Earnings Call: Q3 2020

Nov 17, 2020

Quarterly report

Hi, everyone, and welcome to the stream for our Q3 2020 report. Hello, Alex. Hi. How are you? I'm good. Yes. How are you? I'm good. I'm a bit depressed. We had some new corona advice in Sweden yesterday, very strict. We're seeing we, as everyone else, of course, are seeing a lot of impact from this. But we are going to do our part. We try to sit far apart, for instance, and get over this as soon as possible. But that's why we're here today. We have some great numbers, I think, to share with you. So let's kick it off. Q3, the Royal quarter, obviously, because we released our game, Crusader Kings III. Our revenues were up 75% compared with the same quarter last year, very happy with that. And if we look at year to date, so that's January to September, 50% up compared to 2019. And profits, a double in profits compared to the same quarter last year. And if you look at year to date, it's up by 77%. So we are, of course, super, super, super happy with these numbers and very proud. The profit year to date is close to SEK1.4 billion. So I think that's where we're seeing great progress there. If we move to the next slide, this is very much thanks to Crusader Kings 3, a game a franchise, I should say, that we have been developing over many, many years, 16 years since the first one was released. And the third one was released 1st September this year. We had high hopes for the game, very high hopes. We felt very good. But of course, it was amazing to, 1st of all, get a Metacritic score of 91. So Metacritic is the combined review score from professional reviewers all over really in our field. But even more fantastic, I think, is that our fans who now have made almost 21 not quite, but almost 21,000 reviews on steam. When we look at the average score there, it's on 92%. So that's, of course, fantastic. It's such a great reward to see that something that we love is also loved by everyone who supports us and plays our games. So that means that a bit more than a month after the release, so early October, we crossed 1,000,000 sold games on Steam, a very big milestone for us. And if we we have also launched the game on Game Pass with Microsoft for PC, and that was the first for us to do it on this scale with a brand new game, a bit scary and very exciting. So we, of course, are also seeing an influx of players who have not been in as much touch with Paradox as the Steam players from before. So that's a really interesting part of this game for us. I should mention that this building franchises over time, which we've done in the case of Crusader Kings, is really something we try to do with everything. It's part it's why we think it's so important to own our own IPs and to build on our own IPs. Even a small and not always amazing release, early days, builds towards the future and towards a franchise over time. And as we have such long games and want to support them for so many years, it is it's really key for our business model. So all in all, we're super happy with this release. If we look at what else is in the numbers for the quarters, we started the quarter with the end of the steam summer sale a couple of days there in July. We have launched only one DLC this quarter, which was Distant Stars for Stellaris console. As you can see in the reports, we are we see a substantial contribution from consoles. We really we're very happy about that. So we are also looking at the future, what else we can do on console going forward. We have, of course, the next generation, so both PlayStation and Xbox Silica came out now. So that's also very exciting and drives interest for the console in general. A big part of, of course, of the revenues is all of our players. It's the only part of our revenues really, all of our players. We have 4,000,000 active users and players of our games, and we have more than 14,000,000 registered PDX accounts. And the accounts are important for lots of reasons. But since we sell our games through 3rd parties like Steam or Microsoft or Epic and many others, we want to have our direct connection with our fans, and we want to be able to communicate directly with them. We've been building our ecosystem for a long time, and we will continue to do so. And this is really the foundation of how we build for the future together with the games. And what we are also doing in parallel is, of course, trying to build services and features that help the that are interesting for the fans and help them to enjoy the games more. We had a cancellation of an externally developed project. This happens every now and then. It's part of what we do really. We think it's very, very important to be able to start projects and then also cancel them if they don't work out fully. It happens all the time. In this case, it was a game developed by a third party studio that we had not yet announced that we canceled. So that affected the result with SEK 28,000,000 bottom line. And that also brings us to the next thing, which is that we have, during the quarter, changed our amortization model. So we, CapEx, capitalize all the developments for a game, whether it's a 1st party or a 3rd party studio that's developing it. And that all that money is then depreciated over time once we release the game. And previously, we have done equal parts for 18 months, so oneeighteen of the CapEx per month. But having analyzed for the past year or so the structure of how revenues come in, we've decided to change this to better reflect how the revenues come in for a game. So for Crusader Kings and games that are similar going forward, we will take 1 third of the cost the 1st month, 1 third of the cost month 2 to 6 and 1 third of the cost month 7 to 18. So that means that it's a fairly different model, but also reflects revenues better. It's not probably not or it's not going to be for all games because a game, for instance, in early access does not have the same revenue stream and the same goes for mobile. But in this type of game, we will see it going forward as well. Yes, I think that is I should also point out what I always point out that the revenue fluctuates over quarters. We release we don't release based on a quarter. We release when we think a game or a DLC is ready. And that means that we don't you can't always compare quarter over quarter. So it's much better to look at us over longer periods of time, rolling 12 months, for instance, would be my recommendation. Other important things this quarter, we've mentioned it before, I'm wearing the jacket, but we have acquired 2 studios. First of all, Playerion game studio. Playerion is based in Paris. It's a mobile studio. They work on a game called Airlines Manager. And the reason we think that they are a great fit for us is that it's in the management segment. That's a very big segment for us. And it's also in mobile where we are always looking at expanding our skill set and the guys and girls at Playaion are really great at this. And the next studio, which is Ice Flake studio. And Ice Flake is based in Tampere in Finland and we have been working with them for quite a while on the game Surviving the Aftermath, which is a management game in the survival world. It was released in early access on Epic a bit more than a year ago, and we actually released it in early access on Steam in October. And we're looking at a full release next year, sometime quite early next year. So this studio is also, of course, an addition of talent to us in an area where we know a little bit more than in mobile, but still a place where we really want to grow. I mentioned COVID in the beginning. It continues to be a big topic. We still encourage all our employees to work from home in almost all of our locations. We continue to follow the recommendations from the authorities. We feel that taking care of our staff and making sure that people feel safe and healthy is key here. We do a lot of activities around we actually do a lot of both social and move around activities. And we also have a lot of seminars for mental health and how can you work from home and how can you lead from home because, of course, this is also quite a big strain on managers to never see their teams. The long term impact, I've said this before as well, but we saw, especially in Q1 and Q2, we saw quite an uplift from COVID. It definitely normalized during Q3. We haven't seen any big bumps as before, but who knows, we will continue to evaluate this going forward, of course. And we are also continuously seeing an effect on productivity. It really comes from 2 parts. One is that it is tougher when you never meet in person. And the other one is also that we really we are recruiting so many people. I mean, we're still in a very lucky situation. So we're growing and we're recruiting. And it's definitely more challenging to build company culture and build an inclusive environment when you meet so little as we do today. So we are, like pretty much everyone else in the entire world, hoping for this to for us to find a vaccine and also that it goes away soon, but we'll see. Last but not least, we have a really cool game coming up, Empiracin. We're launching Empiracin on the 1st December. This is a strategy game, 1920s Chicago mob era during the prohibition. You take on a mobster role and you will build your empire in these times. The game is built by Romero Games. They're based in Ireland, in Galway. And we are seeing some really cool and good previews on the game. So we're very excited about this and really, really look forward to the release 1st December. That's it for me, I think, for now. Alex, you're over to the numbers. Thank you. Let's dig in. So as Eva mentioned, a new record quarter in terms of revenue. We managed to obtain SEK 495,000,000 of revenues in the quarter compared to SEK283 1,000,000 the same quarter the year before. So that is an increase of 75%. As we have pointed out many times before, making these year on year comparisons single quarters is not always relevant because our business is not seasonal. So you need to look what has happened in the quarters. And on paper, these two quarters, Q3 this year and Q3 last year, are very similar. I mean, we have released one new game in both quarters, CK3 this quarter and H1:Planet World in Q3 last year. But besides from that, no proper piece expansion, but this quarter one port to Stellaris Consol of a DLC and last year's quarters, one port to Stelaris console and one to City's console. So looks kind of similar, but of course, the fantastic reception of CK3 made a big part of this difference, the large part of course. But in addition to that, we should mention the collaborations we have with Game Pass or Microsoft regarding Game Pass as well as Epic for Surviving the Aftermath. Well, Game Pass we had last year's Q3 as well, but not to the same extent. I think we had 3 games in the service at that point. Now we have much more and especially newer games like CK3. So that of course generates revenues that we didn't see last year. So operating profit SEK188 1,000,000 compared to SEK93 1,000,000 same quarter last year. That is little more than doubling, 102% up, very good, of course. And the same goes for profit of the financial items, CHF 187 1,000,000 versus CHF 93 1,000,000 and profit after tax is came in at SEK 149 1,000,000 compared to SEK74 1,000,000 the same quarter last year. Operating margins, very strong again, 38% Q3 this year compared to 33% the same quarter last year. And if we look at the full year, year to date, so far we are at 37% and the profit margins after tax is 30 percent this year Q3 this year compared to 26% Q3 last year. So very solid and strong margins as we're very happy with. Equity through asset ratio, well, there we have had the drop compared to last year. This is due to accounting standards regarding leasing. So it means that we take our leasing contracts as an asset and as a debt. And as you might remember, last year, we did quite a lot of moves in Stockholm, in Delft and in Seattle and entered into new lease agreements, which meant that the assets went up and that the debts went up. So the equity through asset ratio went down a bit. Average number of employees, 596 through the quarter and we ended the quarter at 606. And of course we had a nice addition at the beginning of the quarter, which was to a large extent driven by the acquisitions of Iceflake and Playrion. So we were at 472 end of same quarter last year. So quite a nice addition of colleagues during the last 12 months. And hence this whole challenge of getting everyone on board and being a part of the bigger family when we're not in the office in the same way. Yes. But also great. Also great. So let's dive in a bit more into the cost side. But first, we can look at the top line, the revenue. Here we see something that is a bit strange for Paradox. During the last four quarters, we have had a constant growth. So each quarter has been higher than the previous quarter for the last four quarters. And if you look a bit earlier in the years, you will see a much more fluctuating revenue. And I think that, that is more representative for how it will be going forward. So we were, of course, planning for a continued trend going upwards, but we will see, as we have had during the last 3 years, a much more fluctuating quarter to quarter development, I think, where we have high increase 1 quarter and some decrease in next quarter. It's basically a clear sign that we don't release based on quarter. We release based on when we think a game is ready to come out, right? That's exactly why it looks like that. So let's look a bit more into the costs. We divide our costs into 3 main types: cost of goods sold, selling expenses and administrative expenses, where cost of goods sold is by far the highest or biggest type of cost. Here we have all the costs for our studios, our 9 internal studios now, all the costs for our external development partners. So we say a bit rough that some where around half of our games are developed by external studios. So all these costs come in here as well. We have royalties on this item as well. We pay external studios when the games are doing good. We pay royalties to the studios. We also have depreciations here on the games and intellectual properties that we have acquired over the years. So the latest one was Playrion where we got the rights to airline manager. The same, we acquired a prison architect a year and a half ago, BattleTech through the HPS acquisition and Age of Wonders and also World of Darkness, we don't forget, of course. So that all adds up. And then also we have quite a lot of tech development at our publishing unit here as PDX. That tech unit is since the beginning of this year spending almost all its focus on developing functionality that is very close to the games. So therefore, that is considered as a cost of goods sold now. If you look at all these three costs, they add up to some SEK300 1,000,000, SEK 303 1,000,000. And if we go back to Q3 2019, it was just below SEK200 1,000,000. So it's a 53% increase, less than the revenue, which is an important thing. And this comes if we remain a bit on the COGS line, this has to do with the fact that we are growing our business. We are growing our organization and doing more things. But also since we are recognizing costs for the development when through the amortization that Eeva described, that means that when we release a game, the cost goes up because then we start amortizing on that game. Previously, when we amortized equal amounts during the 1st 18 months, it didn't have such a huge impact when we released the game. But from this quarter and it's probably going to look similar to in future quarters, we will see a COGS or cost of goods sold that is following the revenue in a better sync, I would say. And that is part of the purpose. Why we do this, we have changed this amortization method. We want to match the period of the cost and revenues for the same resource. Marketing costs and administrative costs, so marketing and selling expenses is all the costs we have for external marketing, for our internal marketing organization, our partner management and everything. So that went from SEK40 1,000,000 Q3 last year to SEK50 1,000,000 Q3 this year. So and this cost, as you can see, it fluctuated between the quarters. So you shouldn't analyze the development of the costs by just looking at the 2 quarters comparing then. You need to look a bit more over time. And as you can see from the blue lines, it's growing slowly. Administrative expenses, that is everything else. Everything else that is not cost of goods sold and marketing. So it's part of the offices, it's Us? It's us. It's HR. It's IT and quite a lot of things. And that has been going down even compared to previous quarters and that has to do to a large extent with the fact that we a big part of our tech people at Publishing that previously used to work with administrative closer functions now work with gain closer functions. So let's I think we can move from this chart further. This shows revenues as in the previous chart. And here you can see the same in the green bars it has during 4 quarters going up. But before that, it has been much more fluctuating. And you see the operating profit that has followed the revenues. And we will see the same or perhaps even more similar going forward where the yellow line will follow the green bars to a larger extent. And again, it's since especially if you look at 2018 2019, there is quite a fluctuation of revenues and profits between the quarters. So if you want to analyze and understand paradox and try to figure out where we're heading, Don't compare just 2 single quarters even if it's this compared to the last quarter or whether you use the same quarter previous year. It's much better to try to group it together as we have done for you on this slide. So this is rolling 12 months or rolling 4 quarters And there you can see a much clearer trend or and a much smoother growth both in terms of revenue and on profit. Cash flow, green bars shows the cash flow from our operating activities. So that is pretty much all our kind of live games, what it takes to the revenues we get from the games and what it takes to support them. And the yellow bars is the investing activities. So if we start with the cash flow from the operating activities, it's again a super strong cash flow with over SEK 200,000,000 added to ourselves. But still a bit low if you consider Mr. King's or yielding question. Yes. Thank you. It's a good question. Yes, we had a fantastic Q3. So one could expect that the cash flow from our operating activities would be higher. But we released Crusader Kings 1st September. So that means that all the cash from our distributors from selling Crusader Kings 3 in September, we had not received by end of Q3. Instead, we got almost everything at the end of October. So we can expect a very good October from cash flow from operating activities. If we look at the cash flow from our investing activities, that is a record. Normally, what we have here every quarter is the cash flow from investing into game development. There we had CHF154 1,000,000 investing in Q3. That is a record if we just look at investment into game development. But in addition to the SEK 154,000,000, we have also invested in Playrion and Iceflake by doing those acquisitions. So quite an important quarter in terms of building for the future. Total equity and total non current assets, the total non current assets is very close to SEK1.5 billion. So this is mainly our capitalized development. It's also the intellectual properties to the licenses and game rights that we have acquired over the years and not yet depreciated on. And it's also all these rent contracts that I mentioned earlier. And as you can see from the green bar, it's almost 1 to 1 covered by our equity. And this shows that we have very little debt financing of our business. That is what I had planned to go through. So I know we have We have a million questions. We have quite a lot of questions. I'll start reading and we can try to keep the answers quite short. First, how many copies of CK3 has been sold during Q3? I mentioned it. We passed €1,000,000 just after the end of the quarter, early October, super happy with that. We also shared some stats a while ago. For instance, 25,000,000 hours played. I can't remember how many murders. There's a lot of them and a lot of babies sold. You can find that information if you Google the press release from that. What are your favorite PDX games? Well, mine, at the moment, I'm mainly playing cities actually. I'm back to cities. I need to say CK3, of course. Yes. Yes. Have you killed any babies? No, not yet. Soon maybe. Soon, yes. Okay. Somewhat on a more serious note, does PDX plan on supporting more new releases with some kind of season pass, Alex? Yes, yes, we do. So season pass is when we bundle different DLCs together and sell them as 1. So this we did for Crusader Kings 3. And we also plan to do it for Empire of Sin and And you can already buy it you preorder. Yes. Yes. You're right. And we've done it for quite a few games. Yes. And the port I mentioned, which was the only kind of DLC we released during Q3, that was actually part of the 3rd expansion pass or season pass that we have for Stylos. Yes, true. That's the first part of that. Okay. Did giving away CK2 and making it free to play have a huge positive impact on CK3 sales? Yes, it's a very good question. It's part of going into a launch of a new game. There are lots of marketing activities that are being done and they all at least the intention is that all of them support each other and giving away CK2 for free was definitely a part of this. So it's very difficult to draw a straight line. But as we can see from the sales of CK3, we are super happy with all of the activities that build it up together. And I also think it's a great way to ease into one of our games to look at one of the ones that are free to play. So it's I would try it out if you haven't already. Alex, how do you recognize the revenue from CK3 or any game? Does it all come in the quarter or is it recognized over a period of time? Maybe cover both preorders and then Yes. So this is a question that we received, a couple of them during the morning, so it seems to be important. Well, so most of the games have been sold during September, meaning that the players have actually made a purchase during September. And for the revenues from those purchases, we recognized in September. So that is the base method. Then there are a couple of variations to that and one is pre orders that we have sold before September. The revenues of those pre orders we recognize when we release a game, so in September. And then on the other hand, we have sold the previous question was regarding season pass. So when we sell a season pass for that includes revenues from future DLCs, then we distribute the revenues from that season pass. Even though we have received the money, we distribute it over the original base game or the period when we release the original base game and the upcoming periods when we plan to release the DLCs. And was it something about yes, so yes, I can mention You mentioned it before the question. Revenue from game pass was the question I see. Yes, because that is part of the revenues we have seen in the second quarter sorry, 3rd quarter comes from the game Game Pass revenues from CK3. So there we get we kind of recognize the revenues distributed fairly even over the period where we have the game available on the service. So that is compared to the sales we do on Steam, the revenues are much more spread out over time. So it's not that kind of front loaded. So that's the way that we recognize game pass. And a little bit about cash, we talked about cash regarding Steam. Regarding Game Pass, that depends on the contracts. Sometimes we can get some upfront, sometimes we get it over at the end, sometimes distributed over some time. So that affects cash flow, but not the result? Exactly. The result comes in the No, the result in revenue is distributed over time. Cool. Okay. Are you satisfied with your game's performance on Xbox Game Pass? Can we expect more of the titles in the future? Short answer is yes. It's always scary to go into a completely new business model, in this case, subscription. But we want to do it because we think a lot of people enjoy our games that way. It's important for us that we then work on onboarding to make sure that people understand what it is they're supposed to do in the game even if they're not super used to our games. So that's something that we try to balance. And we've been on the platform since it launched for PC in June 2019, and we our plan is to continue to be on there. So yes, that's the plan. CK3 again, Alex. The take rate on steam, so basically the revenue share, I saw that question in the chat as well. How does the revenue split for steam work these days? Yes. So it's yes, it's a very specific question, but that is exactly what it regards. So when our distributors distribute the games for us, they we kind of pay them by them keeping a share of the revenue. And in the digital entertainment industry, 30% seems to have been the standard for many, many years regardless of which platform you're on. And so on steam up until 2 years ago, it was 30% flat. But starting October 2018, they have changed it. So once a game reaches $10,000,000 in revenues, the revenue share drops from 30% to 25%. And for, of course, a game like CK3 that has sold that much already, we reach that lower take rate quite quickly. And then there is another take rate to reach for and that is once a game has reached $50,000,000 then it drops another 5 percentage points to 20%. And this when it's an internally developed game, this extra money comes down to the bottom line for us. So it affects the result in a very nice way. I think one I saw it on in the chat as well. One additional question is how can you is the revenue share to steam included in the top line and it's not? Exactly. Exactly. And there are kind of different methods to do it. You could take the full gross number and then include the kind of fee to steam and the other distributors as a cost, but we don't do that. We take the net as a revenue. All right. Next question. How did the experiment with the Europa Universalis 4 subscription pan out? So basically, we've had an experiment for quite a while on Steam where you buy the base game and then you subscribe to all the DLCs. It's going well. It was a quite small sample because we wanted to see if anyone wanted it. The people who wanted it tend to stick to it. So we deem that it's successful. So we will continue to iterate on it and continue to have that option available for people. And we are also looking at if we can include other games in that setup as well. But I would say it's mainly interesting for games that have a lot of DLCs where maybe as a player, you want to try out a couple and either continue that way or decide which DLCs you like. Are you developing any new unannounced titles, Alex? How many externally developed titles are in the backlog? Yes. Well, we yes, we are developing both external and internal titles. We always do and we always try to develop more titles and bigger titles. But until we have announced them, we kind of haven't announced them and we are not saying how many they are and when we plan to release them or when we plan to announce them. So you just have to keep waiting until the announcement comes. Keep your eyes on the price, so to speak. Okay. What are your plans in regards to PDX Con in face of COVID-nineteen and the industry's trend to move to more digital event format? Well, this has been a huge topic of conversation this year. We, of course, would have wanted to have a physical PDX call. We love meeting up with everyone and having all the developers there and all our partners there, etcetera. Given that it's 17th November and you haven't heard anything, I think you can safely assume there won't be a PDXcon this year. I really, really hope to come back to doing something next year, but we still don't know. And we want to make sure that we have something to talk about, of course, but also that we can do it in a way that's good for us, but primarily also safe for us and you, everyone who wants to join. Okay. I have a question about Steloris Galaxy Command. How much of an impact is it having to cash flow? If it's not doing well, is there a downside risk to overall earnings? So sorry, Stellaris Galaxy Command is our mobile game for Stellaris, I think you get to point out. Yes. So at this moment, it does not have much impact to the cash flow. I mean, negative cash flow, as you could see from one of the previous slides during the development phase. And then once we start when we release a game on like the cost side, we don't have much negative cash flow. But normally when a game is successful, we have a very positive cash flow. This is mobile games. So the expected the kind of take up rate is different. So far, we are not seeing a huge cash flow impact from this game. The second question, if it's not doing well, is there a downside to risk to overall earnings? Yes, I mean, we the plan with all our games is that they are going to generate a positive earning each game. So the games that don't contribute to that don't contribute to the earnings. So that is like the main negative thing with the game if it at the end doesn't deliver. And then of course, if it doesn't even generate enough profit to cover its own development costs, then we do these write downs. That is very rare once we have released the game, but it happens. It happened 2 years ago, the last time I remember. The new CK3 players, do you see them moving over to play other PDX games as well? I would say it's a bit too soon to tell because people are sticking to CK3 to a very large extent. But we do see a large influx of new players, not least from the Game Pass Corporation. So of course, we hope to see them move over into other games. And when we look historically, we can see that when we've had new games with big new influxes like Cities, for instance, or Stellaris or even further back, Magicka. But yes, over time, yes, they move into other games as well and start to play them. We have an amortization question here. What's the effect in September with the accelerated amortization? Can you go into more detail, Alex? Or Yes, a bit in more detail. I mean, we don't disclose single games not revenues and not development cost, but I can explain the model a bit more. So previously, we took oneeighteen of the development cost and now we take onethree. So let's only as an example assume that the development cost to be depreciated would be SEK50 1,000,000. Then in the previous method where we take SEK1.18 million, it would be little less than SEK3 1,000,000 per month to write off or to amortize. Now with this new model, when we take SEK1 third, it will be SEK17 1,000,000 during the 1st month. So the difference is €14,000,000 So if the game would be €50,000,000 it would be €40,000,000 impact of this new method. If it would be double EUR 100,000,000, it would be EUR 28,000,000 as an impact. What long term growth do you plan for in the company as a whole? Well, we don't disclose that either, but we do disclose that we are on a growth path and we intend to continue to grow. And I think you can look at our CapEx volumes to see that we are investing a lot for the future and build for that. Back catalog weakness in Q3 year on year in PC, excluding Crusader Kings III from Q3 and Atre of Wonder's Planetfall from Q3 2019. Is there a big difference? And is this a result of Laca New Deal Seas release in Q3 2020? Or is that a potential demand was absorbed by a strong Q1 and Q2? Yes. So two things here. Yes, all our quarters are very dependent on us coming out with the content for the games. So if we don't come out with expansions on certain titles, it means that those titles are not going to sell a lot. So if we have a quarter with no DLCs, we are not going to sell much. That goes for every quarter and it goes for Q3 this year and Q3 last year as well. And neither of those quarters had any real expansions. But I would I don't know if there is some kind of conclusion here that the so called back catalog sold less this year's Q3 compared to last year's Q3. Again, we don't disclose it on a per game level, but I would not confirm that conclusion at least, I can say. All right. Try to go through a few more questions here. Mobile, how is it going? We mentioned it before. We're investing for the future. Playrion was an acquisition in line with this and it's not our biggest platform, and we don't think it will be in the future either. But it is important as an addition to our games. Do you see any similar patterns in engagement from Q2 to Q4 as some lockdown measures are implemented, for instance, in the U. S? I think it's too early to say. But I mean, in end of Q1 and throughout Q2, I would say, we had we saw huge uptake on the gaming on the consumption side. I think we should not take that for granted that, that will happen again. And bloodlines is a question on how is that going. So bloodlines is seeing definitely seeing impact from COVID-nineteen. And it's a new genre for us, but we are continuing to build on this game, and it's definitely one of those areas where we build for the future. So there will be more news about this at a later stage for sure. And does work from home also have an impact on DLCs? Or should we for that reason expect less DLC in the upcoming quarters? I think it impacts everything a bit, but perhaps DLC production is not the part that is impacted the most. Perhaps it's impacted a bit less because there you have a smooth team that has released on the franchise before. So you could say that it's later in the development stage. So I think the DLC production will be less impacted than the new game production. Tech is to move a game to their back end. The tech is to move a game to their back end. For some, it's just it's the same game, for instance, for PlayStation's cloud version. So it depends. But we are available on multiple cloud basis, and we want to be as well. As I said before, we want to be where our players are. So it's we tend to move to that. Why have we chosen to change our amortization schedule now? I think think we responded to this. But Yes. I mean the timing so I mean we see bigger and bigger games being released in the future and then this becomes more of a topic how you distribute the amortization over time. If we look back over 2018 2019, if we would have applied the same model during those 2 years, it wouldn't have made much difference. But going forward, we see just bigger games coming out with bigger development costs, then this is going to have a bigger impact. So it becomes more important to match the revenues and the costs more detailed together. So Xbox has been mentioned a few times. What about the other consoles? We are on both the Switch, Emperor of ZYN for instance will be on Switch and also PlayStation. So we are definitely there. Alex, the cash spent on M and A seems a bit lower than I thought. How much of the payment is deferred or is it being supplemented by equity? Okay. No, I mean, if you look at the quarterly report towards the end of it in one of the notes, you have a fairly detailed explanations on how much has been spent on each of the acquisitions. And it's I can say we pay all with cash and no shares. All right. And then last but not least, you have now sold €80,000,000 to €90,000,000 in 2019 and written down substantial portion of your capitalized development. How does the pipeline look for 'twenty one, 'twenty two? When can we expect more information? Also, is it reasonable to expect the same amortization strategy for most big titles? So as we said before, yes, we see that we for similar types of games, we will do the amortization in the same way. And then when it comes to the pipeline, we will tell you when we are ready to tell you. And I would like to point out one thing. We have written down a lot what was the kind of opening to the question. Well Actually, if you compare, yes. No. Yes. I mean, if we compare how big part of capitalized development that has been written down, I think we are at 3.7% year to date this year. Last year was 5.4% and the 2 years before that was 7% 8% respectively. So this just shows that this is a part of our business and this is something that we need to kind of expect and actually to embrace because it's so important that we do this. We don't want to ever be in the situation where we have to release a game just because we couldn't afford to cancel it basically. All right. Time is running out. Yes, time is running out. I think we covered pretty much all of the questions. Thank you so much for tuning in. We will be back with Q4 2020. That's not until February though. 23rd February, I believe, is the date. So until then, if you have more questions, you can always contact us on Twitter or other platforms. And thank you. Thank you for watching. Thank you.