q4. And this shift, we're going to continue to see. It's going to go up and it's going to go down. If we take a look at the costs, here they are separated, but if you add them together, these three costs will for Q4 2020 add up to SEK 334 1,000,000 that is up 30% from last year, so from Q4 2019 and it's up 10% from Q3 2020. And this is if we and this is something that comes from the fact that we are in the growth stage. If we look back the last 4 or 5 years, the quarterly average growth rate of the cost has been 9%. So quarter over quarter, increased 9% in average. Some quarters, it goes up 20% and some quarters, it also goes down. But in average, it goes up 9% and that's going to continue as long as we're in the growth phase. And then also Q3 to Q4 is some seasonal effect. We tend to spend have less cost in Q3 because it's summer months, so most of us are on vacation, which means that we eat from this vacation debt, we call it, so it doesn't affect P and L. And we do a bit of less activities, have less consultants on and do less events during summer times as well. So therefore, we normally have a bump up from Q3 to Q4 in costs. So if we should look a bit more in details, you can see the large the largest cost is cost COGS or cost of goods sold. This is all the cost for our studios. The cost for the part of our publishing department that works with the game kind of game development. It includes all royalties that we pay to our external studios where we pay royalties And all the depreciation of the licenses and brands that we have acquired, so when we have acquired Playrion, Herbrand Skins, Triumph Under and so on. We depreciate those purchase sums and it all ends up on this COGS row. And also the amortization that we have discussed, the new model, the write downs, they all end up on this yellow line as COGS. And if we compare a bit 2019, so Q4 2019, the yellow line, it has gone up quite a lot. Couple of reasons. 1, the aggressive amortization model impacted a lot. The fact that we have grown the organization, we invest more. I mean, we invested We're going to come to that, but we invested SEK160 1,000,000 in Q4 in game development and that is what we capitalized. But with that also come a lot costs surrounding the development that we take as cost immediately. And Yes, also the final thing why COGS is up from 2019. We have a considerable tech development going on in the publishing part of the business, there we develop stuff for the games that can be used by more of our games. That during 2020, all their efforts have been focused on game related development. So therefore, it's all part of the COGS. But in 2019, the development was more connected to administrative parts of the business, you could say. So therefore, that the COGS goes up significantly during 20 So I think it's good. And as you can see, the red line, which is administrative expenses, that has actually gone down from Q4 2019 to Q4 2020. So it's good to read these lines together also to get like the full cost development picture. Blue line settling expenses went up slightly from Q3 to Q4, also from That's normal. We tend to do more activities in Q4 than in Q3. And it went down a bit from Q4 last year, but that was we had PDXcon last year, so that was a bit of a special year. PDXcon and Steam Publisher Weekend, which we supported with some extra additional marketing. Let's move on. Yes. So this is the slide that shows our revenues quarter by quarter and our operating profit quarter by quarter. I think this shows 2 things. 1, what we continue to repeat, It fluctuates a lot. It fluctuates a lot. There can be 2 quarters where it looks stable, but Rest assured, it's going to continue to fluctuate. I think that is pretty clear. The other clear thing is the trend both in revenues and in profits. You can see both the peaks and valleys are going upwards And the profits are being held back. The profits aren't increasing in the same pace as the revenues and that has to do that we are in such a massive growth phase and we invest a lot and with that comes more cost, which we will kind of reap the benefits of in the future in terms of more revenues. But it's going to look like this as long as we are in a growth phase. So to give it perhaps a bit more easy to analyze picture, we have grouped the quarters into 4, so we see rolling 12 months. It's the same picture, but it looks a bit more smooth. And here it's perhaps easier to see the and it has a healthy increasing trend from all the way back to But again, since our quarters vary, you will see what happened now in Q4 and that has happened in other quarters. There will be quarters where it goes downwards and it's going to be like that in the future as well. So cash flow, this is a record year sorry, record year as well, But let's start with the quarter. We our operating activities generated more cash than ever. And this is perhaps this can be a bit the reasonable question is why if the profit isn't a record, but this has to do with, of course, when we get the money onto our account. And what happened between Q3 and Q4 was that we had lots of revenues in Q3 from the Crusader Kings release that we got the money from in Q4. But this also shows how kind of sensitive these quarters are because depending on when in the quarter we released again, it has a huge impact on the P and L in 1 quarter and the cash flow in another quarter. But we are, of course, super happy with the cash flow from the operating business because this is like the bloodstream for us. And it builds stability for the future and it builds our ability to invest for the future as well. Yes. I sometimes say this is real money, the P and L is accounting. And if you group the last four quarters or the full 2020 we generated more than SEK1 1,000,000,000 actually more than SEK1.1 billion in 2020 and that is up 55% compared to 2019. So that we are very pleased with. And what do we do with the money? We invest, which is the yellow bar. So that is in all our investments. But in Q4, we mainly invested in game development. So it was record high as it often is when we sit here and present these quarterly reports, SEK160 1,000,000 into game development And for the full year, SEK614,000,000, that's up 45%. So we invested 45% more in 2020 into game development than in 2019. And this all adds up to this capitalized development that Eeva mentioned that is at NOK 920,000,000 today that we're going to kind of capitalize on going forward. So what this picture shows is we are kind of our Non current assets where capitalized development is the biggest one. The others are the licenses and brands and the similar rights that we have acquired. And then we have the lease agreement that ends up here. But we can see that all these non current assets are covered by our equities. So it's not debt finance and that is also a very center part of our business. We finance all our development with our own business. So the cash flow from operating activities plan to talk about? We have loads of questions. So I will shoot straight away. Let's do so. Let me just find the thing here. What are your plans for I'm just going to jump straight into it. What are your plans for game streaming services like Stadia, Xcloud, etcetera, where will we see Paradox games there? Yes, good question. I mean, We say that we want to be on the platforms and according to the payment models that our players are. And It's clearly possible that gaming is going to take the same route as video and music had and go to streaming. So we are testing this out. We have a lot of games on this already. Yes, exactly. So it's on GeForce NOW. I think you can play all our games that you have purchased on Steam. Yes. And this is something that we continue to kind of explore. So we are at the forefront, I could say. Yes. With new hirings, are you planning to More parallel game projects to diversify your risk or more people per ongoing game project to improve quality per game to get more loyal fans over time. Also good question. Both, I would say, is the answer. There was also another question, which is how many people going to be end of this year. There is no self interest in growing in amount of people. It's more about game projects, then it's quite natural to also add people. But that's what drives it is what games we are developing. And I think that we have very different sizes when it comes to teams. Some are quite small and some are actually quite large. So it depends a little bit on how complex the game itself is. So there's no one size fits all, so to speak, for a game team. Okay. Is Paradox looking into a model where you subscribe to your games rather than buying them and expansions? It seems like an obvious model. Do you want to answer, sir? Yes. I mean, we as you just mentioned, but we released the Crusader Kings to expansion subscription. So this is something because we want to test it and we want to explore. But then we are on Microsoft Game Pass. We've been there, I think since 2018 for the Xbox and since 2019 when from the first day they launched Game Pass for PC, we've been there with several of our games. And as you might remember, was when we launched Crusader Kings 3. Day in date, we released it on Game Pass as well. And we have a considerable part our revenues coming from indirectly from these subscription services already. And of course, we don't where this is going to go in terms of how much of the revenues in the future are going to come from this. But as with streaming, it might take the same way as video So we want to be prepared if it happens. There's also a specific question on CK3 for Game Pass. And what we've seen is that it's been good for the game to be on Game Pass. It's expanded The type of people who try out the game and it's also so it hasn't really cannibalized on the base game sales through other channels. We don't know how that will look for the future, but we do think it's an interesting way to explore. And we think There's one more subscription question here. Should the increasing use of subscription services by Paradox be seen as an indicator that your company is wanting to focus more on multiplayer experiences in the future in your existing or new games? Well, not by default, I would say. In general, yes, I think multiplayer is very interesting. So we explore that. We explore subscriptions as well. But it's really about that we want to be where our players are and we also want our players to be able to play the games in the way that You guys want to. So it's very much about balancing the 2. So we will continue with both of these as well. Do you plan to port any of your PC console titles to mobile devices? That's a tough one. What's your general interest in mobile? Do you think, Alex? I mean, technically not port them. The mobile device is so different from a PC console in terms of computing powers, screen size and so on. But we would I mean, we are very interested in the mobile platform and we would love to come out with our beloved IPs on mobile. We are doing it with Stellaris Galaxy Command. And now since July, when Playerion joined us, We are, of course, looking into how can we use their expertise and skills in mobile game development and publishing to do something. Yes. And the game has so the airlines manager, it is a very paradoxy game in the sense that it's a deep management game on mobile. So it fits very well with us. And of course, we're hoping to be able to expand that in the future. And I also think that the whole mobile screen is interesting from a cloud gaming point of view, because there it comes sounds that you can play on any device that you want to. It's just about will the screen size fit for all the menus and things like that. So of course from a currently or the opposite increase QA testing in house. We do both today. We have all our studios have QA in house and we also outsource both. QA is quite varying in size over time, so it's good to be able to do both. It's a very important part of making games. So I foresee that we will continue to do both. Has Paradox ever spoken to government Spatial planning authorities about bespoke mods as visualization tools to help aid city planning engagement for Particular places? Yes. I mean, we have several cities or city councils and schools that use Cities: Skylines for And the historical games as well. Yes. And I mean, we are happy to support them with that. This is kind of in the best business way, a way to spread the IP and build the IP and brand, But it's not something that we consider to be a financial big part of our business. How heavily does PDX intend to lean into the World of Darkness IP in gaming? Will Paradox try to cater To the cult following of World of Darkness, we'll try to market to make it more mass market appeal or balanced approach. Well, I mean, I personally think that the World of Darkness has great potential to grow further. And I think that It's also so broad, so you can cater for both sides of this. And we will continue to invest into And there are a lot of games coming out and a lot of also other types of products coming out in the World of Darkness world. So even though we have made the tough decision to delay Bloodlines, there are still things to do in the world. Are there going to be other games ported to PlayStation, Xbox, etcetera? A lot of folks would like to see the strategy Games, the historical ones on console? Yes. I mean, for sure, we're going to continue to develop games for the console. It's I don't remember exactly when we started, but a few years back, we didn't have any consoles again. This was the first. Sixties and then Savares? Surviving Morse, I think. Right. But I mean, we don't have that many games console yet, but still in 2020, we had 14% of the revenues coming from those console games. And so they are clearly very popular amongst our players. So and we mentioned that it's difficult to port to mobile. It's of course much easier to do it from PC to console. Yes, so this is definitely something that we are continuing to focus on. Some of the older games are very hard from a code base point of view. So it depends a little bit on that as well, but yes. I've been seeing reports about Microsoft developing a program for developers and publishers to submit PC and Xbox games for accessibility testing. Paradox has in the past tried to take a role, maybe even a lead role in making games accessible. Will Peridos participate in that Microsoft program? If not, why not? Well, yes, you are right. Accessibility super important to us from lots of aspects, not least that our games tend to be very complex. So we want to have a way in and also a way for various types of players to access the games. We haven't really made a decision on this. So that's definitely something for us to consider for the future. Will studio openings and IP acquisitions continue at the current pace Or in light of the continued developmental issues with floodlines, will these be halted and a full audit of all current studios and projects be undertaken so that future releases are not continually marketed and delayed? Our growth will continue. Yes. So we are continuing to look at IPs. We are probably going to acquire more IPs in the future. We are probably going to establish new studios and we are probably going to acquire new studios. But at the same time, of course, We always review our studios as our publishing business and processes and learn from what we've done in the past. And then you have certain years or periods where we do a lot. So In July, we acquired 2 studios and opened 1 studios. So of course, it's just as our kind of else with Paradox, it's not evenly spread out in a constant pace. But I mean, I think it's also very important to point out that canceling games It's not you can't see that as a failure. You can have the best idea in the world that you really want to try to build, And then it just doesn't come out as a good game. And it would be a bigger failure for us, I think, not to dare to start projects. So we have so we're going to continue to do that going forward as well. And then you could argue that we can announce games a little bit later, I can agree with that. So and that's also why we have a very large pipeline going forward, but we haven't announced a lot because we want to know a bit more when the game can release before we announce. And this review, I mean, this is something that applies to our own internal studios as well as the partnerships we have with external studios. And I think it was mentioned Vampire the Masquerade, HSL is an external steward. I mean, we own a minority stake in it, but it's run by Okay. Next question. We have lots left, so let's try to run through here. After the huge initial success of Why have we not heard very much about it? Well, since launch, we have delivered an extensive free update. It was launched in late November, and that had a lot of new functions actually like a ruler designer, which I know is super if you haven't tried that, but also a lot of bug fixes and things like that that will continue. And while we haven't announced any new content yet we are hard at work and there is a dev diary coming later today that you might want to check out for some teaser. Yes. Why are your core titles which still bring in the majority of your income neglected with small team sizes and Well, I would argue they're not. We focus a lot on our live games and we continue to work. But even a DLC takes a long time to develop. So it's not a small endeavor to make a DLC. We have as I said it before, we have very varying game team sizes, you could argue that you would always want them to be bigger, but it depends a bit on what it is when it's building. Like if you look at I think the original team who built the original Cities: Skylines was 8 people or something like that. So it's not always size isn't always what Why was Empire of ZYN released in that quality? Yes, that's a very good question. I wish it weren't. And it's You always make a judgment call because our teams are very good at pointing out and also in this case, the studio that built the game challenges. And then from a management point of view, we we want to do as I said before, we want to release good games. It's important to continue to build on it and make it into a good game. So that's what we're doing now. But it's always a judgment call when you release a game. So and of course, we want to be more right in that. So we take a lot of learnings from that person. If you ignore the changes in working capital, you are quite close to Negative free cash flow in the quarter because of weaker profits and higher investments. Are you comfortable with that? You comfortable with negative free cash flow in some areas? Yes, yes, definitely. I mean, at the end of the day, we have at year end more than SEK700 SEK100 1,000,000 on the bank accounts. So I mean that we are fine to having that decrease in certain quarters. So far it has I think it has gone up almost every quarter since I started 3 years ago, but that's not a necessity. I think SEK700 1,000,000 is way too much perhaps to have on the bank account. So, yes. Okay. I think this one is for you as well, Alex. Could you explain What mean parent company and group? Those names are in financial statements. Both of them have balance sheets, income statement, etcetera. What shareholder owns At Stockholm Exchange Group or parent company, I looked into the IPO prospect in Swedish and I didn't find any info about this. It's the parent company. Yes. Yes. So the yes, well, the parent company owns everything else. So but then we make a financial statement about the parent company isolated and then we make a financial statement for the parent company including its subsidiaries. And when you include the subsidiaries, you get the company group financial statements. And when you're a shareholder, what do you own? Technically, you own the share in the parent company, but since the parent company indirect owns the other, you own part of the group. Yes. So I think it depends what you're analyzing, but most of us focus on the Company group financials. Can you give a rough sense of expectations for overall revenue and profit growth in 2021? Well, we don't give forecasts like that. But of course, we Hope to announce gains here in the year that is coming from this investment that we're doing. Yes. Yes. So stay tuned. Could you please provide some justifications as to why you are venturing into role playing When your grand strategy franchise is so successful, why not stick with your core competence? That it's a very good question. It's We've discussed a lot over the years. We do invest a lot in our core, and we will continue to invest a that means both the live games and future games coming. But we also want to look at adjacencies and things that are close to us. In the case of the role playing games, it was very much connected to the investment in the IP of World of Darkness. And we have other games that we've added throughout years, if you go back in time, we have Mount and Blade, we have Magica, we have Cities. So we have expanded like this over the years. And I think we will continue to do so as well. How does what happened in 2021 regarding game development, some success, some failures change your thinking on the role of M and A in terms of getting the right talent into the group by I think 2020. Do you want to It's probably 2020. But I think 2020 has been a year that has been very paradox. We see what we have seen for many, many times. Once we establish a brand and a franchise, we are able to get a lot of revenues from that game and a lot of player liking from that game for a long time, not only through the expansions over the actual game lifetime, but also as you can see with CK3, we can build expansions and stretch this out. But as we see with Emperor Sin, it's not that easy to add on new franchises, but that we knew. So it's very much a building over time, right? It's a building over time. So when we added City Skylines, that was Not that was not something we took for sure what's going to happen either, but now it's one of our absolutely biggest contributors. So it's a bit Difficult to know in advance, unfortunately, but we're continuing to invest in new games and the hope is that they are going to turn into these. So I mentioned that we had this usual 5 suspects on top grossing games. We, of course, hope that new games are going to turn into the usual So we have time for 3 more questions. I'm going to pick very financial ones for you. What happens with your investment in Hardsuit Labs? You have 33%, if I remember correctly. We keep it. Yes. We keep it. And I guess they refer to The announcement on bloodlines and we think Carteret Labs has a good future and it's going to be a healthy company. So We're going to keep that and we're going to keep our good relationship with Harsut Labs and we'll see what will happen. Is there any impairment of capitalized development because of the change of direction with Bloodlines 2? Always. I mean, we always do impairment test. That means that we look at this the total capitalized development is SEK920 1,000,000 that is spread out over different franchises. And we always look at them and see, is this something that is kind of supported by the future potential cash flow. So if certain game holds a development of SEK100 1,000,000, we want to have a forecast that shows that the game generates at least SEK100 1,000,000 over the next Yes. So we always look into this. But the fact that we Taking on a new lead studio for Bloodlines 2 does not impact that. They are going to continue to build on what Hargit Labs has built. Okay. And then we have there was a fairly big step down in gross margin in 2020 because of the COGS step up. Should we expect gross margin to rebound in 2021? Or will it take time for gross margins to move back to plus 60%? I think so there will be a pressure down on the gross margins as long as we are growing And especially during this kind of transformation period when we're moving into this new amortization model. Yes, that's true. That makes a Difference. Yes, because once we are past that with 1 year, maybe 18 months, then we are seeing kind of the benefits from that as well having lot of the capitalized development in those games having been amortized. But I would say as long as we are in a kind of big growth mode, there will be pressure on holding the margins back. Yes, that's true. That's it for us. But I will have one bonus question, which is when can we attend the next PDXcon? We also really want to attend the next PDXcon. Right now, we don't have thing to share, unfortunately, because of you know what's going on around us in the world. So we've had to rethink all of our event planning, but we really want to have a PDX con again. So hopefully, stay tuned. Thank you very much for tuning in. Thank you. And we will have our next quarterly report. I think it was May 11. May 11. See you then. See you then. Thank you and bye.