Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the CD PROJEKT Group Q1 2022 results conference. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Adam Kiciński, President of the Board and Joint CEO. Please go ahead.
Good afternoon. Welcome to call on CD PROJEKT Group's financial results. Today, we'll briefly sum up the first quarter of 2022. My name is Adam Kiciński, and I'm Joint CEO. I'll run this presentation together with Piotr Nielubowicz, our CFO. The webcast of the presentation, along with the audio feed, are also streamed as I speak. You can find them on our corporate website, cdprojekt.com, and on our IR YouTube channel. Okay, let's start from Cyberpunk. On the 15th of February, we released the next-gen update together with a big patch, 1.5. The next-gen update enriches the game with the native next-gen features, making Cyberpunk an amazing next-gen experience. At the same time, patch 1.5, which brings many improvements, was released across all platforms. The impact of the next-gen update and patch is definitely positive, both on game sales and its perception among players.
On slide three, you can see the sales of Cyberpunk for major platforms in Q1. The quarter is divided into halves as we launch the update in the middle of quarter. The material impact on sales and boost on consoles are clear. Although the transition is already visible, we believe that there are still many more console players to be reached. This is our goal with our next large update, 1.6, planned for this year, and then an expansion planned for the next one. Of course, those are to be released on PC as well. Moving on to slide four. I would like to remind you about another important event of Q1. In March, we signed a strategic long-term partnership with Epic Games. It enables us to use Unreal Engine technology in our future games.
Strengthening our technological core and de-risking the whole process fits perfectly into our RED 2.0 transformation. Already at this early stage, we can see an improvement in terms of efficiency. I mean the development of the creative layer of the game. Right now, we are working with the Epic's programmers to make sure that the engine is properly tuned and scalable to our needs. This is important as our strategy is to continue creating powerful open-world RPGs. Additionally, we are also developing our own in-house pipelines and toolset like, for example, narrative design tools. Our next Witcher game is being developed on Unreal 5. Please go to slide five. The initial research phase of this project started last year, and in Q1, we began the pre-production. This means that we started capitalizing development expenditures as pre-production is the first phase of development.
For now, there are over 100 developers involved in the project, and we are really happy with the progress. Talking about developers' involvement in ongoing projects, please move to the next slide. As you can see, Cyberpunk expansion is our most intense project at the moment, of course, headcount-wise. At the same time, we moved part of the team responsible for service, servicing Cyberpunk to new projects. There is one new thing, a small team finishing The Witcher 3 next-gen edition. This game is scheduled to be released in the fourth quarter this year, of course. Let's move on. Now, slide eight. We plan two releases in the second half of 2022. The first is the anime series, Cyberpunk: Edgerunners, which we've created with the Japanese studio, Studio Trigger. It will be aired on Netflix, and we believe it will add even more recognition to our newest IP.
The second one is the next-gen version of The Witcher 3. Of course, this upgrade will be free for everyone who has already bought the game. Also, in the second half of the year, we'll be launching the marketing campaign for the Cyberpunk expansion. Stay tuned and look forward to some extra news from Night City. Now, let's sum up the financials. Piotr, the floor is yours, as always.
Thank you, Adam. Now I'll guide you through our results for the first quarter of 2022. Let's start with the slide 10, consolidated profit and loss account. In total, our sales revenues reached PLN 260 million, which is 9% more than our previous best-ever first quarter in 2021. However, what is even more important, the structure of our group revenues was changed towards further increasing the share of revenues from our own products, which stands for the most profitable part of the business. It's also worth mentioning that the comparative period was the time immediately following the premiere of Cyberpunk, when we still observed the high curve of post-release sales of the game.
This year during Q1, thanks to the release of the next-gen edition of Cyberpunk, our revenues from sales of products reached nearly PLN 174 million, and grew by 90% versus the first quarter of 2021. At the same time, revenues from sales of goods and materials, mainly representing GOG and our merch store activity decreased. The main measurable reasons for that are, first, revenues booked by GOG on the PC version of Cyberpunk came naturally lower this year, as the next-gen update mostly influenced our console sales. Second, GWENT-related revenue attributable to GOG also decreased after the consulting agreement was terminated. Third, this year, the digital store recorded lower revenues from new releases from external partners, as some of the new releases planned for Q1 were moved to future periods.
Also suspension of sales to Russia and Belarus added a bit on top of the above. Cost of products and services sold amounted to PLN 80 million. Both this and last year, most of the amount comes from depreciation of past expenditures on development of Cyberpunk. However, this year, we no longer have depreciation of initial GWENT development expenditures, which had already been fully depreciated by the end of 2021. Cost of goods and materials sold came mostly from GOG and decreased in line with sales or even a bit more. All in all, our gross profit from sales exceeded PLN 168 million, which is one-fourth more than a year ago. Moving to the operating costs. In 2022, our selling costs decreased to PLN 61 million.
The high amount in Q1 2021 was largely influenced by Cyberpunk servicing activity, which, as we indicated previously, is to decrease this year. At the same time, costs associated with, broadly speaking, our Cyberpunk publishing activity increased to over PLN 21 million as a consequence of the next-gen release related communication promotion. Next slide. In Q1 2022, we also saved on the G&A costs. The decrease was driven by two main factors. First, among others, we included in this line item costs related to the valuation of incentive program based on CDR stock, which declined due to the change in our estimates regarding meeting results goals of the program, which had been done as of the end of 2021. Second, decrease of early phase research costs related to our future products. That was recorded parallel to the increase of expenditures on capitalized projects in development.
Moving further, this year, the result on financial activity was more favorable to us, mainly due to the recent increase in interest rates, allowing us to add over PLN 6 million to the total result. At the same time, the reported income tax for the period and the effective tax rate was higher than what we had observed in previous quarters. The increase was mainly caused by withholding taxes paid abroad by our international licensees. Having received confirmations of withholding tax payments this year based on existing treaties on double taxation, we deducted from our local corporate tax liabilities as much as was allowed. Obviously, the local R&D and IP Box tax regimes, which allow for preferential local taxation, give us less capacity to deduct foreign withholding taxes. An excess of withholding tax that was not possible to be deducted locally was recorded in our P&L statement.
The total amount of such excess in Q1 this year reached nearly PLN 16 million. The amount is related mainly to payments of licenses, we received after the preview of Cyberpunk, on which respective tax payment confirmations were delivered to us this year. Based on the share of our business partners from whom we received the tax payment confirmations in Q1, I estimate that we might already be close to half of the total excess withholding tax amount we may see later this year, presumably mostly in Q2. This is obviously a rough estimation, and the final amount will depend on actual tax payment confirmations to be received from our licensees. All in all, our net profit for the first quarter of 2022 reached PLN 69 million and was over 2 x higher than the net profit for the first quarter of last year.
GOG posted neutral results, most of the profit was generated by CD Projekt RED. Let's now move to the next slide, number 11, our consolidated balance sheet. In Q1 of 2022, our balance of expenditures on development projects increased by nearly PLN 70 million. This figure represents the balance of new expenditures on development projects of the quarter that reached over PLN 35 million, less depreciation of past projects in the amount of PLN 80 million. Other fixed assets were at a relatively stable level over the last quarter, so there is nothing in particular I would like to comment on here. At the same time, among working assets, our receivables decreased by nearly PLN 57 million, which is due to a natural annual cycle after Q4.
The total value of cash deposits and T-bonds included in the three positions marked with an asterisk is summed up under the table to the amount of PLN 1.262 billion as of the end of March 2022. This means that our financial reserves grew by PLN 108 million during the past quarter. Let's go to the other part of the balance sheet, slide 12. As of the end of Q1, our group equity had a value of nearly PLN 1.96 billion and grew by nearly PLN 66 million, mainly driven by our profits for the period. Another change among our liabilities section actually involves liabilities themselves, which increased by nearly PLN 34 million.
This was related mainly to CD Projekt RED, its operating business and purchases of fixed assets done at the end of the quarter, as well as updated revaluation of instruments hedging the currency risk. This time, there is finally not much to elaborate on our provisions. We no longer have any past released sales provisions. Cost provisions slightly decreased by nearly PLN 10 million. At the same time, provisions for bonuses, mostly based on our results, increased in line with Q1 profits. The total amount still includes 2021 team bonuses that had not been paid by the end of March. Now please go to the next slide, number 13. CD Projekt RED's expenditures on research, development, and service of released games presented quarterly to better show the changes recently happening at the studio.
The purple part represents our total cost of servicing our released games, mainly Cyberpunk and GWENT. The amounts related to GWENT is relatively stable, while the Cyberpunk allocation declined, leading us finally to the release of Patch 1.5, along with the next-gen version of Cyberpunk. At the same time, the proportion of the team and therefore the total expenditures related to future projects keeps constantly growing. It's represented by both the green slice, early phase research costs, and the blue part development phase of new projects. Now our simplified cash flow on slide 14. Cash wise, PLN 69 million of net book profit for the period was supported by the nearly PLN 22 million of P&L included depreciation for the period. PLN 44 million reduction in receivables that we collected in Q1, and PLN 11 million exchange of non-financial operational liabilities and provisions.
Two main outgoing cash drivers not included directly in the P&L statement and the adjustments I just mentioned were expenditures on development projects. In cash terms, nearly PLN 28 million and purchases of intangible and tangible assets, fixed assets. Altogether, our financial reserves increased by PLN 108 million, up to PLN 1,262 million in cash, bank deposits, and T-bonds as of the end of March 2022. This leads us directly to the recent announcement on the board's recommendation on allocation of results reported for 2021. Keeping in mind our current cash position, plans, developments, and investments yesterday, the board of CD PROJEKT recommended to allocate PLN 135 million to the reserve capital and to pay out a dividend of nearly PLN 101 million.
We continue to believe that dividend is the most straightforward, instant, and democratic way of sharing profits with all the shareholders on the same terms. That's all from me for now. Thank you for your attention. Let's now move on to the Q&A section.
Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. The first question is from the line of Ken Rumph with Jefferies. Please go ahead.
Hello, gentlemen. Do you hear me okay?
Yes, we can hear you.
Yeah, okay.
Hello.
Sorry. Okay. Firstly, I was just gonna ask, although it's not a large number, but still a relatively large team involved in Spokko. Bigger, for instance, I think, than Molasses Flood. I'm just a little bit surprised that that's, you know, as noticeable a part of the total development team as it is. Secondly, you mentioned that you've begun capitalizing work on new projects such as a future Witcher game. Sorry, did that begin at the beginning of January or during the quarter? Sorry. Finally on working capital. Last year was kind of unusual because obviously we'd had Cyberpunk at the end of the year.
I was thinking that you might have a bigger cash working capital position because the next-gen version came out, you know, halfway through the quarter, and therefore there'd be receivables to come in. Can you just explain a little bit more about why you've got the big inflow? Is it purely because the fourth quarter's a large number? I forget quite how it looks, but I was expecting, in a way, perhaps the opposite move, that there'd be money still to come in from next-gen sales in the second half of the quarter. Thank you.
Thank you for questions, Adam, here, and I'll take the first one, and Piotr will take the second and the third. In terms of Spokko, first and foremost, I keep working on The Witcher: Monster Slayer. They've just released, like-
Hours ago. A significant update to The Witcher: Monster Slayer. At the same time, Spokko is working on a new project. It's an early phase, but let's say research phase, but they are working on something else as well. That's why the size of the team is as it is.
Mm-hmm.
Piotr, can you take a second?
Yes. When did we start capitalization of the next Witcher project? It was at the end of the first quarter, as far as I remember. That was in March, and it is influenced in the March numbers, so rather end than beginning of the quarter. The third question regarding the inflows from the next generation on consoles, honestly speaking, I do not precisely remember what are the payment terms with console platform owners, whether the revenues for February were already paid in by the end of March or maybe they skipped to the beginning of April, so I cannot precisely answer the question.
At the same time, it's kind of difficult to clearly distinguish what are the decreasing receivables, which we recorded and presented, was only related, you know, to annual cycle, Q4 versus Q1. I believe that was the main reason, and most of the Q1 revenues were still presented in receivables line.
Okay. If you permit me one follow-up of a more general nature. Regarding the first expansion to Cyberpunk, you've said in the past, I think that in hindsight, you delivered a lot of value, a lot of playtime with the expansions to The Witcher, with the Blood and Wine and Hearts of Stone or whatever it was, and that perhaps you could have charged more for them and indeed done more expansions. Can you say anything about your ambitions for the scope of the expansions to Cyberpunk and perhaps pricing? You know, we're seeing, you know, expansions to premium games costing, you know, $40 now, which would be a lot more.
Mm-hmm.
than The Witcher was. Thank you.
Actually, it's too early. I mean, we want to
Mm-hmm.
announce the title later this year. The title is not announced. I mean the title of the expansion, and then we'll talk more about the pricing, about the content, the whole concept. It's too early to share this information. Of course, we have everything planned because, you know, it's very advanced, but we don't want to reveal just one fact because then gamers will take it, and they will start discussing this. Everything will be
Understood.
You know, we'll provide gamers and investors with one nice initial package and starting the campaign.
Sure. Okay. That's kind of what I expected, but thanks very much. Thank you.
Thank you.
The next question is from the line of Nick Dempsey with Barclays. Your question please.
Yeah. Good evening, guys. I've got a few. First of all, on slide 3, you show the boost to units on consoles from the launch of the next gen version of Cyberpunk. Was that really driven by a spike in the second half of February, beginning of March, which had already subsided, before the end of the first quarter? In which case is the kind of run rate of sales in the two months since the end of March, more kind of along the run rate that we saw in the beginning of the year to the 14th of February, that kind of pattern? I just wondered if you could give us some kind of color on how that is shaping. Second question. Can you give us...
You've given us an indication in the past of sort of what proportion of revenues from sales of product came from Cyberpunk. I just wonder if you could give us a rough percentage there. Then just kind of a follow-up to one of Ken's questions. Should we expect the expenditures on development projects in the cash flow to step up notably in the coming quarters as you start to capitalize the people working on the new Witcher project, or is that not large enough to make that much of a difference? Just trying to understand how we should think about modeling that for the coming quarters.
Yes. The first question related to revenues on next gen version of Cyberpunk, and I would say I would repeat what we already said during our annual conference that yes, the initial February revenues they seemed like a natural new release spike. Later on, obviously, the amount of revenues on the next gen version got stabilized. What we see after a couple of weeks from the release is that right now at the Sony digital storefront, for example, 'cause digital revenues are easiest for us to monitor, the next gen attributable revenues are significantly or visibly higher than what we still observe that is coming from the old gens.
From this perspective, it looks like we started offering the product to new group of customers interested in the next-gen experience.
The second question was about stepping up with the expenditures on development projects. We are not giving precise guidance on what the future will bring, but I believe the charts I presented just now, showing the trends over the last five quarters, show the direction. The more people work on new projects, the higher the expenditures on developing them, capitalized ones are, and at the same time, the servicing costs that go directly into the P&L keep decreasing over the time. That's the guidance we are ready to make for now.
I just had a little question in there about the proportion of revenues from sales of products that came from Cyberpunk. I don't know if you could maybe address that.
We were not revealing this data, but as you may expect, Cyberpunk is our leading revenue generator and responsible for a big part of the revenue included in Q1.
Thanks. That's great.
The next question is from the line of Omar Sheikh with Morgan Stanley. Your question, please.
Yeah. Hi, everyone. I've got three as well, if I could. Maybe starting with the expansion, could you perhaps give us a little bit of sense of how you think the development process is going so far? How far through the process do you think you currently are? How happy are you with the way it's going? And do you have a sense of the timing of the release that you're also targeting for next year? Is it first half, second half? Any color there would be very helpful. Secondly, you mentioned that you're planning to do some pre-release marketing for the Cyberpunk expansion in the second half of this year. Could you maybe just talk a little bit about what you're anticipating there? Is it sort of Q4?
How big might it be? How are you sort of thinking about the scope? Finally, just wanna ask about the game engine, given your kind of positive comments that you made on the initial experience with Unreal. How are you thinking about how it might fit into your technology plan, if you like, over the next few years? Do you still think that it's right to run two game engines? Does it make sense? Do you think it might make sense at some point in the future to rationalize? Helpful if you get some color on that. Thanks very much.
Hi, Omar. Adam on the stand. First two questions are about expansion, one about campaign and one about the production. I can say that the production is run mostly in Agile and we see the progress in a different way. We are happy with the production, with how the game is produced. There is still, you know, some time to finish. You know, I'm judging on what we have now. In terms of campaign, I can't reveal anything. I mean, we are preparing to start it, and once the time will come, we'll start. Stay tuned, but I can't provide you with any more color on this.
Game engine, this is the question I can precisely answer. Cyberpunk expansion is the last product based on REDengine. Any, you know, further product will be on Unreal. Starting from I mean, next Witcher is on Unreal, and next products will be on Unreal. Unreal fits to our needs. As I said during my part of the speech, we already see some. It's very early stage, right? It's I mean, very initial stage, but even now we can see some improvement in processes. Of course, very important part is to secure together with Epic's programmers to be sure that Unreal 5 is able to support our ambitions or our designs. That's the goal.
I mean, we have shared this, the goal together with Epic. That's why we call this partnership strategic. At the same time, as I said, we are preparing our own tools on our end, securing very specific features specific to our games, for example, narrative tools. Yeah.
Okay. That's clear. Thank you for that, Adam. I just wonder if I could follow up on the expansion question. Could you just tell us when you plan to announce the launch date? You said you were gonna say what the title is maybe this year, but do you think you're gonna kind of give us a long lead time, a short lead time, given the experience, obviously, of the main games launch? Just be helpful to get some color there. Thanks.
I'm not sure if I can answer, really. I mean, the content of the first bit of campaign. It's not to be revealed today. Any information about this thing, I mean, I cannot share any information about whether we will announce the title together with the price or with the precise dates. This is something I can't share now.
Okay. No, sounds good. Thanks a lot for that, Cześć.
Thank you.
The next question is from the line of Jamie Bass from Berenberg. Your question please.
Hello, guys. Yeah, most of my questions have already been covered, so I've just got the two. At the last set of results, there was a bit of a question about your plans for headcount expansion. It sounds like your headcount was relatively stable. Could you give an update on that? I'm assuming from the increased R&D costs that you've started hiring more, so maybe how that's going and what the plan is for the rest of this year in terms of additional headcount on R&D. And then similar to Nick's question, but on GOG.com. So obviously it was a bit weaker in Q1. What are you seeing going into Q2? And do you expect that there'll be a sort of re-acceleration from GOG.com for the rest of the year? Thank you.
I'll take the first one. Of course, these days, especially in the post-COVID era with home office and all changes on the market, attracting and retaining employees are challenging, but at the same time there are new opportunities. We started hiring remotely. Our goal is to get back on the path of growth. We have to actually. For now, we are good. I mean, for the stages of production we have now, we are good. But we have to grow, our goal is to develop two triple A titles at the same time, so we need more developers. We have a very solid strategy for this.
This is an internal strategy. I can share. We think we have a precise idea how to do that. Piotr will take the second or shall I do it as well? Yes. As regards GOG.com expectations for the next quarter and the rest of the year, we do not share directly, you know, any guidance on future revenues. Obviously GOG.com works hard on improving the results and on the sales side and on the popularity of the store.
Good news, which I can share with you in part is that GOG.com contracted with a new supplier of games, and you can see if you dig more into details of the GOG.com segment balance sheet, you can see an increase of deferrals on GOG.com sides. This is due to the contract signed and new products being prepared for GOG.com to be released to customers, and I hope it will influence future revenues and the catalog GOG.com offers to its customers.
Excellent. Thank you very much.
The next question is from the line of Matthew Walker with Credit Suisse. Your question please.
Thanks, guys. Thanks for taking the questions. So the first one is, if you're gonna start marketing for Cyberpunk expansion in Q4, does that imply that, you know, you're gonna do the launch in the first half of 2023? Or is it like a really small campaign and then it builds through the first half of the year, so it could be in the second half? That's the first question. Second question is, can you give us an idea on the tax rate for the full year in 2022 and 2023? Use of the Unreal Engine, do you think that speeds up the next Witcher game or does it slow it down or it doesn't really make any difference?
Hi. Hi Matthew, Adam here. I'll take the first one. We haven't said that we will start in Q4. We said in the second half of year. And really I'm repeating myself, I know, but no further details is to be shared today in this regard. We are, you know, we are eager to start talking about our next title. Really eager because we've been fairly silent for quite a while. We want to wait till the moment we are ready and we will start. Piotr, the second is yours, I guess. Yes. The second is regarding tax rates for 2022 and 2023. Again, it's a question about the future.
Polish tax regulations are really complex and we are not guiding on what preferences we will be able to use and to what extent. On top of that, there is the withholding tax issue. In broad terms, I would say that the standard tax rate in Poland is 19%. The preferential IP Box tax regime allows us to tax our corporate incomes in 5%, so the effective tax rate should be somewhere within the brackets. Adam is back here. The third one is. It's easy to answer. I wouldn't expect any major changes in the pace or in the length of production. I truly believe that with Unreal, we can run production in a much smoother way and then with a huge support from Epic technical support.
We can be more focused on our non-technological creative layers. I expect the process will be much more secure, predictable, and run in a nice manner. Briefly in the same time bracket, but they at the end with much more secure effect, final effect.
Okay, thank you very much.
Thank you.
Ladies and gentlemen, for all listening via telephone, if you would like to ask a question, please press star followed by one at this time. The next question is from the line of Matti Littunen from Bernstein. Your question please.
Hello, good evening. Just the one left on Gwent. I was wondering if you could give us an update on the overall trajectory of the game since the successful Android launch in 2020. Should we see the overall pattern of engagement as, you know, a slow managed decline from that high base back then? Or is there a different pattern? Now if we smooth out, for example, the short-term effects from new season launches and so on, how should we think about the kind of trajectory of Gwent? Thanks.
Hi. We continue to develop Gwent. As for the current year, we are planning to release a single player mode, which we call Project Golden Nekker. This is what the Gwent team is focused on and to share information about this soon. Actually, this is everything I can share about Gwent.
Sure. I was going to add that, you know, ignoring the impact of Project Nekker, but I appreciate if the information is not to be shared. Thank you.
Thank you.
The next question is from the line of Tomasz Rodak with DM BOŚ. Your question please.
Yes. Hi, good afternoon. Can you hear me well?
Hi.
Hello.
Yes, we can.
Yeah.
Hey.
Hi. Yeah. First of all, I've got one follow-up question for this single-player Gwent project, because I guess you haven't put it in the slide where you presented the projects that are supposed to debut this year. I wonder if it means that it's not going to happen this year. Because I guess you were saying that it was supposed to debut this year. Correct me if I'm wrong. The second question is a general question about the market. Could you give us some light on the current state of the gaming market from your side, from your point of view?
Can you see any slowdown in sales? What are your thoughts on the market in this post-COVID high inflation, possibly even a recessionary period? Thank you.
Adam here. I'll take both, I guess. Yes, Project Golden Nekker is not in slides because it's fairly tiny venture in our business. That's why. It's planned for this year. Generally, Gwent in our results is not very important, as everyone knows. We continue supporting Gwent, but this, as a business line, is fairly small. That's why sometimes we just don't talk about it. Our thoughts about gaming market. Well, you know, it's not easy to judge from our perspective because, for example, in GOG.com, it's okay. I mean, but in our main games, as Cyberpunk has this kind of history, we have no reference.
We see that the next gen will be successful, but having no reference, it's hard to judge. The first quarter was very competitive, that's for sure. This is not due to the COVID that there were many releases, and this is, I think, everything I can say.
Okay. Thank you.
There are no further questions at this time, and I hand back to Adam Kiciński.
Thank you very much. Now we'll read the questions that are in the chat, and then we'll answer them. The first question is, can you please give a number of sales of Cyberpunk 2077 sales in the first half and second half of the quarter? Piotr, this is for you.
Yes. As you know, we are not sharing individual sales results for separated quarters. When we come to certain milestones, then we announce what is the most updated results, which we did recently. For now, there are no individual sales data included in our Q1 report.
The next question: what do you expect from gaming sector in general for the rest of the year? Recently, Microsoft was guiding for a decrease. Yesterday, NVIDIA shared similar thoughts.
Sony is struggling with the production of consoles and so on. Yes, I mean, definitely for hardware manufacturers, not only with. In our industry, many industries, it's a tough time, definitely. For pure gaming companies like ours, we don't see it like this. I mean, in our case, especially in terms of, in case of Cyberpunk, everything depends on how we'll launch next patch, how we start the campaign of the expansion, how the sentiment around the game will be changing. This is much more important than general situation on the market. Same with Witcher 3. It's about how the next-gen version of the game will be received by gamers. It's more in our hands and more depends on what we will deliver.
I will read next questions from Konrad Krasuski, Bloomberg News. First: Does company plan to set new management incentive plan after it admitted targets for 2020 till 2025 program are not achievable? Second: how do you perceive consolidation driving global gaming industry after sentiments to computer game studios weakened? Would CDR be interested in larger deals given its vast cash reserves, or you stick to your previous approach to be very selective only? Third: what is the situation with wage pressure in the industry in Poland and elsewhere amid inflation? How difficult it is to get employees? What trends can you see? How difficult is to keep developers at work?
The first question was about the management incentive program. I wouldn't name it management, but in general, the incentive program based on our stock. Yes, we analyze different options and we evaluate what could be the next incentive program for the CD Projekt Group. As for now, this is still work in progress and no specific decisions were made. We work on it, and we look for the best suitable solution for the group.
I'll take the second and the third. In terms of consolidation, of course, let's say when we see what's happening, but we're really focused on our internal plans, and that's, you know, that's the key and to deliver our strategy to make it even more ambitious. In terms of deals, I think we'll stay being very selective. Selective, not necessarily only focused on small things, but we are interested in supporting our own strategy.
If there is a chance to make a deal that will speed up or strengthen our strategy in building great, enduring franchises, through triple-A games and everything around, yes, definitely. Let's talk. It has to be directly, visibly supportive to our strategy. The third one was wage pressure. There is a wage pressure. Yes. There is, especially with the new, very new, phenomenon of working from home, which makes things a bit different, a bit new, because some people can work from Poland having Western salaries. It's already happening. We don't know if it's a new trend or just a temporary phenomenon after COVID.
We introduced new model that will allow people to work from home if they fit, and if it fits to what they do. It's opportunity on the other hand as well. We can hire more and from more regions because we don't have to bring them here to Warsaw or to our other hubs. We see wage inflation.
I have to add one thing. In our business, in triple-A business, it's less about cost. Of course, we have to keep them under control and so on. Our goal is to deliver great games. When we are successful, sales is.
I mean, return on investment is so huge that wages which influence cost of production are less relevant to the final P&L of the title. Okay. There are no more questions. Thank you very much and see you or let's hear on the H1 results at the end of April, right? No, sorry. August. Sorry. End of August. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.