Earnings call transcript: CD Projekt Q3 2023 sees strong sales and strategic growth

CD Projekt reported its third-quarter 2023 earnings, showcasing a robust performance driven by its flagship games and strategic initiatives. The company recorded group sales revenue of PLN 985 million, with significant contributions from "Cyberpunk 2077" and its expansion, "Phantom Liberty." Despite a slight decrease in net profit compared to the previous year, CD Projekt continues to expand its development capabilities and strategic partnerships. According to InvestingPro data, the company maintains a beta of 1.13, indicating moderate market sensitivity compared to its peers.

Key Takeaways

• CD Projekt achieved group sales revenue of PLN 985 million, 80% of the previous year’s figure.
• The "Cyberpunk 2077" franchise continues to perform well, selling 30 million copies and 8 million copies of the "Phantom Liberty" expansion.
• The company increased its cash reserves to PLN 1,472 million.
• "The Witcher 4" is in full-scale production, with over 400 developers involved.
• CD Projekt announced a new dividend policy, promising a minimum of 25% of net profit starting in 2025.

Company Performance

CD Projekt’s performance in Q3 2023 reflects a solid foundation in its core franchises, with "Cyberpunk 2077" leading the charge. The game’s sales cycle has been 2.3 times more profitable than that of "The Witcher 3," highlighting the company’s successful expansion into new gaming territories. The integration of the Molasses Flock team and the expansion of the development workforce underscore CD Projekt’s commitment to innovation and growth.

Financial Highlights

• Group sales revenue: PLN 985 million (80% of previous year)
• Net profit: PLN 470 million (2% decrease from previous year)
• Net profitability: 48% for the group, 58% for CD Projekt RED
• Cash reserves: PLN 1,472 million

Outlook & Guidance

CD Projekt’s future looks promising with several projects in the pipeline. "The Witcher 4" is anticipated to release post-2026, with the potential for a trilogy within six years. The company is also exploring new intellectual properties, such as Project Hadar, and expanding into animation projects with Netflix.

Executive Commentary

Piotr Milobovich, CFO, emphasized the transformative impact of "Cyberpunk 2077," stating, "Cyberpunk clearly brought us to a new level." Meanwhile, Michal Nowakowski, Joint CEO, highlighted the company’s cautious approach to new technologies, saying, "We have no specifics to be shared" regarding animation projects.

Risks and Challenges

• Potential delays in major projects like "The Witcher 4" could impact future revenue streams.
• The integration of new technologies and AI tools presents both opportunities and challenges.
• Market saturation and competition from other major gaming franchises may pressure sales.
• Economic fluctuations could affect consumer spending on entertainment products.

CD Projekt’s strategic focus on expanding its franchises and exploring new markets positions it well for future growth, despite the challenges that lie ahead. The company’s commitment to innovation and franchise management continues to drive its success in the competitive gaming industry.

Full transcript - Cedar Realty Trust Inc (CDR) Q4 2024:

Conference Moderator: Hello, and welcome to CD Projekt’s FY twenty twenty four Earnings Call. There will be a presentation followed by Q and A. I would now like to turn the call over to Mikael Nowakowski, Joint CEO of CD Projekt.

Michal Nowakowski, Joint CEO, CD Projekt: Good afternoon. My name is Michal Nowakowski and I’ll be your host during today’s conference dedicated to the CD Projekt’s financial results for 2024. I will be co presenting with Piotr Milobovich and after the presentation, we will invite you to participate in a Q and A session where we will be joined by Carolina Ignacio, our VP and Head of Investor Relations. Twenty twenty four was the year during which we achieved a major milestone in the development of The Witcher four, previously code named as Project Polaris. In November, we announced that the game had entered the full scale production phase.

A team consisting of over 400 developers is now focused on scaling up the solutions developed during preproduction and validating them across the entire game. The cherry on top came in December, when at the Game Awards event we unveiled the first massive trailer of The Witcher four. That marks the beginning of a new saga with Ciri as the protagonist and a natural successor to Geralt embarking on her own journey to become a professional monster slayer. The fan anticipation for this new chapter was clear at TGE, where the trailer became the most watched of the event with over 8,000,000 views on IGN’s channel within the first seventy two hours after the event. And similarly, global media outlets were thrilled by our reveal.

The Witcher four generated great interest being that most talked about game after the game awards. It dominated headlines and media articles proving that the gamers are hungry for more stories to be told in the Witcher universe. Our second franchise, Cyberpunk, is also riding high. The base game consistently maintains a high recent review score on Steam, which currently stands at a level of 95%. This shows that our commitment to the game is highly appreciated by the community.

Additionally, last year, Cyberpunk 2,077 won additional accolades including a BAFTA award in the Evolving Game category. Looking at sales in November, we announced that over 30,000,000 copies of Cyberpunk 2,077 have been sold along with over 8,000,000 copies of the Phantom Liberty expansion. And we’re not stopping there. Cyberpunk 2,077 is coming to the macOS platform this year, which will allow us to reach new players and further expand the Night City community. The game will be available to purchase in Mac App Store, GOG.com, Steam, and Epic Store.

In parallel, we’re also broadening the universe built around the Cyberpunk games. In 2024, we announced another animation project, which is currently under development and in the future will be relay released on Netflix platform. And that’s just some of what we have in store regarding Cyberpunk. Looking forward, I’d like to give you a brief overview of the current status of our other ongoing projects. Regarding project series, we have decided to integrate the Molasses Flock team into our studio structure by merging the company with City Project Red Inc.

To ensure even better alignment in the scope and direction of the project. Although this naturally entails some changes in the project leadership, the project itself is proceeding. Moving on to the next project, the Witcher remake. Due to production process dependencies, among others related to assets and technology, we have decided to temporarily integrate its development with ongoing work on the Witcher four. As a result, a small portion of the Force Theory team is currently supporting the Witcher four team.

Our goal is to have the necessary assets, tools, and pipelines ready for a more efficient development of the Witcher remake. As we have mentioned before, we’re also currently working on some undisclosed projects, one of which is carried out in collaboration with Force Theory. As for what’s next for the Cyberpunk franchise, the Orion team is heading towards the end of the concept phase. And this means that we’ll be entering the preproduction phase in the coming weeks. Moving to deferred IP, the vision of Hadar has progressed over the last year, becoming more detailed.

Internal assumptions and ideas have been forged into main pillars that guide us forward. This year, the team’s focus is on further development of our new IP and the work on the game’s story, while prototyping some gameplay solutions specific to Hadar. The mentioned activities require a greater workload and hence the recent recruitment announcements for new positions. As for our current allocation of development teams, the differences in team sizes versus the October, the overall number of developers increased by about 10% to over 700. The Witcher four development team remains above 400 developers, a level we expect to maintain with adjustments made as project needs evolve.

Orion has seen the highest rate of growth since October 2024 and continues to be our primary recruitment focus. We plan to double the team working on the new Cyberpunk game by the end of twenty twenty five. Regarding our other projects in the pipeline, we plan to increase recruitment in response to evolving project needs. And as the last thing from my part, I’m excited to share that we have entered into a strategic partnership with Scoply to develop a game set within one of CD Projekt’s IPs. That will be all from me.

And now time for some financials, which means I’m handing over to Piotr.

Piotr Milobovich, CFO, CD Projekt: Thank you, Michal, and good evening, everyone. Let’s start the presentation with our twenty twenty four financials with the consolidated profit and loss account on Slide 13. Our group sales revenue for 2024 reached PLN985 million, which corresponds to 80% of the revenues for the previous year when the Phantom Liberty expansion was launched. Cyberpunk and Phantom Liberty were the main drivers of our sales, bringing PLN $589,000,000 to the group. It’s worth mentioning that the Witcher Products family remained a strong and stable contributor to our revenues in 2024 with PLN 163,000,000 in sales, slightly more than the year before.

Sales of goods and materials were mainly driven by GOG, which looking at non CD project products also recorded some growth versus the preceding year. The main reason for the cost of products and services sold being higher in 2023 than in 2024 was the premier related higher amortization of Cyberpunk and Phantom Liberty in Q3 and Q4 of twenty twenty three. Speaking of amortization, the most recent track record of the strong performance of The Witcher three and Cyberpunk has proven their longevity. Based on the achieved sales results, we reevaluated our historic assumptions regarding both titles’ useful life. This exercise led to adjustments in our assumptions for the amortization schemes of the products.

More details on this can be found in our 2024 financial statements. An important note: The new amortization schemes will be applied starting from 2025. Moving on to operating costs. Our selling expenses decreased by PLN108 million down to PLN135 million. The savings came mostly from the following two areas: Lower Cyberpunk IP publishing costs in the non premier twenty twenty four year Lower costs of product maintenance.

And I will come back to that in a moment. Prior to that, in 2024, we involved ourselves more in the early phase research works on our future products. That was the main driver of growth for the administrative expenses. On top of the projects you know, such as Orion, Witcher, Remake, and Hadar, five new product initiatives were kicked off last year, both in gaming and non gaming. The research work costs also include our constantly growing AI engagement.

Moving farther to other operating income and expenses, the positive balance of PLN 30,000,000 in 2023 was supported by the partial reversal and partial write off of our development expenditures related to Project Series. This year, no such one of transactions supported our results. The surplus for our financial operations reported for 2024 at PL 64,000,000 came mainly from the usual drivers such as interest from bonds and deposits. Moving farther to our income tax, in 2023, we recorded a relatively high amount of withholding tax that could not be deducted from our local tax settlements, which increased the overall value of current income tax reported for that fiscal year. In 2024, the tax due on income generated by the activities taxable within the IP box tax regime amounted to over PLN 18,000,000.

At the same time, the reported negative effective tax rate was mainly due to a change in the net deferred tax asset calculation totaling over PLN58 million. This was related mainly to the disclosure of the historical costs qualified for the R and D relief as part of an adjustment to the tax declarations for years 2020 to 2023 in connection with obtaining favorable decisions of the Supreme Administrative Card and an individual interpretation relating to the R and D relief. And finally, our net profit for the last year reached $470,000,000 PLN, only 2% less than what we achieved in the comparative period of the Phantom Liberty Premier. The overall net profitability of the group increased to 48%, while for CD Projekt RED alone this factor was 58%. Annual reports always make me take a longer term perspective on our business.

Let’s proceed to the next slide presenting over a decade of our revenues, costs, and expenses. Two key events mark our growth and cycles: the premiere of The Witcher three in 2015 and the premiere of Cyberpunk in 2020. The order of things was different after each launch, but now for each of the cycles we have a five year perspective to compare against, which I am going to present on the next slide.

Michal Nowakowski, Joint CEO, CD Projekt: I am

Piotr Milobovich, CFO, CD Projekt: proud to show that our revenues for the five year Cyberpunk cycle between 2020 and 2024 were 2.3 times higher compared to the five year Witcher three cycle that started in 2015. Cyberpunk clearly brought us to a new level. And an even better news, net profits for the group presented in green in the recent five year Cyberpunk era were 2.5 times higher than what we had achieved within the five years following the launch of The Witcher three. I believe this is an impressive growth that we aim to continue, as reflected in our long term product outlook and the goals of our incentive program for the coming years. Now we can move on to the next slide, number 16, our consolidated balance sheet.

On the asset side, first, the core of our business, expenditures on development projects. The balance here increased by SEK168 million. The new developments, mainly The Witcher four, Sirius and Orion, but also some that are still unannounced, were responsible for a SEK274 million increase, parallel to a decrease coming from the amortization driven mainly by the already released Cyberpunk 2,077 and Phantom Liberty. Along with the recent and planned growth of our development activity, we also continue investing in our local infrastructure, as visible in the 77,000,000 PLN increase of the property, plant and equipment line item. This was mainly driven by the ongoing construction of a new building at our Warsaw campus.

Our staff team working on the Witcher 4 will move in in the middle of this year. The growth of our deferred tax assets comes mainly from the discussed recalculation of the R and D tax relief, which we will be utilizing in future fiscal years. The total value of cash, deposits, and bonds included in the three asset items marked with an asterisk is summed up under the table and amounts to PLN 1,472,000,000 as of the end of twenty twenty four. I will have a separate slide to provide some more insight on our main cash flow drivers this year. Moving forward to Liabilities and Equity, slide 17.

The most noticeable change here is the increase in our equity driven on the positive side by the strong financial performance of 2024 and, on the other side, by the 2023 dividend paid out at the June 2024. The Board has not yet made the decision on our recommendation regarding allocation of 2024 profits. We will inform you immediately after its adoption. Incidentally, an important decision in respect of future dividends was made in January. We adopted our first ever dividend policy.

Starting from the financial year 2025, the management board intends to recommend a dividend of at least 25% to the company’s net profit for each financial year. To ensure this does not impact our development projects, payouts may be delayed up to five years. Any difference between the 25% and the actual dividend will be reported in our financial reports, providing investors with clear expectations. Undistributed funds may also be used for share buybacks. The policy aims to enhance transparency for shareholders and set clear goals for the management.

But coming back to our balance sheet, among liabilities, our trade liabilities and provisions grew over the last year, but in general, no major changes were noted in this section. Now please move on to the next slide, number 18. So the prior CRAD’s expenditures on research works, development and cost of product maintenance presented here quarterly for 2024 and the comparative period. After the premiere of Phantom Liberty, which took place at the end of the third quarter of twenty twenty three, we visibly regrouped our dev teams. During the fourth quarter of twenty twenty three, following the release, extra effort was dedicated to servicing the Fresh expansion and the Cyberpunk Ultimate Edition released at that time.

And starting this year, we’ve been continuously growing our engagement in both research and development of future projects. The growth over the course of this year is clearly visible. And finally, our main cash flow driver is on Slide 19. The PLN $470,000,000 book net profit, which included over PLN 78,000,000 costs attributed to research works that I have permitted myself to extract on the next bar, was supported by PLN 120,000,000 in amortization and depreciation. At the same time, PLN 98,000,000 was expensed to the acquisition of tangible and intangible assets as discussed on the balance sheet guide.

Summing up all the above, thanks to the strong performance of our games, we came up with an estimation of PLN $590,000,000 generated by the ongoing business. At the same time, we continued our engagement into new projects and technologies, both in the already mentioned research phase and development phase, SEK 78,000,000 and SEK $249,000,000 respectively. And last but not least, at the June, we shared with our shareholders a nearly SEK 100,000,000 dividend. All in all, our financial reserves kept in cash, bank deposits and bonds increased by PLN 163,000,000 over the reporting period, reaching PLN 1,470,000,000.00. To sum up this financial part, I would also like to present where we are in terms of achieving the goals of our share based incentive programs.

The goal for the first financial years of 2023 till 2024 was set at PLN2 billion of our accumulated net profit. After two full years, we’ve delivered PLN951 million, which accounts for 48% of the target. Even though we do not plan to release The Witcher four by the end of twenty twenty six, we are still driven by this financial goal, and although it’s very ambitious, we stand a chance of achieving it within the given timeframe. Before we move to Q and A, I would also like to invite you to celebrate with us the tenth anniversary of the release of The Witcher three: Wild Hunt. To mark this occasion, we are launching The Witcher in Concert, a special world tour that will bring to life the open world RPG’s timeless core with a live orchestra performance.

I personally can’t wait to take part in it. That’s all from me for now. We can now move on to the Q and A session.

Conference Moderator: Thank you. Our first question is from Nick Dempsey with Barclays. Please go ahead.

Nick Dempsey, Analyst, Barclays: Yes. Good evening, guys. I’ve got three. So first of all, in terms of your partnership with Scopely, that’s interesting. Can you first of all say whether you expect an upfront licensing fee for your IP from Scopely in relation to that project?

Or is it just a question of the project runs through and you get your cut at the end of it? And then any sense of timings for that project with Scopely when it might deliver a game? The second question, you said near the end there that you don’t expect The Witcher four to be released by the end of twenty twenty six. Given that you kind of already know that now, can we have any confidence that it will land in 2027? And the final question, the slight reorganization of your project teams around Sirius and The Witcher three: Make and The Witcher four, does that in any way affect the timings of those three projects in the way you’re thinking about them?

Michal Nowakowski, Joint CEO, CD Projekt: I’ll start with the first two, which were about the Scoply and the partnership, which we just revealed. Unfortunately, the answer to that is is probably not gonna be satisfactory. We have no further information to be added on that subject on this call. The time for that is gonna come in the future.

Piotr Milobovich, CFO, CD Projekt: I can take the third question regarding the expected release date for The Witcher four. We are not going to announce the precise launch date for the game yet. All we could share for now to give more visibility to investors is that the game will not be launched within the time frame of the first target for the incentive program, which ends thirty one December twenty twenty six? And regarding the fourth question, no, there are no connections or there is nothing that we can imagine Sirius influencing the Witcher for that team. Both projects run independently.

Sirius is mostly developed in North America on its own. We believe the changes will bring more efficiency and more alignment to the Sirius team with the Sierra Club’s prestigious systems and game development, the way we develop games. And at the same time, Witcher four is developed fully in Poland and the two teams are not crossing in any significant way.

Nick Dempsey, Analyst, Barclays: That’s helpful. Thank you.

Conference Moderator: Thank you. And as we have no further audio questions coming in, I would like to turn it back over to to the team for any webcast questions.

Michal Nowakowski, Joint CEO, CD Projekt: Okay. I think the first question we can see here is from Tristoph Kotz from Erster. And the question is, in your opinion, how big is the chance that GTA six will raise the price the standard price of AAA gains? So, it will be an opinion because we have no intimate knowledge to that. You know, the opinion is that we’re gonna find out soon what’s gonna happen.

There is likelihood for sure. I mean, it’s been indicated on few calls, but it’s pure speculation to be honest. And our stance is if the standard price changes for the markets, it will work towards our benefit for sure. I mean, that’s where we sit.

Piotr Milobovich, CFO, CD Projekt: I’ll take the second question from Tomasz Rodak, Don Maklarski Boesch. In order to deliver your twenty twenty two, twenty twenty six incentive program target, you still need to generate around NOK1 billion net profits in twenty twenty five, twenty twenty six, which seems extremely difficult without any new projects. Would you please shed some light on the new projects that may help you to achieve these goals? Yes, the incentive program targets are for 2023 till 2026, so small correction in dates. But yes, that’s true.

We still need to deliver slightly above PLN 1,000,000,000. And what I can say today is that our business success is based on longevity of our products, active franchise flywheel management and releases of new content. And we expect to be active in all of dimension areas within this, remaining timeframe. Another question comes from Nicholas Langele, sorry if I mispronounce it, from BNP Paribas. Now that you have entered full production for Witcher four, are you able to size the total development costs you expect for the game?

In terms of headcount, since we believe the headcount is at the target size for now, it may obviously somehow fluctuate over the time. But in general, we are where we should be. Yes, in terms of future costs, especially those related to future development stages like localization or QA that will be getting more intense closer to the end of development. Obviously, things will change. But the general rule we will follow here is that we do not guide on future budgets.

Michal Nowakowski, Joint CEO, CD Projekt: The next question is, can we also coming from Krzysztof Kotz from Erste. And the question is, can we ask for an update on the progress of the animation live action projects? We have no specifics to be shared. I would only say that these are two separate processes. And when it comes to animation, we’ve seen some teasers end of last year.

So naturally, I would expect more information coming sooner on the animation side rather than the live action. And other than that, we really have nothing new to share with you about that today.

Piotr Milobovich, CFO, CD Projekt: Next question comes from Krzysztof Tkocz, Erste. What percent of investment expenditures are animation, live action projects and unannounced projects? So most of the investments, expenditures and development projects come from the major products we are involved in, which is The Witcher four and Orion. As for now, the other projects are much smaller than than the main flagship titles we work on.

Michal Nowakowski, Joint CEO, CD Projekt: K. And next one is coming from Zagros Balzerski from Trigon. It’s a long question. I’ll read it. I have a question about the whole new Witcher trilogy.

You have probably already had some experience with the production of the new Witcher. Based on this work and observations of the entire development process so far, also taking into account the use of the new Unreal Engine, Do you think that it is possible to release the entire Trilogy in a six year window? So, at this moment in time, we we see nothing that would prove this goal to be impossible. Our experience of working with UE five is is is actually pretty good. We’re progressing as planned.

Any hiccups that we can we encounter, we’re able to straighten out, so, you know, ourselves and sometimes with support with the with the EPIC team. So so nothing changes in terms of our outlook towards the frequency of releases in the Witcher three trilogy.

Piotr Milobovich, CFO, CD Projekt: Petr Poniatowski, MBank. Kudos on the results. Could you once again explain what has happened on the tax line in Q4 twenty twenty four alone? Why was it that much negative? So thanks to the favorable decisions of the Supreme Administrative Court and an individual interpretation relating to the R and D tax relief, we could recalculate historic disclosures of the R and D tax reliefs in our historic tax declarations for the years of 2020 till 2023.

And based on that, we could generate or we came to an increased R and D tax relief available to the company, which influenced our deferred tax asset calculation. And this increase of the deferred tax asset calculation generated influence on the total tax calculation, opposite to the 18,000,000 taxes that we paid within the IP box tax regime and this extra R and D tax relief that we obtained thanks to the Supreme Administrative Court rulings, will allow us to spend less on taxes in future years to utilize the r and d tax reliefs in future years. But this r and d tax relief is already available to the company, and some part of it was also used in 2024 tax declaration.

Michal Nowakowski, Joint CEO, CD Projekt: Okay. And the next one is coming from, Nicola Langlais from Banpe Paribas. And the question is, can you update us regarding the development, deployment and use of generative AI tools within your development process? As a concrete example, do you plan to use any type of Gen AI tools for which are for development? So, I think we mentioned before that last year, we set up a team that’s investigating the potential use of AI solutions in our future products, including development of our own customized AI models.

And we have several research projects underway. However, they are really not necessarily focusing on generative AI. Gen AI, to be honest, is is quite tricky when it comes to legal IP ownership and so on and and many other aspects. So so, when it comes to implementation of AnyGen AI in the actual games, we really have nothing nothing, you know, happening when it comes to Witcher four or or any any projects in the near future. I mean, should the should the legal status of of that change, we, you know, we may we may look at it, but there’s there’s nothing happening with Gen AI specifically.

There’s various other tools we’re looking at or or using, but not, you know, not Gen AI oriented so much.

Piotr Milobovich, CFO, CD Projekt: Okay. So the next question comes from Alexey Filipov, JPMorgan. What is the impact on depreciation in 2025, ’20 ’20 ’6 from the new accounting policy? It’s not actually a new accounting policy. The policy is the same.

However, based on the great performance of Cyberpunk and Witcher three in the recent quarters, we decided to reevaluate our amortization schemes, which should be in line with expected products used in the future. And right now, we updated our plans for the future. Hence, we also updated our amortization schemes. And as far as what size of effect it may have on our future results, What I can say from the top of my memory is that for 2025, for Cyberpunk and Phantom Liberty together, the quarterly amortization was supposed to be around PLN 16,000,000 and after this reevaluation it will be down to approximately PLN 30,000,000. So the difference will be PLN 3,000,000 per quarter.

It’s not a huge one. And in case of the Witcher three next gen version, the effect will be even much, much smaller as the base amount for depreciation that is still remaining is a level of magnitude lower than what we had for Cyberpunk and Phantom Liberty still to be amortized. Another question comes from Alexey Filippo of JPMorgan. Why ResearchWorks costs hatched down in 4Q compared to previous quarters in 2024? ’10 million dollars in fourth quarter twenty twenty four versus 20,000,000 per quarter in Q1 Q3 twenty twenty four.

I’m not sure if I understand the question right now, but I believe I tried to give you an answer in my commentary. Basically, we started capitalizing expenditures on Orion starting from September, and that’s why, starting Q4, the expenditures on development projects grew. And at the same time, the early research work cost presented in general and administrative expenses decreased.

Michal Nowakowski, Joint CEO, CD Projekt: Okay. The next one is again from, Nicola Langre from, Ban Preparipa. And the question is, do you plan any meaningful licensing deals in 2025, like the one you signed in 2024 with Sony or the Witcher three. So, it’s it’s it’s as I understand, it’s about including Witcher three in the in the PlayStation plus subscription. So we stand on a position that subscription can work well for the back catalog titles.

And it always requires careful consideration at our end. We try to make, in these cases, you know, the best possible decision business wise, looking also at the timing, whether it makes sense for the franchise at a given moment. And so so the end, the long story short, we may consider that that is not a confirmation at my end that we’re doing something like that this year specifically. I’m just trying to explain how we look at these things. So one thing I can I can definitely state is we’re not fans of including titles, you know, in subscription services of any kind for the launch?

However, for a back catalog, again, if it makes sense business wise, time wise, from the franchise perspective, we we can consider that. But there’s no confirmation for twenty five, six or any other year coming from me here right now.

Piotr Milobovich, CFO, CD Projekt: Morgan. Do you have any indication where your effective tax rate might settle in twenty twenty five, twenty twenty six? Did I understand correctly that you have more deferred tax liabilities to recognize in twenty twenty five, twenty twenty six? So book wise, we’ve already recognized the deferred tax assets, which we will be consuming in the future. Hence, our cash flows related to income tax will be somehow limited.

But at the same time, book wise, we will be accounting the taxes the regular way. I know it’s not a very precise guidance, but since the tax calculations are pretty complex, we use two tax regimes, both IP box regime with 5% taxation and the standard one of 19%. What I can say for now is that our standard taxation, in case nothing extraordinary happens, should land in between 519% of the gross profit.

Michal Nowakowski, Joint CEO, CD Projekt: And the next question is from Grzegorz Malzewski from Trigon. And the question is, I assume you participated in recent GTC. And, recently, as main topics were layoffs and AI and gaming, what issues dominate the GDC this year? That’s a interesting question. I did participate in GDC.

I was I was there last week, together with lots of members of our team. And while you are correct that layoffs and AI were the subjects of the past years, I did not really find a very, very dominating subject this year. I think I think there was maybe a lot of, you know, people talking about everything at the same time. Still, there were some people talking about layoffs. There was a lot of conversations about, you know, whether the industry is rebounding.

The AI charter has has gone a little bit more quiet compared to the previous years, which doesn’t mean that AI is not a subject for the industry. On the contrary, I think it is, and I think everybody else, does as well. It’s just the novelty of it has has worn down a little bit, so it’s not such a buzz buzz term as was, for example, last year. I think there’s a lot of discourse and about whether the industry is growing overall. And I I have noticed myself that the perception of that depends on, where you’re positioned.

So so, basically, depending on which corner of the industry you’re occupying, some people believe it is. Some people believe it’s not so much. And these are very subjective positions, to be honest. So, there was no specific dominant theme I could really notice this year specifically. Alright.

And as we have no further questions, as it seems, I’d like to thank everybody for joining us today. And if you have any follow-up questions, feel free to contact our wonderful investor relations team. And

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