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CD PROJEKT S.A. (OTC:OTGLF) Q1 2020 Earnings Conference Call May 29, 2020 6:00 AM ET

Company Participants

Adam Kicinski – President, Joint CEO

Piotr Nielubowicz – CFO

Michal Nowakowski – SVP, Business Development

Conference Call Participants

Matthew Walker – Credit Suisse

Omar Sheikh – Morgan Stanley

Ken Rumph – Jefferies

Nick Dempsey – Barclays

Piotr Lopaciuk – PKO

Tomasz Rodak – BOS

Marcin Nowak – IPOPEMA Securities

Operator

Dear ladies and gentlemen, welcome to the conference call of CD PROJEKT S.A. 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. [Operator Instructions]

May I now hand you over to Adam Kicinski, who will lead you through this conference. Please go ahead.

Adam Kicinski

Good morning – actually good afternoon. Welcome to CD PROJEKT’s Q1 2020 results conference call. My name is Adam Kicinski, and I will run the presentation together with Piotr Nielubowicz. There’s also Michal Nowakowski with us and he will join the discussion for the Q&A session that is planned after the presentation. The presentation is available on our webpage, cdprojekt.com.

What you can see on the cover slide of the presentation is not V, it’s actually a Roman five to mark the 5th anniversary of the release of Witcher 3, and thanks to gamers, we just got the birthday present. Take a look at the second Slide. Sales of The Witcher series have hit another sales mark – milestone, totaling 50 million copies, with Witcher 3 accounting for almost two-thirds of that number. Piotr will tell you later, a bit more about figures.

Let’s go to Slide number 3, and have a short update on COVID. We are still working from our homes and we have adapted to the situation. We are focused on the final phase of Cyberpunk and the whole development team will continue to work remotely till the end of August. We are also supporting local charities in the fight against the epidemic.

Moving on to key business events of Q1, I would like to start with Thronebreaker’s release on Nintendo Switch. Please go to Slide number 4. As you may know, Thronebreaker is our original take on CCG brand that with classic isometric RPG. It found its niche within which it is performing well.

Let’s move on to slide number 5. At the end of Q1, we released GWENT on Android as planned. It’s worth mentioning that just as on iOS, GWENT is highly scored on Android. On the next slide, Slide number 5, you can see our revenues for the first week after the release on each platform. For PC and consoles as launched, we took the re-release of GWENT so called homecoming that took place at the end of 2018. Now our CCG is available on all systems, but on PC we’ve just extended accessibility by releasing GWENT on Steam earlier this month.

Let’s jump to Slide number 8 and 9. For the first time, media representatives and global opinion leaders will be able to try out Cyberpunk 2077 in June. This is an important milestone for us and we expect to collect initial feedback around mid-June. Also we plan to run Night City Wire, which will take place on June 11th. For now, we are not providing any detailed information regarding this event, but we wish to already invite everyone to tune in to our broadcast.

Let’s move on to the financial part. Piotr, the floor is yours.

Piotr Nielubowicz

Thank you, Adam. I’m proud to say that both in the respect of sales and net profit, the first quarter of this year was the best first quarter we ever had in our history. Let’s jump directly to Page number 11, CD PROJEKT Group profit and loss calculation. Our consolidated revenues reach nearly PLN 193 million which is 2.4 times more than a year ago. Both our segments posted increased sales. GOG grew nearly by half and CD PROJEKT tripled its last year’s result.

Where did the growth come from and what supported it? There is no simple answer. Looking at our products in Q1 this year, we saw excellent performance of Witcher 3, including the Switch edition which wasn’t released until last October. Other new products that added to this year and were not available in Q1 2019 are the ones that I’m just mentioned a minute ago.

GWENT released on iOS last Q4 and on Android at the end of March this year, and Thronebreaker released this year on Nintendo Switch. The above four new additions boosted our sales this year versus the first quarter of 2019, but we also experienced increased sales of our other products. We believe that there was more than one reason behind it. First, the Netflix series released at the end of 2019, which added to the recognition of The Witcher universe, and the lockdowns implemented in many countries around the world due to the COVID pandemic.

Along with the increase of revenues, our costs quarter-on-quarter also grew. On the cost level, the growth was 1.7 times which allowed the gross profit on sales to increase 2.8 times. And on the operating cost level, the growth was 1.5 times which made the EBIT grow 4.8 times versus last year.

Along with higher financial incomes and proportionally lower income tax, our net profit for the first three months of 2020 reached PLN 92 million growing over 5 times comparing to the first quarter of 2019. To put this into some longer perspective, please have a look at the next page, Page number 12. Revenue-wise during the last quarters, it seems like Christmas came twice. The next page presents our net profit versus sales, both in the last Q4 and in the first quarter of this year roughly 50% of our Group sales stayed with us as net profit after taxation.

The next table, our balance sheet, Page number 14. Assets and fixed assets to start with. The main growth comes from expenditures on development projects, obviously, mainly due to Cyberpunk 2077 development. And again, to put this into some longer perspective, please have a look at the chart on the next page, our outgoing cash for expenditures on development projects.

During the first three months of 2020, we spend a bit less on developing games and technologies than we did in the preceding quarter. This is mainly due to the completion of The Witcher 3 Switch project and lower spend on external services mainly related to Cyberpunk to get in closer to the accomplishment of the project.

Continuing with the balance sheet on the next page within working assets to positions change. Our receivables decreased, this is natural since after the successful fourth quarter of 2019, we had relatively high open balance of our receivables. And the nicest part, our cash position, including all bank deposits grew by PLN 128 million. I will get to this in a moment.

Equity and liabilities. Equity grew driven by our profits of the period and on the short-term liabilities side, the biggest change was reported in the deferred revenues line. The over PLN 22 million increase comes mainly from our royalties on continuously growing PC digital preorder sales of Cyberpunk, okay. And the most important, changes in our cash position, please flip to the next page.

We started this year with PLN 482 million on our accounts. Our net profit for the period reached PLN 92 million. From the reduction of receivables, we get additional PLN 73 million inflows. The balance of all other adjustments added PLN 17 million and the main positive driver here comes from inflows related to the deferred revenues on Cyberpunk of PLN 22 million. At the same time, we spent PLN 54 million on development as I said a minute ago, slightly less than in Q4.

All in all, we ended March with PLN 610 million of cash and deposits, that is PLN 128 million more than the opening balance for the year. As many of you may know, a few weeks ago, we reported our plan to diversify the allocation of our cash assets. We would like to convert up to PLN 300 million into treasury bonds, the half-half between domestic and foreign key bonds. The foreign ones issued by the USA, Germany and Switzerland. The FX exposure should be limited by respective hedging transactions. We’re currently in the process of reallocating the funds.

Thank you. That’s all from my side. We can now start the Q&A session

Question-and-Answer Session

Operator

[Operator Instructions] And the first question is from Matthew Walker, Credit Suisse. Your line is now open.

Matthew Walker

Thanks a lot. I’ve only got one question, please. The first is, well, the question really is around you said you wouldn’t be giving much more details around the June the 11th events, but could you say whether the June 11th event is a strong signal that you are indeed ready to launch the game in mid-September as you previously outlined?

Michal Nowakowski

So hi, this is Michal Nowakowski speaking. So June 11th event is not really related to a launch date in any way. I mean, this was supposed to be [e-free] [ph] and we were planning things for that time, no matter what, to be honest. So I’m saying that because it’s really just not, it’s our – it’s in view of our e-free what we’re doing, so Night City Wire is what we would have preferred for e-free of course, in a different forum, because we don’t have the gathering of people in convention center in LA, it’s digital, so it’s going to have a different form and so on, but it’s predominantly really just that –

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Matthew Walker

As when – no that’s fine. But is there anything that you’ve come across in terms of the home working or foreign translations or anything that would make you think now that you are not on track for the launch date?

Michal Nowakowski

No, I mean, the release that still continues to be scheduled for the September 17th. And you know the whole team is working really hard to deliver on that date. You know, the final few months are always the biggest obstacle, the biggest hurdles. So these are always the most crucial months for sure and we know that from our past experience, you know, we’ve been there a couple of times already in the past, and well truth is, this is the first time we’re doing that remotely. So you know, we learn as we go. This is the first time for us. So I don’t know, I guess that’s as much as I can say I mean in terms of that. I’m not sure if it answers the question, but…

Matthew Walker

Okay, thank you very much.

Michal Nowakowski

You know we already –

Matthew Walker

No, that’s helpful.

Michal Nowakowski

Thank you. Thanks.

Matthew Walker

Thank you.

Operator

The next question is from Omar Sheikh, Morgan Stanley. Your line is now open.

Omar Sheikh

Good morning and afternoon, everyone. I’d have a couple of questions, if I could. The first is on the Witcher. I mean first of all, did you I’m trying to look back to see when you went through the PLN 40 million mark for sales at all platforms, I wonder whether you could just tell us approximately when that was so I can get a chance to get a sense of the cadence up to the current levels of total sales?

And then you mentioned in your prepared remarks that there were two impacts on you know, demand for the Witcher. One, being the Netflix series and the other being lockdown. I wonder whether you can maybe just talk about what the mix between those two sort of influences on demand have been which one is more important. Obviously just given, you know, one would expect the Netflix effect to be ongoing and obviously the lockdown effect not to be so? Some comments on that would be helpful. That’s the first question.

And then secondly, we are, you know, kind of coming out of lockdowns in developed Europe certainly and obviously the markets where you’re aiming to launch Cyberpunk into, in September. So I’m just wondering whether you could make some comments about the demand environment you currently anticipate for the launch? Because I guess there’s one school of thought that as the lockdowns ease, you might have a bit less of a tailwind than you currently have in terms of consumer appetite to buy your products? So some comments that would be helpful. Thank you very much.

Adam Kicinski

Hello, Adam Kicinski. We announced PLN 40 million of all three Witchers together at Q3 last year, June 2019. So it took us less than a year to add PLN 10 mill to this and most of this 10 mill is of course Witcher 3. Piotr will you continue?

Piotr Nielubowicz

Yes, the question was, what had a bigger impact on ourselves whether it was the Netflix series or the COVID lockdown pandemic situation. Honestly speaking, we do not track users and their motivations, so we are unable to precisely answer the question as I tried to state during my part of the presentation, there were several factors stimulating ourselves.

So first of all, new products from our side and secondly, the market situation plus the Netflix, I believe none of the factors would give such an impact if they were single, but combined, all of them together allowed us to visibly increase the revenues. And the other, I think that’s all I can say. It’s really hard to measure what’s that bigger impact whether it was Netflix or COVID pandemic.

Adam Kicinski

And I would add one more thing. Last year, revenues for Witcher 3 doubled the results of 2018. So it’s not only about the first quarter of this year or the last quarter of 2019, the whole 2019 was great. So which is doing good – great. There’s maybe one more factor and we are heavily promoting Cyberpunk, but of course, the main companies were ahead of us and there is an obvious association between Cyberpunk and Witcher and we produce both. So it might be like with any past release that, and it will – and again release hubs in sales of backup each time so maybe this time the promotion of Cyberpunk is helping itself and for Witcher 3 as well.

Omar Sheikh

Okay, thanks. And then demand environments September release?

Michal Nowakowski

Yeah, so I’ll take this one. This is Michal Nowakowski again. So we’re in constant touch with all the market, because it’s mostly – your question has mostly – is mostly relevant when it comes to physical market, because in terms of digital, there’s really – there hasn’t been really any barrier in terms of digital downloads from any of the storefronts globally. There had been, of course, quite a few barriers when it comes to physical purchases and stores being open all across the globe.

So the situation of course, as you probably know, vary depending on the territory, on the region of the world, but it’s increasingly optimistic, almost globally I would say, there’s more and more story openings and maybe except for Latin America, South America where the situation is quite grim. But even there, at least when it comes to Brazil, there is expectation of things getting better towards September. I literally had a chat about that with the partners about a week and a half ago. So it’s relatively refresh.

But when it comes to key markets like US, Europe, Asia, there’s – I want to – I don’t want to say a huge optimism or anything of that kind but everybody believes things are going to go back to normal when it comes to sales and stores being open, customers being able to make purchases so yeah that’s pretty much how we see that situation. We do believe that things are definitely going to improve in terms of you know, stores being available for customers to shop, that – those experience may vary that maybe some store pickups and so on, but basically things should be relatively normal in September that’s what’s most of the markets seem to believe.

Omar Sheikh

Okay, great. Thank you very much indeed.

Michal Nowakowski

Thank you.

Operator

Your next question is from Mr. Ken Rumph, Jefferies. Your line is now open.

Ken Rumph

Hello everybody, Ken Rumph from Jefferies. I had three questions. One was just on staff and kind of how numbers are changing? Apologies, if I missed that at the beginning, and the kind of recruitment during this period? Second one was regarding Cyberpunk and the process of adapting the game for next generation consoles and kind of whether the hardware and sort of work from home situation was affecting that?

And finally, I wanted to ask about your most important great game, GWENT. Obviously not your most important game, but I’m interested because unlike sales of The Witcher, in a sense if you know, people buy The Witcher today, there isn’t a DLC to buy, you know, later in the year or next year. It’s a kind of one-off benefit until another game in that universe arrives, which is a little while I’m sure. Whereas, GWENT is you know, the more players, the more potential monetization, particularly on mobile and also, it’s kind of a test run for a live game. So just interested in the extent to which you know how the GWENT’s gone, how your experience with that is going? Thank you.

Adam Kicinski

Hello, Adam Kicinski. So I’ll take the first one. In terms of recruitment, before our outbreak happened, so last year we decided to slow down the recruitment for 2020, because this is very natural. Every time when we release the game, we are focused solely on this and we are not hiring that match. Of course, there are some open positions, but it’s like I would say 10% or 20% of a normal recruitment activity. So we are doing, I mean, we are dealing with this without any bigger problems.

Of course, I mean, recruiting remotely. It’s a bit tougher, but it’s not actually – it’s not only I mean, recruiting is not that tough than onboarding and first miles are challenging, but as I said, the number of people joining us this year is very, very limited. And we don’t see any threats in this regard.

Ken Rumph

Thank you.

Michal Nowakowski

And – Michal Nowakowski again. And the second one was about next gen, and is that correct?

Ken Rumph

That’s right. Yes. Thanks.

Michal Nowakowski

All right. So we, as you know, we’re working on the game on the, currently on the PC, PS4 and Xbox One. We don’t really have – not much to comment on the next gen to be perfectly honest.

Ken Rumph

Okay.

Michal Nowakowski

The whole focus currently is into the diversions we have announced which is PC, PS4, Xbox One and we also announced [indiscernible]. And the last question about GWENT. So could you just rephrase a little bit to make sure that we thought it’s –

Ken Rumph

Okay –

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Adam Kicinski

And – one moment, I will – one thing, but of course, we are going to release next gen. So we’re not talking about this now because we are focused on the current gen, but as we said to the next gen Cyberpunk will be released next year.

Ken Rumph

Okay, understood. Okay, my GWENT question had two parts. Firstly, just your experience operating a live game, because obviously you intend to have a Cyberpunk multiplayer live game in future which is too close. So I’m interested in kind of your experience of that. But also in a sense, the sales that you make or new players that you bring into GWENT, can benefit you in future periods where in a sense, as I say, if someone buys a copy of as I’ve done the Witcher 3, there are no more DLC, there’s nothing more for me to spend money on until, you know, another you know, Witcher again comes out which we anticipate will come, but as I say, you know, it’s kind of a one-off. So I’m interested in that potentially recurrent part of the business in GWENT? Thanks.

Michal Nowakowski

So yeah, I mean, of course we have accumulated a great deal of experience of the past couple of years when it comes to operating a live game. This was the first one for us so this has been a big experience, in theory, we knew quite a bit, but in practice, of course, turns out that you keep learning with everyday as you make progress and that was definitely the case with us.

When it comes to the learnings we’ve taken from GWENTs to Cyberpunk then yes, of course, there is going to be quite a few things that we will take out from that and apply to Cyberpunk multiplayer and not to say that Cyberpunk single player there’s not going to be any micro transactions or anything of the kind in the CP single player as we take at a number of times. But I prefer to emphasize that every time, because then things get quoted in a weird way sometimes.

But in the multiplayer, yes, I mean, multiplayer is something that we’re planning not just to launch, but of course, to operate. So this is a long-term thing we’re envisioning and it’s an operation that’s going to have, you may imagine kind of like GWENT has a few smaller launches, you know, from the moment of its, let’s say, big opening, so there’s going to be additional content produced and launched on a regular and steady cadence. So that’s definitely the plan for Cyberpunk we want to make sure that people who will enjoy that kind of formal gameplay will be willing and happy to come back for new content as we keep developing that.

Ken Rumph

Thanks, Michal, I’m sure you’re right to remind people about no monetization in Cyberpunk singleplayer before Twitter melts. Can I just come back to Adam and ask a question related on the point of staff? How do you feel about your experience of working from home and the potential for the future operations of the Group either in kind of in a sense, also rest lot of staff working from home, but also the potential for you to have a kind of distributed workforce, because, you know, apparently, you can pretty effectively, you know, people can work from home and home doesn’t have to be Warsaw, Poland. Have you had any thoughts about the kind of longer-term pattern of work?

Adam Kicinski

Yes. We have, but we are not ready to share it yet. But still discussing it and we are not sure. I mean, we’ll see how we’ll feel in September after next three months. And one thing I’m pretty sure about is that, in a creative environment, being able to work in a group in one place adds value, add value. That’s why we try to do as much as possible in Warsaw. Of course, we have two teams out of Warsaw but everything gravitates to Warsaw eventually. So that I – I’m a bit skeptical about long-term, full-time remote work, I would say.

Ken Rumph

Fair enough. Thanks very much.

Operator

Your next question is from Nick Dempsey, Barclays. Your line is now open.

Nick Dempsey

Hi guys. I’ve got two follow-ups. First of all, Ubisoft in their most recent call they talked about issues around motion capture some localization issues, voice recording from those things that needs to be done physically, which they worried would delay, perhaps one of their games or more. Is all of that done, Cyberpunk, all the things that work in that kind of list that would be most difficult to do at home. Is that behind you in the project?

And the second question, I’m sure you must have been tracking the recent uptick in sales of games consoles globally during lockdown. Do you think that objective enough to make you more confident about the number of console units of Cyberpunk you can sell or does it not move the needle enough?

Michal Nowakowski

All right, so it’s Michal Nowakowski again, I’ll take this one. So when it comes to more capital, all these things which created a lot of difficulties for some of the other studios are actually behind us, yes. So as I think we mentioned during the last conference, we – the main biggest challenges in terms of like the raw production, I would say, were with some of the localization, some of the recordings and those challenges are actually slowly going away. I’m not saying they’re completely gone, but they’re minor. So we’re not really worried about that.

But when it comes to like physical mock up sessions and so on, I mean, we’re good with that. So this is no longer a threat. We’re more at a back fixing stage and polishing the final quality of the game then the stages that you’ve described earlier.

Now, when it comes to the number of consoles, we’ve been confident with the number of consoles, you know, before, so of course, you know, the more consoles, the better for us from our perspective, it’s very hard to draw a direct correlation between the number of potential units sold and the number of consoles sold, especially the ones that were sold at the end of the lifecycle, because these are very often very casual consumers who may reach for a sports or racing game, but not necessarily for something like we’re doing.

So I don’t think we’re really attaching that greater value to that. I’m pretty sure there will be some consumers for us, you know, in that last cohort of, you know, new consumer owners, but I don’t think we’re really creating in our heads large value around that to be perfectly honest.

Hello?

Operator

It seems like that he is not anymore in the teleconference right now and we have no further questions. So I would like to speak the reminder. [Operator Instructions]

Michal Nowakowski

All right, so the first question I see in, is from Mr. Szymon Nowak from BNP Paribas. Do you plan more corporation with Nvidia connecting sales with Cyberpunk with graphic cards and something else?

So we can only talk about what is announced. So we have announced that there is a – we have a marketing call with Nvidia. So there’s quite a few things happening between us, which were announced beforehand, most of them are announced some few things may still come up.

But we’re not planning to bundle Cyberpunk keys with graphic cards, which is a very specific question I can definitely respond, this is not implants. It’s currently the things that come – the things to come is more about certain PR activities, you know, around each other’s brands, which is a normal activity in terms of marketing corporation, but Nvidia is a partner for sure and continues to be so for Cyberpunk.

Operator

We have another question via the telephone line is from Piotr Analitykiem. Piotr, your line is now open.

Piotr Lopaciuk

Hi, Piotr Lopaciuk, PKO. I have a question or just correct me if I’m wrong. But when we were talking like three months ago, we were talking about some time buffers. And maybe that’s September that because maybe some date would not be the best for sales or it could be even earlier. Now, I think there’s some bit – a bit more focus on the fact that working from home makes some difficulties. Is this correct impression or just the wrong feeling and could you elaborate on a bit on that? How sure earlier you were talking about some time buffers now that you can move the – can postpone the release? And but sure, I imagine you would basically focus on doing the best still on the current generation of consoles? Thanks.

Michal Nowakowski

So – but I think you’re touching upon similar thing that was asked in the very beginning. I recall the question. I pretty much have not much out there to be honest. As mentioned, we’re working towards the 17th. You know, work from home and closing the game from home is the first one for us. But that’s pretty much it. I mean, and as I also mentioned in yet another question, yes, we’re working towards the current gen consoles and PCs. And you know, when it comes to next gens, we’re definitely going to be out on them. But we’re going to announce when we have something to announce which is unfortunately not now.

Piotr Lopaciuk

Thank you.

Michal Nowakowski

Thank you.

Operator

Your next question –

Michal Nowakowski

And please in the meantime, yes please go ahead.

Operator

Yes, please – okay. The next question is from Tomasz Rodak from BOS. Your line is now open.

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Tomasz Rodak

Yes, hi. Can you hear me now? Hello.

Michal Nowakowski

Yes.

Tomasz Rodak

Yes. My first question was already answered. I wanted to ask about the localizations and how is the progress going? I remember that you were talking to this pandemic environment is slowing down. But I get that you mostly got through this. But and the second question is, yeah, the company is getting bigger with regard to the capitalization and I wonder if you haven’t even considered do a listing on some other exchanges then Warsaw Stock Exchange and if yes, what kind of benefits would you like to see with this dual listing process? Thank you.

Adam Kicinski

All right, Adam Kicinski here. I’ll take this one. Well dual listing is something we might consider one day, but to be clear, CD PROJEKT is a Polish company. We’re doing business in Poland and we’re listed on Polish Stock Exchange and we’re happy with this.

I mean, the only thing we might consider one day is to have an access to a broader audience of funds. But this is a matter of the rather distant future. So for now we are focused on delivering the game and we are not considering any projects like this in the nearest future.

Tomasz Rodak

Yeah, thank you.

Operator

The next question is from Mr. Nowak, IPOPEMA Securities. Marcin, your line is now open.

Marcin Nowak

Good afternoon. Thank you for taking my questions. As a follow-up to one of the previous questions, it was said that the recruitment for 2020 was slowed down. Could you please provide then some updates regarding your plans when exactly you expect the company to be able to work on two AAA titles at the same time with two full teams in full capacity? I am not talking about the multiplayer but on triple based play titles? Thank you very much.

Piotr Nielubowicz

Multiplayer is planned to be AAA. AAA so multiplayer is definitely among them and bear in mind that, we don’t need the same size of a team for the whole course of the production. So it’s better to start with a smaller team like, I don’t know, 70, 80 people, sometimes even 50 for the first year, and then you grow the team during the pre-production and it grows rapidly when you enter the full production phase. So somewhere in the middle of the project.

So we don’t – we don’t have to and it’s better not to have two big teams and – teams which are too big at the very beginning. So I believe that we are ready after Cyberpunk start working on more than one time – one thing at a time.

Marcin Nowak

Okay, thank you.

Operator

We have no further telephone questions. I would like to hand back to you, gentleman.

Piotr Nielubowicz

Yes, so if possible, I’d like to refer the question from Anna Kazaryan. The question is, could you please clarify your decision to allocate the cash assets towards the purchase of treasury bonds? The decision is based on the idea of further diversification, how we allocate the cash. Historically, we kept all our cash in banks and we decided that it is possible, higher volatility of the markets, it’s better to spread it and not only keep it in banks, but also to purchase some of the T bonds. And that’s what we are arranging right now.

The second part of the question says, does it anyhow expense potential dividends after the release of Cyberpunk? No, definitely not. I mean, the two events are not related one to another. I would rather say that the idea of diversification cash right now comes from the fact that we are not assuming any dividend for this year. So we know how much cash we have for now and we want to relocate or spread the funds that we currently have on hand.

Michal Nowakowski

All right, then the next question I have is from Mr. [Philip Gurevich] [ph]. Did you change your internal assumption regard digital copies shared versus physical during the first month of the launch of Cyberpunk?

So we do assume that maybe more copies sold in digital than we, let’s say planned, I don’t know, in 2019. Just because this year and the situation has been a first experience of buying something digitally for a lot of people and probably some other people are going to convert maybe permanently or semi-permanently. At the same time, you have to remember that we actually have a very attractive physical offering in the units we’re offering in the physical retail, which is highly unusual situation for a new game being launched.

So what I’m saying here is probably there’s going to be some consumers who will still want to have that physical copy. So we’re not changing that share between internally – that share between digital and physical by a landslide [ph] it’s, we do have to assume there may be some uptick but not a huge major one, but it’s a guessing game to be honest.

Adam Kicinski

Adam Kicinski and I’ll take the question from Szymon Nowak. And the question is, what is the expected stable FPS rate on Xbox One, and I’m sorry, but this is to be announced in the future so we are not revealing this kind of details as for now. So it will be provided with this information closer to [indiscernible].

Michal Nowakowski

And the next one is from Mr. Neil Campling from Mirabaud. Do you have more details around the mid-June playable information for media in invited gamers? Are they signing in the Ace as this whole company-only feedback?

So let me start from the end maybe the media invited into the hands-on, of course, certainly in the Ace, but there’s an embargo. After that embargo passes, they will be able to reveal while their opinions on what they experienced publicly, so I guess that answers the latter part of your question. So it’s not for company-only feedback. It’s not mock reviews. It’s not internal feedback. It’s actually meant to be revealed publicly, and frankly speaking, this is as much as we can reveal here right now about the mid-June have some experience.

Yeah, okay. And the next question is from Mr. Konrad Krasuski [ph]. Do you expect that elevated demand for games will be sustainable after lockdown and happening mind looming economic downturn or it will require much stimulus from studios to keep players of consoles PC how it goes for Cyberpunk release?

It’s a very convoluted question, but let me put it like this. I – we do strongly believe and I believe that high quality entertainment in a form of video game or a movie or anything else really is going to be sustainable after lockdown and people will – people are of course craving you know, going out and outdoor activities, but knowing humanity that probably is going to be you know, satiated at some point as well and then people are going to go back to more normal behavior. So some sort of equal desire to have fun you know, both outside and indoors with a movie or a video game and whatnot.

So I do believe that if you create a compelling experience in a form of video game, a truly AAA epic thing for people to experience, yes, they will want to have that kind of experience, they want to enjoy that because it’s just another form of having fun which humanity enjoys. So I don’t think it will require any additional stimulus apart from creating that content and of course, telling people by form of – by means of marketing that you know, the game is out and making sure the media right above that. So pretty much our ABC of what we’re doing. So we do not expect to have any negative impact if that’s your question on the Cyberpunk release in that form.

Piotr Nielubowicz

Okay, another question from Anna Kazaryan. Could you please give us an update about customers’ behavior in April-May, do you see an elevated demand for gaming or the customers are full of gaming and you see demand is going down?

Basically, please let us report this second quarter first and then I will be glad to comment it, but there is nothing spectacular that we are noticing right now as far as we see the sales in April and May, I mean, gamers are definitely not bored by games and we do not see any significant decrease or increase towards what we were expecting basing on previous month.

Michal Nowakowski

And the next question is from Gabriela Burdach. And the question is, how long is embargo for reviews in June? So, of course I cannot comment exactly on that, and I want, but I can tell you that typically such embargoes are made to make sure that the journalist that the whole group of journalists that have access to such portion of the game have enough time to experience that and write their opinions in forms of previous and so on. So it’s enough to give them that kind of time and that’s as much detail as I can – as I can share.

Adam Kicinski

As we have no more questions, I would like to thank you and let’s see on here on the results on the conference, on which we’ll talk about the results for the first half of this year. See you then. Bye-bye.

Operator

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.