Dear ladies and gentlemen, welcome to the conference call of CD Projekt Group. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key, followed by zero, on your telephone for operator assistance. We now hand you over to Adam Kiciński, who will lead you through this conference. Please go ahead, sir.
Good afternoon, everyone. Welcome to CD Projekt's conference call dedicated to Q3 2020. My name is Adam Kiciński, and I will run this call together with Piotr Nielubowicz, CFO. Please note that the presentation is posted on our corporate website, cdprojekt.com. After the call, we will also post the audio recording of the call and its transcripts.
First, let me start with a short pandemic update. As the COVID-19 situation is definitely not better now than it was in July, we have decided to extend the studio's home office mode until the end of March 2021. Of course, the well-being of our team remains our top priority, and we'll take additional measures to ensure everyone's safety. In spite of these extraordinary and difficult circumstances, our team is giving it their very best at this final development stretch of Cyberpunk 2077.
I am truly grateful to them for their incredible work and dedication to the project. Thank you, thank you, thank you. Please move on to slides three and four. Even though the circumstances are less than perfect, we continue to work hard on delivering top-quality content for our fans. The game went gold in early October and will hit stores around the world in 15 days. Please move on to slide five.
The game will be launched on PC, Xbox One, PlayStation 4, and Stadia. Just days ago, next-gen consoles were released, and our title will run great on Xbox Series X and S, as well as PlayStation 5, from the very beginning, thanks to their backward compatibility. We are excited to be able to bring our game to more players than ever before. Please move on to slide six.
In the past few days, we released two trailers presenting gameplay on current and next-gen consoles. The extra time gained by postponing the release is being used to further optimize the game, and we feel that it was the right decision. In the next few slides, starting with slide seven, I would like to tell you more about Cyberpunk's promotional campaign.
Here, we present an updated chart showing our promotional activities between September and today. The thickness of each bar represents the intensity of activities. As you can see, we are already in an advanced phase, but the crucial, most intensive period will begin in the first days of December. We want to reach as many fans as possible, which is why our ads appear in 55 countries and 34 different languages.
Our goal is to be wherever gamers are, and we want to talk to them in their mother tongues. As for the game itself, it has been localized into 18 languages, including 10 fully dubbed versions, slide 11. What's even cooler, mimics and facial performance are unique and fully natural in every voice overed language.
Let me now briefly summarize the key events of the past weeks, starting with slide 12. We began October on a high note. At the opening game of this year's NBA Finals, we aired a new Cyberpunk commercial starring Keanu Reeves, which kicked off our TV marketing campaign. We also carried on with the Night City Wire series. Please move on to slides 13 and 14. Each episode presents new facets of Cyberpunk, including trailers, behind-the-scenes footage, the game world, and key characters. Interest has been huge, with each episode attracting more and more viewers.
The gameplay trailer aired during the final fifth episode last week was viewed a record 23 million times over just three days following its release. Moving on to slide 15. We recently announced our collaboration with brands such as Porsche, NVIDIA, Adidas, Rockstar Energy Drink, and Sprite. Each such collaboration is carefully tailored and fits into the Cyberpunk game world. We now have far greater capabilities in this respect than in the case of the Witcher universe, and we intend to exploit this potential to improve awareness of our new IP.
Please move to slide 16. Earlier this month, we organized a second wave of hands-on of Cyberpunk, this time extended ones, focused on just a handful of gaming media outlets representing key global markets: the U.S., the U.K., France, Germany, Japan, and Russia. Each guest we invited played Cyberpunk 2077 for about 15, 16 hours, and the feedback is really encouraging. Let's move on to slide 17. Piotr, the floor is yours.
Thank you, Adam. Let's go to the first financial slide: profit and loss account. Between July and September, we focused on Cyberpunk, but our Witcher products continued to entertain people around the world. Group revenues reached nearly PLN 105 million, which technically is only 13% above the result for the previous year, but the structure of our sales changed in a favorable way. Sales of products, which is the most profitable part of our business, increased by nearly one-third.
This is thanks to the great performance of The Witcher 3 on four platforms, but also strong performance of Gwent, operated on iOS since last October and Android since March. This summer, we had lower revenues from services, as last year we had some exceptional revenues related to cooperation with our marketing partner. Next important line: revenues from goods and materials, which consists of two major ingredients.
First, revenues from sales of physical elements of our products. Last year, we had an increase of such revenues due to shipments of Nintendo Switch cartridges for the October release of The Witcher 3 on Nintendo. This position at CD Projekt Red decreased from PLN 15 million- PLN 5 million year- on- year. It's a low-margin part of the business, as all revenues recognized as royalties, which constitute most of our gross profits, are included in our products revenue slide.
Second ingredient of our goods and materials sales: core revenues of GOG.com, which grew nicely by one-fourth versus the third quarter of last year. The change of structure of our sales caused a slight decrease of our cost of products, goods, and materials sold, parallel to an increase of overall sales.
This resulted in an increase of our gross profits on sales up to PLN 68 million by nearly one-fourth versus last year. Our total operating costs remained fairly steady. Among them, selling costs increased, mostly due to promotional expenses related to Cyberpunk, and G&A costs decreased, mostly thanks to ending the recognition of the cost of our previous incentive program valuation at the end of June.
Next line, financial revenues less expenses. Recently, we see lower interest on bank deposits and, at the same time, surplus of negative FX differences on the more volatile market. All in all, despite having no major releases and accelerating internal engagement in the Cyberpunk launch, our net profit increased 57% versus last year and reached over PLN 23 million. Moving to the next page, graphic presentation of our quarterly revenues for the last three years.
The third quarter is usually the quiet part of the year for us, and so it was this year. Even so, it was the best third quarter in years. On the next page, the same revenues are decomposed into costs and expenses, light gray color, and net profits for each quarter, presented yellow. As I mentioned before, despite being focused on Cyberpunk, we maintained popularity of the Witcher franchise during the typically dry summer season, and also profit-wise, it was the best-performing third quarter in recent years.
Next page, number 21, our balance sheet. As usual, a major change on the asset side is visible on the expenditures on development projects, which increased by over PLN 39 million. This is mainly related to Cyberpunk works, and I will have a dedicated chart for this in a moment.
After the strong sales of the second quarter during the summertime, we decreased our receivables balance by PLN 25 million, which added to our cash flow of the third quarter . Speaking of cash, our cash reserves are currently diversified between banks and bank deposits and T-bonds, included in both short and long-term other financial assets. Overall value of our cash reserves decreased by PLN 7 million over the three months of the third quarter .
I will go into more details on that with a dedicated chart in a moment. Equity. It decreased by PLN 179 million due to the buyback of own shares we ran in July and August. And among short-term receivables, two big changes happened. First, CD Projekt was paid in the capital contributions by the participants of the previous incentive program.
The new share issue is not registered yet, so the received capital contribution is presented as our liabilities towards the program participants. Second change, the nicest of all liabilities, deferred revenues grossed by over PLN 77 million, mainly related to Cyberpunk royalties on selected pre-order sales and advances on minimal guarantees from our distributors. This is the biggest increase of deferred revenues we ever experienced. Let's go to the next page, number 22.
Our quarterly expenditures on development projects in cash flow perspective. In the third quarter , we were still working full force on Cyberpunk. The decrease of spent cash in Q3 versus the previous quarter comes mostly from annual bonuses for developers being paid out in the second quarter . Next page, number 23, cash flow. We started July with PLN 642 million on our bank accounts in bank deposits and invested in T-bonds.
In July and August, we ran our share buyback and spent PLN 240 million on it. Afterwards, the shares we bought were sold to our incentive program participants, plus we received from them additional capital contribution prepayments for the new shares issue. All of that amounted to PLN 126 million in flows. Effectively, our net cash contribution in the settlement of the previous incentive program via the share buyback was PLN 88 million so far.
At the same time, on our core business, we spent PLN 52 million on development projects. Parallel to that, our deferred revenues increased by over PLN 77 million. The deferred revenues increase comes in vast majority from selected Cyberpunk pre-orders and received tranches of minimal guarantees.
On top of that, we brought PLN 23 million of net profit to the equation and enjoyed other flows, mainly driven by decrease of receivables in the total amount of PLN 32 million. All in all, having financed our incentive program settlement via buyback of own shares and investing into Cyberpunk development, the total value of our cash deposits and T-bonds decreased by PLN 7 million only. And overall, during the first three quarters of this year, our cash reserves increased by over PLN 152 million. As you know, the main dish of the year is yet to come. Thank you. That's all from me for now. Please move to the next page.
Thanks, Piotr. We are 15 days away from launch. We are entering the most intensive phase of our marketing and PR campaign. On top of that, in the next two weeks, we'll be sending review copies of the game to journalists around the world, enabling them to publish their impressions and reviews of Cyberpunk before its release. We are very excited, and we eagerly await the moment gamers can finally lay their hands on the game. That's all from us. That's all from me. We'll now proceed with the Q&A session.
Thank you. So we will now begin the question and answer session. If you have a question for our speakers, please dial 0 and 1 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask the question. If you find your question is answered before it is your turn to speak, you can dial 0 and 2 to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. The first question is from Omar Sheikh of Morgan Stanley. Your line is now open.
Good evening, everyone. I've got three questions, if I could. The first is on pre-orders, pre-sales. 15 days out, I guess you have some visibility on a meaningful kind of view, I guess, on pre-orders at this stage. I wonder if you could maybe, first of all, tell us what you think about the overall numbers that you're seeing, and then also maybe about the mix between console, PC, and GOG. That's the first question.
Secondly, I wonder if you could give us a sense of what impact going into home office mode until March 21 will have on, I guess, your schedule for next year, in particular for releases of expansions in 2021. So specifically, could you give us a sense of how many expansions you expect to publish next year? And then finally, a question for you, Adam. I mean, we all know you're a perfectionist.
The whole company is full of perfectionists. I guess the question is, how satisfied are you with the quality of the game as you see it today, and where you expect it to be in terms of quality by the time you release it on December the 10th? Thanks very much.
Hello, Omar. This is Piotr Nielubowicz. Yeah, thanks for trying to get some extra info on pre-orders. As you know, we are not revealing much information on that. We believe at this stage we do not have full and complete data that we could share, and it's not easy to say how any data should be applied on final sales. Therefore, unfortunately, I can't give you any more details than the total increase of deferred revenues that was presented in the financial statement I just referred to.
All right. Adam, on the end, I'll take the second and third one, so it seems that home office mode will not impact our schedule. We haven't revealed any dates regarding expansions, but so far, so good. None of, I mean, nor home office, nor the last delayed is impacting our schedule in this regard. Bear in mind that part of the team is working from the office. I mean, smaller part, but it helps a bit as well so we can organize things here internally and then collaborate with people who are at homes.
The last question, well, it's tricky. It's tricky to share our impressions before reviews and before gamers are able to play the game. We are satisfied, but we are never fully satisfied. Don't get me wrong. It's not like we are not sure, but let's wait these 15 days. Let's wait even less because reviews will be published earlier, so let's wait for the external judgment, and then everything will be clear.
Okay, that's clear. Thanks, Adam.
Thank you.
The next question is from Matthew Walker of Credit Suisse. Your line is now open.
Thanks . Good evening. The first question is on the release. Can you update us on what your thoughts are on the percentage which will be digital for December quarter and then for the other quarters after that? If you could give us a feel for what you think that would be helpful. The second question is on the multiplayer. Do you think that's still coming in 2022? And would you say your monetization level, because you care about the gamers, is going to be at the same level as peers for online games, or do you think it's going to be below or significantly below in terms of monetization to keep the gamers happy? And then the last question is on the PS4. I think there was some press stuff saying that maybe it wasn't working quite as well as it could on PS4. Have we seen any gameplay on PS4? Maybe you could give us a bit of an update on how it performs on PS4. Thanks.
Piotr Nielubowicz, first, the expected ratio between digital and physical on our sales. As we see it on pre-orders, digital is very strong. So definitely, we are more into moving potential split digital-physical more on the digital side. How far we'll go, we honestly speaking do not know. Definitely farther than we had on the Witcher 3, and definitely more than 50% should come from the digital channels. And then the history of Witcher 3 shows that the longer the game is on the market, the more the split shifts towards digital again. On Witcher 3, it's vast majority, and on Witcher 2 and 1, it's, let's say, 99% of the revenues we generate are digital. So this is the only direction that can be expected in a mid and longer term.
All right, Adam again, and I'll take the second and the third one. Regarding multiplayer, we haven't announced any dates so far, and actually, right now, it's not, I mean, it's not the moment to talk about any business model for multiplayer, even though we had discussed it before, but to avoid any fuss in our gaming community, I will skip it because we'll share our thoughts about next year's once we'll update our strategy. It will happen in Q1 next year, and that will be after releasing Cyberpunk, and that will be the right moment to discuss deeper all key aspects around future releases. And PS4, yesterday, we released the gameplay both on PS4 and PS5, so you can see the difference. And on both, I mean, PS5 is great. PS4 is still very good. I mean, we had those extra three weeks, and we achieved a lot in this final stretch. So we believe that the game is performing great on every platform. Of course, according to platform capabilities, but every platform should be great.
Thanks . Best of luck with the launch.
Excuse me?
I was saying best of luck with the launch.
Thank you very much. Thank you very much.
You're welcome.
The next question is from Ken Rumph of Jefferies. Your line is now open.
Hi, gentlemen. Understanding your point about not wishing to distract anybody, but could you comment? Obviously, not everybody in the team is working on Cyberpunk, obviously on GWENT and so on, but also on future projects. Could you give us an idea of the extent to which you've been able to begin work on non-Cyberpunk projects?
Hi there. Well, rather not. Of course, there are teams who have been finished with Cyberpunk, and obviously, those teams are the first who are starting the next things. But we were discussing this call before, and we decided to really be focused on the release because gamers are listening to us a lot, and we don't want to distract them, really. I mean, now everything is focused on Cyberpunk. We have two weeks. Everything will be clear by then, and then we'll start talking. Maybe not right after, but as I said.
Yeah. Take a holiday.
In Q1 next year. But of course, anything what was said before is still valid. I mean, nothing has changed. I mean, we are just trying to avoid communicating too much about the further future. And there's one more thing. After the third delay, we believe that some gamers can be a bit frustrated waiting for the game. So talking about future things might make them even more frustrated. So we are delivering the game. Full stop. Then everything, I mean, and right after this, we'll talk about future. That's our communication plan.
Okay. I understand. It's important to get the communication around the game itself right. Again, this is something that may be a little early, but you were asked about it perhaps at the time of the delay. I'm sure after the game comes out, you'll look back at this. But my suspicion is that the day you announce the next release date for the next AAA single-player game, everyone will say to themselves, "Well, we can expect that to be delayed two or three times." What, at this stage, lessons do you think, if possible, you can learn from this?
We are aware of that. Of course, our goal is to deliver on time, but at the same time, we are delivering unique experience in many parts, very innovative. And this process is always not fully predictable, but don't get me wrong. I mean, it can be planned, but there is always a part of things which can be predicted precisely. But we can change some methods. We can change some ways of communicating. And our goal will be to deliver on time. Full stop. And we'll try next time to be on time without any delays. That's the goal.
Does it mean that you potentially change your attitude to how far in advance of release that you would give a date for a game? I mean, you also mentioned regarding the kind of strategic plan for the company that you weren't sure whether you would kind of put dates and deadlines in the way that you did back in 2016. So one way you can avoid, in a sense, taking the risk of a delay is by waiting until the game is closer until you give a date. So are there any thoughts about that?
Yes, it's one of ways. It's not decided yet. Finally, I mean, before release, the date has to be announced in some advance because you have to start the final PR campaign. You have to start collecting pre-orders, and the date has to be set by then. But maybe earlier, we'll be not sharing thoughts about dates. But of course, we'll be guiding. I mean, I can't imagine that investors will have no fairly clear picture of what's going to happen. So let us rethink after release how to put this in the future strategy update. It's not decided yet, as I said.
Okay. That's fair. Thank you very much.
Thank you, Ken.
The next question is from Vladimir Bespalov of VTB Capital. Your line is now open.
Hello. Thank you for taking my questions. My first question will be on Cyberpunk. As I read the hands-on reviews that were released recently, one of the most frequent comments was that the game was quite buggy, even though not critically, but still. Could you maybe provide some color? How different is the current version, I would say, from what you provided to the reviewers and how many of those bugs have been fixed? Because you were pretty aware of those bugs, as far as I understood from the previews. And the second question, maybe you could give us some color on Monster Slayer. What is the current status? What's going on when the release is planned for that? Thank you.
So in terms of bugs, we are aware of them. Of course, such a big game can be just bug-free. That's the kind of obvious. But we believe that the level will be as low as to let gamers not see them. And fortunately, some bugs in extended previews were caused by some general, I would say, general features, and many of them are already fixed. So what gamers will get will be different from what reviewers will get in this final review is better than what previewers got. Piotr, can you take the second?
I can take the second.
Yeah, sure. All right. So go ahead.
Yeah. The Witcher: Monster Slayer is planned for release next year. Right now, we are in soft launch. We are in a couple of territories, including Russia, which is the biggest territory. So far, the soft launch goes well. The game is very well reviewed or judged by gamers on iOS, as the soft launch is run on iOS devices. So everything looks promising, and we are looking to next year to release it full force to gamers.
One more comment on my end. We were thinking about announcing the date this year, but having the Cyberpunk released on 10th of December, we might probably skip this original plan because there is a lot of communication around Cyberpunk, and we don't want to communicate. We don't want to be lost in the communication of Witcher Monster Slayer. So we need some more quiet time for this.
Okay. Thank you very much.
Thank you.
The next question is from Matilde Durazzano of Barclays. Your line is now open.
Hi, good evening. Thanks for taking my question. I apologize if this question has already been asked, but I was disconnected earlier. I just wanted to know if you could give us any color on how pre-orders have been going in the past weeks now that we're so close to the launch date, and that's when we expect them to pick up. Thank you.
Yeah, so as I already answered, we are not really going into revealing more details on pre-orders right now, more than we included in our financial report as in the third revenue section. However, nothing changed from our previous meeting. We are really happy about the pre-order level right now. It's visibly higher than anything we achieved on the Witcher, and it keeps increasing at the expected pace comparing to the Witcher sales historically, so from this perspective, everything goes according to the plan, and the results are really good.
Thank you.
The next question is from Robert Berg of Berenberg. Your line is now open.
Hi, thanks. Just one left. One of the advantages, I guess, of going last or after your peers is that you can actually see their reception, the reception of the hardware sales, etc. I'm sure you have some good contacts in the industry and get to hear color of how things have been progressing. Without talking about any particular games or consoles, which I'm sure you won't want to do, how are you feeling about the health of the video game industry this holiday season, perhaps compared to what you might have thought last time we spoke? Thanks.
It seems the industry is very healthy. Even though circumstances, pandemic circumstances, are generally tough for most industries, our industry seems to be healthy, and for us, releasing on the actually current previous gen and the current next gen and PC and Stadia at the same time is a unique opportunity. I mean, we are reaching an unprecedented number of potential gamers, potential customers, so for us, this window seems to be very sweet.
Great. And there's nothing so far you would say is showing any evidence of a weaker economic climate or the opposite in terms of versus what you previously thought?
Nothing I'm aware of.
Okay. Thank you.
Thank you.
As a reminder, if you would like to ask a question, please press zero and one. The next question is from Matti Littunen of Bernstein . Your line is now open.
Good evening. First question on back catalog sales. So it looks like the year-on-year growth rate has slowed down quite a bit from H1, but the revenue drivers you listed seem to be pretty similar. Could you give us a bit more color as to why that growth rate has slowed down year -on year and sequentially as well from Q2? And the other one relates to the marketing effort you mentioned there. So as advertising spend kicks off properly in the start of December, I was specifically asking about the TV investments between yourselves and your publisher partners. On an absolute level, will this part of the marketing mix be much higher than it was for Witcher 3? Thank you very much.
So first, answering about back catalog sales, I would say that the first and the second quarter were spectacularly strong, especially the time by the end of April, May. And I see three major reasons behind it. First of all, The Witcher franchise got more popular thanks to The Witcher series release on Netflix. Secondly, we had the pandemic situation, which in general supported sales of video games, and as that was one of a few forms of entertainment available to people being locked down at home. And thirdly, at the end of last year, we brought The Witcher 3 on Switch. That was a nice revenue driver for us, and it performed really well comparing to the previous times. The Q3 is always a dry season, as I mentioned already. The lockdown ended. People finally and thank God were able to leave homes.
Probably this has also somehow affected the sales we had. Like it affects every year, I would say, but this time it also included the effect of finishing the lockdowns all over the world, basically. So I would say this is the major reason behind the disproportionality between the first and the second quarter and the third one finally. But what's worth mentioning, this was the best third quarter in recent years for us, both on the revenue side and on the net profitability side. So I would rather say that we are happy about it, especially that the whole company was focused on Cyberpunk, on preparing the launch of this game. And definitely, that's what most people were thinking about and being involved in. I'm not sure if I properly understood the second question.
The standard scheme for our marketing campaign arranged by us together with our distributors is that we are responsible for preparing most of the assets. So in case of TV commercial, we create it, we finance it, and then this TV commercial is broadcasted territory by territory, and this is pre-financed by local distributors. And then this expense on promotion of our game is deducted in our royalty reports or in the royalty reports that the distributor sends us after each quarter. And it's one of the deductible costs. So it's pre-financed by them, but at the final calculation, we will be made liable for all of the costs of the marketing supporting the revenues on our games.
And I can add some about comparing Witcher 3 to Cyberpunk. Obviously, this time we are gravitating to online, definitely. So that's the major change. In terms of TV, it depends on territory because we are not only creating assets. We are those who create whole campaigns. I mean, we are those who decide where money is spent. So depending on the territory, working with professionals, we decide what would give us the best effect. So for example, TV is fairly strong in the U.S., not necessarily across Europe, and the whole campaign of Cyberpunk, it's a multiplier of Witcher campaign, but it's hard to generalize how to compare TV campaign of Cyberpunk to Witcher 3.
Okay. Very clear. Thank you both.
Thank you.
If there are no further questions, I hand back to the speakers.
So we have a couple of questions on chat. The first one from Lubild is, "Good evening, everyone. Could you tell us what are your plans for the multiplayer mode?" So first, we don't call it mode. It's a separate dedicated production, a big production, and we think about it as a standalone product. Obviously, it's not entirely standalone as it comes from the universe of Cyberpunk and is very much related to the concept of single-player Cyberpunk we came up with. But from our perspective, it's another independent production and independent team of people who works on it. And as Adam said already, we are not focusing right now on talking too much about other future products, products that are to be released after Cyberpunk. So please be with us in the first quarter of next year when we plan to share some strategy update, and I believe Cyberpunk multiplayer will be part of it.
The question from Piotr Łopaczuk, PKO BP. When exactly will the embargo on reviews be lifted? Before release, but we are not revealing the exact date, the exact day actually so far, but definitely before release to let gamers read about the game before they buy the game. And I can take the next one from Piotr as well. The game has been not presented on base, non-Pro consoles, PS4 and Xbox One so far. What is the performance of the game on these machines? Of course, a bit lower than on Pros, but surprisingly good, I would say, for such a huge world. So a bit lower, but very good. That's the answer.
Another question comes from Albert Longterm. What percentage of CP pre-orders comes from GOG.com, and how many more CP pre-orders will be sold compared to pre-orders of Witcher percentage-wise? So first, GOG operates on just one platform, on PC, and among PC, we will have some physical sales and some digital sales, and within the digital sphere, Steam is definitely the dominant platform.
So from the perspective of all our expected sales, GOG is representing some single number % of all of the sales, including pre-orders, but in general, I may say that GOG's representation in pre-orders of our Cyberpunk is naturally higher than GOG's market share in the global video gaming business. How many more CP pre-orders were sold compared to the Witcher? We were not revealing this info, but as I said, we are very happy and Cyberpunk pre-orders are visibly higher than anything what we achieved on the Witcher 3 for comparable time.
We can't hear you at the moment.
The next question from Baird. Company Baird. Has Keanu Reeves played the game? Yes. Yes, he played the game, but as far as I know, haven't finished yet. But definitely, he played the game and he loves it.
Next question. Are QA testers in demand now? Embracer acquired a Romanian-based company which is specializing in this segment. Yes, we still QA the game. We do it both internally and externally. We used to have two or three, I'm not sure, external teams. So we cooperate with some companies and the game will be tested by the launch date, and that's a natural part of the process.
Marek Kaźmierczak, Aviva Investors Poland TFI. Are QA testers in demand now?
So I basically answered this question already.
Okay. All right. Łukasz Kosiarski, PKO. When do you plan to announce and start selling season pass for Cyberpunk 2077? The initial plan was to do it before release, but after the recent delay, we decided to wait for the release to provide gamers with the game and then to start talking about future projects. So after release.
Another question comes from Marcin Haber of Wprost. The question is in Polish, so I'll try to translate it on the fly. What profit did the company generate on Cyberpunk pre-orders? What was the level of canceled pre-orders due to the delayed release date? And what part of costs is to be allocated to the international advertising campaign of Cyberpunk? So first, what profits did we make on Cyberpunk before release? All the revenues we generate on Cyberpunk are not booked directly into our profit and loss account. All of them are presented in our balance sheet as deferred revenues, and we will show them upon release of the game. So the first quarter when we will start generating revenues on Cyberpunk will be the fourth quarter of this year. Therefore, there is no profit which we could relate to. Obviously, we have certain costs.
The expenses on developments are not costs that are put into the P&L directly. They are also capitalized on our balance sheet. However, all costs of the marketing campaign go directly into costs of each of the periods. From this perspective, so far, the result on Cyberpunk in our books was negative. But each quarter, historically, the revenues and gross profits we generated on the Witcher franchise were much higher than Cyberpunk-related marketing costs on our side. What was the level of canceled pre-orders? I would say marginal comparing to the number of pre-orders we collected. There were some people who decided to abandon the pre-order. I hope we will make them come back, and we are really active in promoting and talking to our gaming community.
Comparing this to the day-to-day sales or the cumulative number of pre-orders, that was not really influencing the overall level of them. What part of costs is to be allocated to international campaign of Cyberpunk? I'm not sure how to understand it. I mean, absolutely vast majority of our sales, 96%-97%, comes from export international sales. Poland, our domestic territory, is responsible usually for 2%-4% of our revenues. So by far, most of the expenses for Cyberpunk promotion are related to the international markets as we sell the game really on the global sphere. I hope I managed to answer all of the questions.
All right. I'll take the next one. Łukasz Kosiarski from PKO is asking, "Did you receive conditional or full certification from Microsoft and Sony? If conditional, did you fulfill all their conditions?" We got full unconditional certification from both platforms because we went gold. So the game is certified. But having said that, we have to bear in mind that every patch has to be certified. It's a simplified track. So day zero patch will go through simplified certification, but the game is already certified.
The next question, "What are the general player feedback on the game trailer? Is the feedback in line with your expectations or above your expectations? What is the anticipated impact from recent alleged gameplay leak?" The next question probably is for you, and the third is for you, so I'll stop here for you, Piotr. So I'll stop here.
So the feedback is great. I mean, we are really happy. We are really happy with the number of viewers, so it's a little above our expectations, I would say, but we try to stay humble, but it's obviously great, and regarding the leak, fortunately, there were not too many spoilers because this is the ugliest thing, I mean, spoiling the game before it was released, so it was not harmful, even though every leak is bad, but as I'm concerned, there are no impacts, no negative impacts from the leak.
The second question from Lyra is, "You mentioned Q1 next year to discuss future strategies. Just to confirm, do you mean at the financial year 2020 full year result in Q1 next year?" The truth is we haven't decided yet whether we will arrange a dedicated event specifically to this update on strategy or we will merge it together with the annual results. Please stay tuned. I mean, we will definitely announce it when the time comes. But right now, I can't precisely answer except for the fact that, yes, I confirm we would like to share the update in Q1 next year.
And the next one is, "Are you considering providing the number of pre-orders before the release date?" Well, it's not decided yet. As we said before, it might be before release date. It might be on the release date. We haven't decided yet. We are discussing the right moment for this.
Yes. And one more question from Lyra from Jefferies, "Any update guidance on the marketing expenditures related to Cyberpunk?" We were not revealing any guidance on that except for the fact that we confirmed that the marketing campaign of Cyberpunk will be visibly bigger than what we had for the Witcher 3. Some time ago, based on discussions with our marketing team, we confirmed that the scope of it should be approximately three times bigger, three times wider than what we had for the Witcher 3. But I believe that closer to the release, the bigger it seems to be. So I wouldn't say this is still an updated comparison as for now. So it seems there are all of the questions. If anyone wants to add an additional one, that's last call.
All right. The last one. I'll take this. Piotr Łopaczuk from PKO BP. "When, after the release, are you planning to release the first sales numbers of Cyberpunk?" Same like with pre-orders. We will see what we'll have on the table in terms of reliable data because we have to have a global picture. And of course, in terms of digital, we have them almost on the fly. In terms of physical, sometimes it takes some time. Bear in mind that we use local distributors, so there is a middleman between retail and us. So we'll work on having as fresh data as possible and to release them as soon as possible. We'll have the whole picture. All right. Thank you very much. Thank you for joining the call. And be ready to play the game in 15 days. Thank you.
Yes. Thank you very much. Thanks for joining. And a very good Thanksgiving to all our American friends. Goodbye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.