Paradox Interactive AB (publ) (PDX) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Paradox Interactive Quarter 3 2023 Live Stream. I'm Fred, and with me, I have Alex. Welcome.

Thank you, Fred. How are you?

I'm good. Good to be here. I just wanted to start by saying that we've gotten a couple of game-related questions sent into us. And this stream is not for answering game-related questions in general. I'm going to comment a bit on Cities; Skylines II, even if it's outside of the quarter. But apart from that, I would like to ask everyone to go to our respective pages for the games where the teams have their dev diaries and they answer questions about the games, et cetera. So we'll keep this to the reports and to the finances in general. So let's kick start this. That's me. And as we know, our quarters vary quite a lot. It has to do with what releases we have in said quarter. So Q3 this year was probably the quarter since we listed the company with the least action, if you want to call it that. So it was very slow on releases. It has to do partly with we had a heavy Q2. We're going to heavy Q4 with releases for most of our main titles. But it's a natural -- it varies naturally, but we aim to perform more equal over time as well with our releases. So another thing that is worth mentioning is that the first game from Paradox Arc was actually lifted into our portfolio, and that is Across the Obelisk that has performed fairly well for us. It's not going to be a record-breaking seller yet, but we'll see in the future, it shows some good promise there. So going through releases and announcements is fairly quickly done, as I already mentioned. We had Wards & Wardens for Crusader Kings III, Dawn of Wonder for Victoria 3 and the first bigger DLC for Across the Obelisk: Sands of Ulminin. We also announced a game Millennia, which is due for release in 2024, in the beginning of 2024. Commenting a bit on Cities: Skylines II, which is obviously the biggest release for us this year. We always have to remind people that it's a marathon and not a sprint. So our core games are always planned for the long term. And the most important metric that we have is player retention and engagement. And now it's only been 36 hours after release, we can see that the initial player numbers are good and sales are off to a good start, mostly in line with how we planned actually. So we're fairly happy. But speaking of being 100% happy, we know that performance hasn't lived up to player expectations to some degree, and we work every day with Colossal Order and the team at Paradox to optimize and to continuously update the games. So you can follow the game in all our social channels or through the games page as well if you want to get more update. It's going to be a lot in the coming weeks. So I want to recap a bit about our growth strategy that we went through in the deep dive of Paradox that we held in May for everyone, all shareholders and everyone interested in investing in the company. So we have, as you know, a portfolio of core games, which we work with over time. And our first growth strategy is to, if we click that is what we call dig in, namely releasing content for our live games where we have a lion's share of the player base and people who want updates and the people -- DLCs that we charge money for. And you see in the coming quarter here, you have a release for Stellaris, Europa IV, Age of Wonders 4, Victoria 3, Crusader Kings III, and Hearts of Iron IV. So it's going to be a packed quarter, quarter 4, for our live games. If you look at the next part of our growth strategy is called stock up. It's basically we make games that we are fairly certain that our core audience of 6 million people that play our games every month are going to like. So you have games like Foundry, Millennia, Cities II that I already talked about, and Star Trek: Infinite that released earlier in Q4. It's off to somewhat bumpy start as well, but it's doing fairly well also. So we hope to build on the Star Trek game going forward. The third part of our growth strategy is called breakout, and this is where Paradox Arc or what we call the new games team comes in. So we're looking to find new niches or find new games that has a breakout potential and the potential to make it into our main portfolio where we continue to support the games for 10 to 15 years into the future. And some of the examples from here is Across the Obelisk that I already mentioned, but also Mechabellum, Stellaris Nexus, and releasing later on this year, I think, is Space Trash Scavenger. All right. And with that, I want to leave the word to you, Alex, to go through the numbers. I might comment on the numbers as well at last. Okay.

Thanks, Fred, and thanks for the repetition of the strategy. So let's dig in. Let's start at the very top. So revenues for the quarter came in at SEK 426 million compared to SEK 458 million in the third quarter of last year. And you that follows us knows that our revenue and financial performance is heavily dependent on 2 things: 1, what we released in the quarter, but also when you do compare 2 quarters against each other, it's a difference in currency movements between them. So if we look at those 2 factors, we can see that currency movements from a year ago has been slightly in our favor. Dollar is up a little bit, but British pound and euro is up roughly 10% from a year ago, so that benefits us. So on that side, we are good. Release wise, as Fred mentioned, we have had a very weak quarter because we released on almost everything in Q2, and we have a lot lined up for Q4.

As compared to Q3 last year where we released a lot of DLC for most of our live games, if I remember correctly.

Yes, you're right. So Q3 last year was almost like Q2 this year, we released for -- we actually released for all 5 big franchises, something. So Cities, Stellaris, Hearts of Iron, EU4, and CK III, all got some form of DLC or expansion last year. Thus we released Across the Oblisk. And this year, you showed all the 3 releases and it's only Across the Obelisk that was a $20 expansion. And that's a fairly small game, so it doesn't have a massive impact.

Right. So it's mostly catalog sales, different sales drives, et cetera.

Yes. We had, as always, steam summer sale ending in the beginning of July, so that helped us and catalog sales. So bearing that in mind, we think that SEK 426 million from a quarter like this with very little releases is a rather strong performance.

Yes, top line is not bad.

It's not bad. And now we normally, as you see on the screen, we compare this, as always, with the same quarter 1 year ago, but it's also interesting perhaps to compare it to the most recent quarters like Q1 and Q2. Then there is also a reason why we are slightly down, and that has to do with the Game Pass deals. So we get Game Pass revenues when we launch a new game on the platform, but also when we renew games, when we renew licenses. And the renewals is not that -- they don't come evenly throughout each quarter. So in Q1 we had then a renewal, in Q2 we had a renewal, but in Q3 we didn't have a renewal. So that makes -- that adds to the bumpiness a bit. So that also explains why Q3 is slightly less than, for example, Q2 and Q1.

Yes. Would you want to comment on the number of employees as well there?

Yes, I'll get to that. So we normally stay at the top 5 contributors revenue-wise, and it's no surprise this quarter, Stellaris, Cities: Skylines, EU4, Hearts of Iron and CK III as most of the quarters. Now, let's say operating profit came in at SEK 85 million compared to SEK 221 million 1 year ago. So that is a decrease of 61%. So as we already mentioned many times, the financial performance and mostly perhaps the profit is highly dependent on what we release in the quarter. And I think releasing 1 DLC or 1 game 1 month earlier or later makes a huge difference if you look at 1 single quarter. And I think that stands out in this quarter if you first look at -– if you first look at operating profit and compare these 2 quarters, and then you look at operating cash flow for the same quarters. Operating profit is down 61%, but operating cash flow is actually up. So we're having high –- we'll come to the cash flow later on in the presentation, but we are having higher operating cash flow in Q3 this year than we had 1 year ago. And that has to a large extent to do with the fact that the cash flow is like 1 month delayed, both the cash we pay out and the cash we get in. So it shows the sensitivity of what we release. One month will make a huge impact on a single quarter.

Of course.

And that's why we often nag about this, that don't look at 1 single quarter, regardless whether it's a strong or less strong quarter. Profit margin wise, 21%, it's down from 48% last year. A few reasons why it's down, of course, less sales, that's the biggest factor. Then another factor is that this Q3, we have had significant marketing costs for games that haven't gone live in the quarter. So especially Cities: Skylines II, we have spent obviously a lot of marketing in Q3 already.

The re-announcement of Bloodlines 2 came in the quarter.

That's right. Lamplighters League, we took marketing costs already in Q3, even though we released the game in 4 of October. What else do we have?

It's also worth mentioning that the New Games Team now work under different circumstances. So all the costs there are taken day and date, and we don't add anything to the balance sheet. So obviously, it's going to be our way of operating going forward, but it hits this year a bit more because we have very few releases, and we have costs for almost all the games. It's like 12 games or something like that in the portfolio, and they all have at least small costs. So it impacts the year as a whole as well. So it's important to take into consideration comparing to a couple of other of the years. So it's -– yes.

It showed us. It showed us. And then finally, what we could mention, one thing that differs this quarter compared to the Q3 of last year is that we have had both in Q1 and Q2 and again now in Q3, a collaboration with 2 other companies for VR games for Paradox brand. So it's a collaboration where we don't risk anything, and we are a licensed grantor.

Right.

But we are also part of the funding that happens. So some of this funding comes in as a revenue for us, and then we just pay it through to the developer.

It's a low margin business.

Yes, exactly.

It's not a lot, but it's low margin.

It's not a lot, and it has zero impact on our profit. So I think it's a very cost-efficient way to try to reach new players for our games.

Yes.

But of course, it hurts profitability because it has zero profitability.

Correct.

Now, you mentioned, well, equity-through-asset ratio continues to increase, solid. Numbers of employee by the end of the period, 627, it was 654 1 year ago. But if you follow the streams, it was 676 at the end of June. So we are down at 49 FTs, and that has to do with the closing down of the Arctic and Thalassic studio that we communicated already 6 months ago. But it has impact on the headcount now in Q3. And also adjusting Harebrained Schemes in Seattle during the development of Lamplighters League when they went into less resource-demanding phases of the game, we reduced staff. So 627, but the reductions are, for those 3 reasons, are gross-wise more, but then we have increased here in Stockholm. So we have increased on Paradox Development Studio, especially during this third quarter, adding people for existing and new projects. Now, let's go a bit more into detail. So this is our classic chart where we show revenue in green and our 3 main cost type in yellow, blue, and red. As you can see, looking at the revenue that we have already discussed, but it's very evident here how much volatile our revenues are if you just look at 1 quarter. We will look at the picture where we have rolling 12 months, and there it will show much more stability. And I think that's a much sounder way to look at it. But this is what it looks like quarter-to-quarter. But let's continue with the costs. So our 3 main costs adds up to, let's say, SEK 343 million in this quarter, and it was SEK 264 million in Q3 2020. But they were SEK 545 million in Q2. So we are considerably up like SEK 79 million from the same quarter last year, but we are down in cost SEK 111 million from the previous quarter. And you see it in the table, and you see it also in the chart, the cost items that varies, that goes up and down, is COGS and selling expenses. Admin costs in red stays very consistent. So let's focus on the cost of goods sold and the selling expenses. Cost of goods sold, this is the cost we have to make the games. So development costs for internal studios, for external studios, royalty we pay, amortization we have on game development, depreciation we have on acquired assets, a lot of different things that are needed to generate revenue.

Because we only have one goodwill item, I think, in the balance sheet.

Yes.

And that's like SEK 20 million, and the rest is depreciated over the years. How many years do we depreciate if we would buy a company?

It depends on the asset that we acquire. So normally, if it's a game included, then it's 18 months. If it's not a game, but a trademark or similar rights, then it's 5 years. With one exception, I think, and that is the World of Darkness catalogue that we depreciate over 10 years, because it had had a very solid revenue generation. So therefore, we chose a longer period. But for everything else, like Harebrained Schemes, Triumph, Prison Architect, Playrion, we amortize that over a maximum of 5 years.

Yes.

So that means, for example, with Harebrained Schemes that we acquired a little more than 5 years ago, that has been fully amortized. So on the company group balance sheet, it doesn't…

It amounts to zero.

It amounts to zero. Yes. But let's say the largest part of the cost of goods sold, that is -- let's start with the numbers, so it's SEK 255 million Q3 this year compared to SEK 197 million, same quarter last year. So it's up. But again, if you compare it to the second quarter of this year, then we had SEK 338 million. So compared to that quarter, it's down significantly. And the cost of goods sold is built up by a few items, as I mentioned. Let's quickly go through the main of them. So the biggest one is amortization, so that's when we develop games. When we develop games that we consider to be proven, then we capitalize and then we amortize. As Fred mentioned, since 2 years back, we took a new approach to development of high-risk projects. So we do that through a separate team called New Games Team. And during the early high-risk phases of the development, we don't capitalize the cost, but instead we take them as a direct cost. It shows up in COGS, but it shows up directly. And as Fred mentioned, as this New Games Team and their investments have increased over the years and became a larger part of our total game investments, that means that the cost of goods sold is going up. But this is a temporary thing because these costs would have ended up as COGS sooner or later anyway if we would have capitalized them. Then they would have shown up as an amortization or a write-off.

Yes, it's also to avoid the sunk cost fallacy when you have things on the balance sheet for future write-off. So we believe that it creates a totally different mental state when it comes to closing games, they shouldn't continue. So that's a part of it as well.

I think that's a very important part of it. So if we look at amortizations, then it was SEK 114 million in Q2 this year, compared to SEK 56 million of Q3 last year and SEK 155 million of Q2 this year. And I think the amount of amortizations has to do with what we release. So if we recently have released a lot of big games or a lot of big DLCs, this amount will go up. So I think to understand a bit, the best is to compare it with the recent quarter. So that's Q2, then we had amortizations of SEK 100 million and, how much was it, SEK 155 million. And now it's SEK 114 million. So it's down like SEK 41 million. And that is because in Q2 we released H1 before.

Yes.

And with our digressive amortization model, we amortized roughly 40% in Q2 and with time, the amortization goes down. So in Q3 we amortized 20% only. So that's a big difference. The same with CK III, that was not a new game, but it was a massive expansion that we released that had taken a lot of people 1 year pretty much to make. So that also came with a huge amortization. 40% of 1 year of development cost taken in Q2, now in Q3 it's only 20%. So that's why it goes down. We touched a bit on World of Darkness. Yes, that's the VR game that we are collaborating about right now. So that didn't exist last year, but it exists now. It adds up the revenue, but it also adds to the amortization. But that was the same in Q2. We mentioned that we amortize or depreciate our acquired businesses and assets. So that is included in the cost of goods sold pretty much every quarter, it's around SEK 20 million that we take as cost. Now, Harebrained Scheme has been fully amortized, but we have added one now and that is Across the Obelisk since we acquired the IP.

IP and the gaming rights from the developer, yes, correct.

So that is SEK 20 million, then also included in COGS we have other amortizations and that is where the rent ends up. That's roughly around SEK 10 million per quarter. That went up a little bit due to index increases from inflation. No write-offs in the quarter, but it was the same 1 quarter before. We will see write-offs again when we come to Q4 as we have announced through a press release from the Lamplighters Game. Then we have an item called, we group them in the report and call it royalties. Tech cost for our publishing organization and non-capitalized development cost and that we have touched a bit on it. So non-capitalized development cost is, for example, new games teams development that has gone up. So all-in-all it's SEK 110 million for all of this; royalties, tech cost for the publishing organization, non-capitalized development cost, SEK 110 million in Q3 this year and it was SEK 112 million Q3 last year. So it's very similar and it was SEK 153 million in Q2. So we're down in Q2. And the reason why we're down in Q2 is mainly driven by royalties. We had high royalties in Q2, thanks to us releasing on Cities, generating royalties to Colossal Order. But also the release from Age of Wonders 4 gave us a lot of revenues and there we have an earnout to the sellers of Triumph who we acquired the studio from. That is based on the performance of Age of Wonders and, yes, it performed great in Q2. So therefore, we had a lot of…

This is money you're happy to pay out.

I'm very happy to pay this money and I hope they will increase in Q4 when we hopefully should see improvements in revenue again. What else can we say about non-capitalized development costs and tech costs for publishing is left? And so that's SEK 85 million, it was SEK 81 million 1 year ago, so it's not up that much. It was SEK 103 million in Q2. So we are down again versus Q2. One big reason why this goes down from Q2 is actually the profit share. So Q2, we had a massive profit of plus SEK 300 million. Now it's less than SEK 100 million, so it's a plus SEK 200 million difference and 6.5% of that goes to profit share. So it's -- I think it's like SEK 14 million profit share. And since the majority of the staff is in the studios, that goes into COGS. So that is also a cost I like to have, not only personally, but because it's a sign that we have done very good. But it works as a hedge. When the profits are down a quarter, the costs are also slightly less. Selling expenses, let's move on to that one, SEK 65 million or SEK 66 million last year, sorry, this Q3 compared to SEK 44 million last year. I think it was SEK 90 million in Q2, yes, it was, Q2 this year. So it's up against last year, but down versus Q2 of this year. So it's 2 things that drives selling expenses. One is what we release and the activities we have in the quarter for what we release. And normally Q3 is very slow in that way. It wasn't last year, but it sure was this year. So we haven't spent that much on the 3 DLCs that we released in the quarter. But we have already released a lot in Q4 and we have, as you mentioned, Fred, we have reannounced Bloodlines. So out of this SEK 65 million or SEK 66 million, almost half of that is cost for games that have not yet been released. And that was not the situation back in Q3 2020, sure, we had some cost for Victoria 3 already in Q3, but it wasn't that much. So that's all I think about selling expenses.

Admin is business as usual?

Admin is business as usual. It's normally around SEK 22 million, SEK 23 million. It doesn't move much, as you can see on the red line. Other income and other expenses. So that is mainly movement in currency. It was a huge movement in dollar during Q3 last year it went up almost 10%, I think from the beginning to the end of the quarter. This year it has moved, but if you compare start of the quarter to end of the quarter, it's not much movement and therefore we don't see much impact on that part. It doesn't show here, but we haven't included it here because it's normally a small part, but below other income and expenses or below EBIT, we have financial items and that is, I think it was minus SEK 1 million last year. It's like effective interest. That's how you account for rent, this year was plus SEK 3 million. And the reason why it has gone up is that we get interest on our cash position. So of course, when the interest goes up, it's challenging if you have a lot of interest-bearing debt, but we have zero interest bearing debt. Instead we have interest-bearing cash, so -- and then it's not a bad thing. We have the slightly higher interest…

We'll have a reason to come back to that, right? In the cash flow statements?

Yes. Let's move into that, I think, or maybe we have a couple of slides before. Yes, we have 2 short slides. This just shows, I think, the volatility between the quarters. Sometimes if you look at 3, 4 quarters, you can spot a bit of a trend, but it's difficult on this view. But what I want you to take with you from this picture is that you should be prepared for that it goes up and down, that it often does. Sometimes you can have quarter where profit drops more than 50% and then you can have quarters where it goes up more than 100%.

Yes. We used to see that, between quarters it will go up and down, but over time it will go up.

Yes. And that leads me to the next slide. So this shows the same numbers as on last slide, but we have grouped it into 4 quarters. So it's a rolling 12 months and then the trend becomes much, much clearer. Sure, there are bumps here and there, but over time it's a steady march upwards both in terms of revenue and in profit. If you look at the very latest quarter, unfortunately we have had, looking at revenue, we have had 6, 7 quarters of constantly going up. Now we have a bump, but we are doing all we can to make that bump go away and continue the march upwards.

The fact is that during -- since I joined Paradox in 2003, we've grown organically every year except for 2 years and that was 2014 and 2021.

Yes. So it's been from I think we had SEK 11 million in revenue in 2003. So it's been quite a journey, we have to say. So it's -- our goal is always to grow as a company and the business and the games, obviously. And sometimes we succeed and sometimes we don't. But over time, I think we have a pretty good case on our hands.

I couldn't agree more.

Now to cash flow. So 2 things to point out here. Let's start with the cash flow from operating activities that we already touched upon. So even though that the operating profit is considerably lower this quarter compared to the same third quarter of last year, you can see that cash flow wise were better. This Q3 were up to more -- over SEK 250 million and 1 year ago it was just below SEK 250 million. So I think this shows a bit the sensitivity in looking at just 1 single quarter because the main difference between the cash flow, the operating cash flow and the operating profit is 1 month delay. Then there are some other things as well, but the main explanation is that factor. Now, the other thing that I want to point out here is it looks like and technically we have invested quite a lot this quarter. I need to check my notes here, but it's SEK 359 million in investments, but it's not –- it's SEK 161 million of it, so less than half is investments in game development, so SEK 161 million. Q3 last year was SEK 167 million. So not much change there. The remaining SEK 198 million is just us placing our excess cash into some bonds.

Right.

So short-term bonds, I think the average time is 6 months or something like that. So it's governmental bonds and similar things, low risk to get slightly more return on our excess cash.

So close to SEK 200 million.

Yes, very close to SEK 200 million. I can also point out, going back to the green one, if we do, again, look at rolling 12 months, we have had positive cash flow from the operating activities of SEK 1,270 million, so that is an all-time high. And I think that's a very nice milestone. Total equity, total non-current assets. So this shows equity. This is pretty much our accumulated profits over the years, reduced with the dividends that we have paid. Total non-current assets, the by far majority part of this is the capitalized development that has continuously gone up over the years because we have been in a phase where we have invested a lot and not released much. Now we have started to release, so I expect the yellow to start to move downwards a bit and then to stabilize again. Was that the last slide? Yes.

That was the last one. And we have a couple of questions. Like I said, for specific game-related questions, please visit our websites or social media and ask directly to the teams because they're more knowledgeable about the games and the decisions being made about the games than we are here, actually, so.

And they're updating it frequently.

Very frequently, with the developer diaries and other things as well. So…

A question for you.

A question for me.

That is not game –- directly game related. What are your thoughts on acquisitions right now?

Well, acquisitions, we have the same strategy as we always had. If there's a great opportunity to acquire a good company, we would look into it. But acquisition is very far from being our core strategy. We focus on growing our company organically and making games together with developers that we trust and that we think can do a great job for us. So it's not our primary focus, but it might happen. We'll see. We have money in the bank and we have stable finances and that's a good way to –- a good place to be. So we'll see. And a question for you here. Headcount has decreased a lot over the past year. How will that impact OpEx?

Very specific. Yes, so in 2 different ways. Some 2 years ago we canceled several projects and with that we also adjusted the headcount in our publishing business. Publishing costs, personnel costs, and other costs are taken as cost immediately, they are taken as OpEx. So with reduced publishing headcount, we see a direct impact on our cost through OpEx. Now, over the last 6 months, the headcount reduction has been in our studios Arctic, Thalassic, and Harebrained Schemes. The costs for those headcounts are capitalized and amortized. So at the end of the day, we will see the same cost reduction coming through in the P&L. But in short-term, you don't see it because those costs would have been capitalized and then amortized when the DLCs or the new games that they were working on would have been released. So I think we are seeing some impact already now, but we will see slightly more impact in Q3 and even maybe next year from actions already taken in terms of result. So back to you, Fred. What are your overall plans for console ports of your games in the future? Will we see more simultaneous releases like with Age of Wonders 4?

Well, the answer to that is that we are first and foremost a PC games company, meaning Windows, Linux, Mac normally. But we do make our games on consoles where it makes sense and we think there is an audience for it there. It's a much smaller audience, in our experience, but it will basically be on a case-to-case basis depending on the game and depending on the format of the game. So -- but like I said, we're Windows or PC first. Alex, has the DLC subscription offer for some games achieved the financial success expected internally? Did we have any expectations? I don't know. I've never seen any of that.

I mean, not really. So what we have done is we have subscription offers for DLC catalogs on EU4, Hearts of Iron IV…

And CK II.

…and CK II. And this has, I think, performed better than we would have expected. So it's still on very small numbers, but the increase after launch has been steady and we see very interesting KPIs in terms of retention and churn. This is something that we at this moment are still just doing to explore, to see whether if this is a way to consume games and DLCs that our players like. Do they prefer this compared to buying them one by one and learn how the user behavior is? So that is why we are still running it. So we are -- I think we are very pleased with the results so far. But next -- but before it has a significant impact on our financials, we will have to take of course decisions, whether this is something that we should push for or to what extent we should do that.

It might be interesting to take into account for upcoming releases maybe.

Yes, for sure. Do we have more questions? Okay, this is for you, I guess. Now that Astral Rifts for Stellaris has been produced by or at least in conjunction with Abrakam, so that's an external studio. Will we see more DLCs for our core titles being produced in association with external studios?

I will have to repeat myself from the former question and say it's obviously a case-by-case basis in this case as well. We have actively been looking for companies to help us out on our live games and on our grand strategy games. But we know that our games are complex. We use our own engine in most of our games, so it's been hard to find the right partners. But when we do, we welcome to work with external studios as well. That's not a problem, but it's a case-by-case basis. If we find someone who want to work with us, that works really well with us, we will at least give it a shot.

Is that the last one?

Yes. Alex, can you give some color on selling expenses? Do you expect them to come up in Q4 from the series release and all other DLCs coming out?

Forward-looking statements.

That's good. Forward leaning, I like that. What are your predictions on Q4?

Well, if you have looked at our streams before, you know that we are very reluctant to give guidance on upcoming financial numbers. Can I say something about this? Well, we are releasing a lot of things in Q4. We have released Cities: Skylines. The game is performing very good in terms of usage. So of course we will continue to market that. We will release several DLCs. We will, of course, have marketing expenses for that. And then we have announced that next year we will have Foundry, Millennia, I think have we set a new date for Life by You? Yes, I think March 5.

Yes, March sometime. Yes.

And I think we will start to see costs in Q4 for those games, just as we have seen costs in Q3 for the games released in Q4, so yes.

Yes, it's the nature of the beast, right?

Come up or not, maybe because we will have the combination of both having a lot of releases in Q4 and having a lot of releases coming up after the quarter.

It would balance itself out eventually. But I mean, releases will lead to selling expenses.

Exactly.

That is a causal connection. We can verify that.

Yes. Fred, how many games are in your pipeline and are being developed at the end of Q3?

I was not prepared for this. It must be a new question because the honest answer is I'm not sure actually exactly the exact number, but it's quite a few. And at Paradox Arc we'll look at things all the time. So it's games coming in and being scratched off the whiteboard all the time. But I guess it's like 10 to 12 at Arc and like 8 to 10 something in the main pipeline as well. But do you have a better answer on this? Next time I will make sure to know exactly the number, if you ask the question again on the Q4 report stream.

I think we stated it in the report.

Maybe we did.

And I think we stated 9. But that is as of the date of the report.

Right.

So that means that we have taken out Cities: Skylines II, Lamplighters League, and Star Trek. So back counting, I would guess it would make it to 12 than back in out of Q3.

Got you. Yes, that was my gut feeling as well, 8 to 10. So 9 fits perfectly in there, but next time I will know for sure. But for new games team it's harder to say because the games move sort of in and out of the pipeline all the time. Because it's games –- if we don't see progress, we'll scratch it off our books right away, so more things happen there.

That seems to be the end of the questions. If we haven't answered your question, but you have sent something in or if you come up with questions after the stream, send them in, you have the e-mail, and we will try to answer them as quick as we can.

Perfect. And looking forward to seeing you again in 90 days, end of January, no?

Yes. The Q4 report we do roughly a week later. So it's the beginning of February. I think it's February 6 or something close to that.

All right. Make sure to log in and watch us then.

See you then.

See you then. Bye.

And thank you for watching.

Ciao.

Bye.