CD PROJEKT S.A. (OTGLF) CEO Adam Kiciński on Q3 2020 Results - Earnings Call Transcript

CD PROJEKT S.A. (OTCPK:OTGLF) Q3 020 Earnings Conference Call November 25, 2020 12:00 PM ET

Company Participants

Adam Kiciński - President, Joint CEO

Piotr Nielubowicz - Chief Financial Officer

Conference Call Participants

Omar Sheikh - Morgan Stanley

Matthew Walker - Credit Suisse

Ken Rumph - Jefferies

Vladimir Bespalov - VTB Capital

Matilde Durazzano - Barclays

Robert Berg - Berenberg

Matti Littunen - Bernstein

Operator

Dear ladies and gentlemen, welcome to the conference call of CD PROJEKT Group. At our customers’ request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]

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

Adam Kiciński

Good afternoon, everyone. Welcome to the PROJEKT's conference calls dedicated to Q3, 2020. My name is Adam Kiciński and I will run this call together with Piotr Nielubowicz, CFO. Please note that the presentation is posted on our corporate website cdprojekt.com. After the call, we'll also post the audio recording of this -- of the call and its transcript.

First, let me start with a short pandemic update. As the COVID-19 situation is definitely not better than -- not better now than it was in July, we have decided to extend the studio's home office mode until the end of March, 2021. Of course, well -- the wellbeing of our team remains our top priority, and we'll take additional measures to ensure everyone is safe.

In spite of these extraordinary and difficult circumstances, our team is giving it their very best at this final development stretch of Cyberpunk 2077. I'm truly grateful to them for their incredible work and dedication to the PROJEKT. Thank you. Thank you. Thank you.

Please move onto slide three and four. Even though the circumstances are less than perfect, we continue to work hard on delivering top quality content for our fans. The game went gold in early October, and will hit stores around the world in 15 days.

Please move onto slide five. The game will be launched on PC, Xbox One, PlayStation 4 and Stadia. Just days ago, next-gen consoles were released and our title will run great on Xbox Series X and S, as well as PlayStation 5 from the very beginning, thanks to their backward compatibility. We are excited to be able to bring our game to more players than ever before.

Please move onto slide six. In the past few days, we released two trailers presenting gameplay on current and next-gen consoles. The extra time gained by postponing the release is being used to further optimize the game, and we feel that it was the right decision.

In the next few slides, starting with slide seven, I would like to tell you more about Cyberpunk's promotional campaign. Here, we present an updated chart showing our promotional activities between September and today. The thickness of each bar represents the intensity of activities. As you can see, we are already in advanced phase, but the crucial, most intensive period will begin in the first days of December.

We want to reach as many fans as possible, which is why our app appear in 55 countries and 34 different languages. Our goal is to be wherever gamers are and we want to talk to them in their mother tongues.

As for the game itself, it has been localized into 18 languages, including 10 fully adopt fashions, light event. What's even cooler mimics and facial performance are unique and fully natural in every voiceover language.

Let me now briefly summarize the key events of the past weeks, starting with slide 12. We've begun October on a high note. At the opening game of this year's NBA finals, we add new Cyberpunk commercial, starring Keanu Reeves, which kick off our CD marketing campaign. We also carried on with the Night City Wire series.

Please move onto slide 13 and 14. Each episode presents new faces of Cyberpunk, including trailers, behind the scenes footage, the game world, and key characters. Interest has been huge with each episode attracting more and more viewers. The gameplay trailer doing the final few episode last week was viewed a record 23 million times over just three days following its release.

Moving onto slide 15. We recently announced our collaboration with brands, such Porsche, Nvidia, Adidas, Rockstar Energy Drink and Sprite. Each such collaboration is carefully tailor and fits into the Cyberpunk game world. We now have far greater capabilities of this -- in this respect then in case of the Witcher universe, and we intend to exploit this potential to improve awareness of our new IP.

Please move to slide 16. Earlier this month, we organized a second wave of hands-on of Cyberpunk. This time extended ones, focused on just a handful of gaming media outlets, representing key global markets. Sales in U.S., U.K., France, Germany, Japan, Russia. Each guest we invited like Cyberpunk 2027 for about 15, 16 hours and the feedback is really encouraging.

Let's move on slide 17, Piotr, the floor is yours.

Piotr Nielubowicz

Thank you, Adam. Let's go to the first financial slide, profit and loss account. Between July and September we focused on Cyberpunk, but our Witcher products continued to entertain people around the world. Group revenues, which nearly PLN 105 million, which technically is only 13% above the result for the previous year, but the structure of our sales change in a favorable way.

Sales of products, which is the most profitable part of our business, increased by nearly one-third. This is thanks to the great performance of the Witcher 3 on core platforms, but also strong performance of GWENT operated on iOS since last October and Android since March. This summer, we had lower revenues from services as last year we had some exceptional revenues related to cooperation with our marketing partner.

Next important line, revenues from goods and materials, which consists of two major ingredients. First, revenues from sales of physical elements of our products. Last year, we had an increase of such revenues due to shipments of Nintendo Switch cartridges for the October release of the Witcher 3 and Nintendo. This position to product grads decreased from PLN 15 million to PLN 5 million year-on-year. It's a low margin part of the business as all revenue is recognized as royalties, which constitutes most of our gross profits are included in our products revenue slide.

Second ingredient of our goods and materials sales core revenues of GOG.com, which grew nicely by one fourth versus the third quarter of last year. The change of structure of our sales cost a slight decrease of our cost of products, goods and materials sold prior to an increase of overall size. This resulted in an increase of our gross profits on sales, up PLN 68 million by nearly one fourth versus last year.

Our total operating costs remained fairly steady. Among them selling costs increased mostly due to promotional expenses related to Cyberpunk and G&A costs decreased mostly thanks to ending the recognition of the cost of our previous incentive program valuation at the end of June.

Next line, financial revenues less expenses. Recently we see lower interest on bank deposits and at the same time, surplus of negative FX differences on the more volatile markets. All-in-all, despite having no major releases and accelerating internal engagement in the Cyberpunk lunch, our net profit increased 57% versus last year. And reach our PLN 23 million.

Moving to the next page, graphic presentation of our quarterly revenues for the last three years. The third quarter is usually the quiet part of the year for us. And so it was this year. Even so it was the best third quarter in years.

On the next page, the same revenues are decomposing to costs and expenses, light gray color and net profits for each quarter presented yellow. As I mentioned before, despite being focused on Cyberpunk, we maintained popularity of the Witcher franchise during the typically dry summer season. And also profit-wise, it was the best performing third quarter in recent years.

Next page number 21, our balance sheet. As usual a major change on the asset side is visible on the expenditures and development projects, which increased by over PLN 39 million. This is mainly related to Cyberpunk works, and I will have a dedicated chart for this in a moment.

After the strong sales of the second quarter during the summertime, we decreased our receivable balance by PLN 25 million, which added to our cash flow of the third quarter. Speaking of cash. Our cash reserves are currently diversified between banks and bank deposits and T-bonds, included in both short and long-term other financial assets. Overall value of our cash reserves decreased by PLN 7 million over the three months of the third quarter. I will go into more details on that with a dedicated chart in a moment.

Equity, it decreased by PLN 179 million due to the buyback of own shares we run in July and August. And among short-term receivables two big changes happen. First, so the product was paid in the capital contributions by the participants of the previous incentive program. The new issue is not registered yet. So we receive capital contribution is presented as our liabilities stores with program participants.

Second change the nicest of all liabilities deferred revenues growth by over PLN 77 million, mainly related to Cyberpunk royalties on selected preorder sales and advances on minimum guarantees from our distributors. This is the biggest increase of deferred revenues we ever experienced.

Let's go to the next page number 22. Our quarterly expenditures and development projects in the cash flow perspective. In the third quarter, we were still working full force on Cyberpunk. The decrease spent cash in Q3 versus the previous quarter comes mostly from annual bonuses for developers being paid out in the second quarter.

Next page number 23, cash flow. We started July with PLN 642 million on our bank accounts and bank deposits and invested in T-bonds. In July and August, we run our share buyback and spent PLN 214 million. Afterwards, the shares we bought were sold to our incentive program participants, plus we received from them additional capital contribution prepayments for the new shares issue. All of that amounted to PLN 126 million inflows. Effectively, our net cash contribution in the settlement of the previous incentive program via the share buyback was PLN 88 million so far.

At the same time on our core business, we spent PLN 52 million on development projects, prior to that our deferred revenues increased by over PLN 77 million. The deferred revenues increased comes in the vast majority from selected Cyberpunk preorders and received transfers of new all guarantees [ph]. On top of that, we brought PLN 23 million of net profit to the equation and enjoyed other flows, mainly driven by decrease of receivables in the total amount of PLN 32 million.

All-in-all, having financed our incentive program settlement via buyback of own shares and investing into Cyberpunk development, the total value of our cash deposits and T-bonds decreased by PLN 7 million and overall during the first three quarters of this year, our cash reserves increased by over PLN 152 million. As you know, the main push of the year is yet to come.

Thank you. That's all from me for now. Please move to the next page.

Adam Kiciński

Thanks, Piotr. We are 15 days away from launch. We are entering the most intensive phase of our marketing and PR campaign. On top of that in the next two weeks, we'll be sending review copies of the game to journalists around the world, enabling them to publish their impressions and reviews of Cyberpunk before its release. We are very excited and we eagerly await the moment gamers can finally lay their hands on the game.

That's all from us. That's all from me. We will now proceed with the Q&A session.

Question-and-Answer Session

Operator

Thank you. So, we will now begin the question-and-answer session. [Operator Instructions]

The first question is from Omar Sheikh of Morgan Stanley. Your line is now open.

Omar Sheikh

Good evening, everyone. I've got three questions, if I could. The first is on preorders presales, 15 days out. I guess you have some visibility on -- a meaningful kind of view, I guess, on preorders at this stage. I wonder if you could maybe first of all tell us, what you think about the overall numbers that you're seeing. And then also, maybe about the mix between console, PC, and GOG. That's the first question.

Secondly, I wonder if you could give us a sense of what impact going into home office mode until March 21 will have on your -- I guess, your schedule for next year in particular for releases of things -- of expansions in 2021. So, specifically, could you give us a sense of how many expansions you expect to publish next year?

And then finally a question for you, Adam. I mean, we all know you're a perfectionist. The whole company is full of perfectionists. I guess the question is, how satisfied are you with the current quality of the game is you see it today. And where you expected to be in terms of quality by the time you release it on December the 10. Thanks very much.

Piotr Nielubowicz

Hello, Omar. This is Piotr Nielubowicz. Yeah. Thanks for trying to get some extra info on preorders. As you know, we are not revealing much information on that. We believe at this stage, we do not have full and complete data that we could share. And it's not easy to say how any data should be applied on the final sales. Therefore, unfortunately, I can't give you any more details than the total increase of deferred revenues that was presented in the financial statement, I just refers to.

Adam Kiciński

All right. Adam, on the second -- I'll take the second, the third one. So, it seems that home office now -- will not impact our schedule. We haven't revealed any dates regarding expansions, but so far so good. So, none of no home office mode the last delay is impacting our schedule in this industry we got. And bear in mind that part of the team is working from the office. I mean, smaller part, but it helps a bit as well. So, we can organize things here internally and then collaborate with people who are at homes.

And the last question, well, it's tricky. It's tricky to share our impressions before reviews and before gamers are able to play the game. Well, we are satisfied. But we are never fully satisfied and don't get me wrong. It's not like we are not sure, but let's wait just 15 days. Let's wait again even let's because reviews will be published earlier. So, let's wait for the external judgment. And then everything will be clear.

Omar Sheikh

Okay. That's clear. Thanks, Adam.

Adam Kiciński

Thank you.

Operator

The next question is from Matthew Walker of Credit Suisse. Your line is now open.

Matthew Walker

Thanks a lot. Good evening. The first question is on the release. Can you update us on what your thoughts are on the percentage, which will be digital for December quarter and then for the other quarters after that, if you could give it a feel for why you think that will be helpful?

The second question is on the multiplayer. Do you think that's still coming in 2022? And would you say on monetization levels because you care about the gamers is going to be -- the same level of peers for online games, or do you think is going to be below or significantly below in terms of monetization to keep the gamers happy?

And then the last question is on the PS4. I think there was some press stuff saying that maybe it wasn't working quite as well as it could on PS4. Have we seen any gameplay on PS4? Maybe you could give us a bit of an update on how it performs on PS4. Thanks.

Piotr Nielubowicz

So, Piotr Nielubowicz. First, the expected ratio between digital and physical on our sales, as we see it on preorders digital is very strong, so definitely we are more into moving potential split digital/physical, and more on the digital side. How far we'll go? We honestly speaking do not know, definitely farther than we had on the Witcher 3 and definitely more than 50% should come from the digital channel.

And then the history of Witcher 3 shows the longer the game is on the markets, the more -- the split shifts towards digital again. On Witcher 3, it's vast majority. And on Witcher 2 and 1, it's -- let's say 99% of the revenues we generate are digital. So, this is the only direction that can be expected in that near and longer term.

Adam Kiciński

All right. Adam again, and I'll take the second and the third one. Regarding multiplayer, we haven't announced any date so far and actually, right now, it's not the -- I mean, it's not the moment to talk about any business model for multiplayer, even though we had discussing before, but to avoid any fast in our gaming community, we -- I will skip it, because we'll share our thoughts about next year once we will update our strategy. It will happen in Q1 next year, and that will be after releasing Cyberpunk and that will be the right moment to discuss deeper or all key aspects around future releases.

And PS4, yesterday we released the gameplay both on PS4 and PS5. So, you can see the difference. And on both -- I mean, PS5 is great. PS4 is still very good. I mean, we had those extra three weeks and we achieved a lot by -- within this final stretch. So, we believe that the game is performing great on every platform. Of course, accordingly to platform capabilities, but not every platform should be great.

Matthew Walker

Thanks a lot. And best of luck with the lunch.

Adam Kiciński

Excuse me.

Matthew Walker

Best of luck with the launch.

Adam Kiciński

Thank you very much. Thank you very much.

Operator

The next question is from Ken Rumph of Jefferies. Your line is now open.

Ken Rumph

Hi, gentlemen. Understanding your point about not wishing to distract anybody, but could you comment, obviously not everybody in the team is working on Cyberpunk. Some obviously are on grants and so on, but also on future projects, could you give us an idea of the extent to which you've been able to begin work on non-Cyberpunk projects?

Adam Kiciński

Hi, Ken. Well, rather not. Of course, there are teams who have been finished with Cyberpunk, and obviously those teams are the first -- are the first who are starting the next things. But we were discussing this call before and we decided to really be focused on the release because gamers are listening to us a lot and we don't want to distract them really. I mean, now everything is focused on Cyberpunk. We have two weeks. Everything will be clear by then. And then we'll start talking, maybe not right after, but as I said in Q1 next year. But, of course, anything what was said before is still valid. I mean, nothing has changed. I mean, we are just trying to avoid communicating too much about the further future.

And there's one more thing, after the third delay, we believe that some gamers can be a bit frustrated, waiting for the game. So talking about future things might make them even more frustrated. So, we are delivering the game full stop then. I mean -- and right after this, we'll talk about future. That's our communication.

Ken Rumph

Okay. I understand that. It's important to get the communication around the game itself, right? Again, this is something that maybe a little early, but you're asked about it perhaps at the time of the delay, what -- I'm sure after the game comes out, you'll look back at this. But my suspicion is that the day you announce the next release date for the next AAA single player game, everyone will say to themselves, well, we can expect that to be delayed two or three times. What at this stage lessons, do you think if possible, if you could learn from this?

Adam Kiciński

We are aware of that. Our -- of course, our goal is to deliver on time. But at the same time, we are delivering unique experience in many parts, very innovative, and this process it's always not fully predictable, but don't get me wrong. I mean, it can be planned, but there's always part of things which can be predicted precisely, but we can change some methods. We can change some ways of communicating and our goal will be to deliver on time, full stop. And we'll try next time to be on time without any delays, that's the goal.

Ken Rumph

Okay. Does it mean that you potentially change your attitude to how far in ahead of release that you would give a date for a game? I mean, you also mentioned regarding the kind of strategic plans for the company that you weren't sure whether you would kind of put dates and deadlines in and the way that you did back in 2016. So, one way you can avoid in a sense taking the risk of a delay is by waiting until the game is closer until you give a date. So, are there any thoughts about that?

Adam Kiciński

Yes. It's one of words, it's not decided yet. Finally, I mean, before we release the date has to be announced in some advance because you have to start the final PR campaign. You have to start collecting preorders and the date has to be set by then. But maybe earlier, we'll be not sharing thoughts about date, but of course, we'll be guiding. I mean, I can't imagine that investors will have no -- fairly clear picture what's going to happen. So, let us rethink after release how to put this in the future strategy update. It's not decided that as I said.

Ken Rumph

Okay. That's fair. Thank you very much.

Adam Kiciński

Thank you, Ken.

Operator

The next question is from Vladimir Bespalov of VTB Capital. Your line is now open.

Vladimir Bespalov

Hello. Thanks for taking my questions. My first question will be on Cyberpunk. As I read the hands-on reviews that were released recently, one of the most frequent comments was that the game was quite buggy, even though not critically, but still. Could you maybe provide some color how different is the current version, I would say, from what you provided, you said you hit viewers, how many are those bugs have been fixed because you were pretty aware of those bugs as far as I understood from the preview.

And the second question maybe you could give us some color on Monster Slayer. What is the current status? What's going on, when the release is planned for that? Thank you.

Adam Kiciński

So, in terms of bugs, we are all aware of them. Of course, such a big gang can't be just bug free. That's the kind of obvious, but we believe that the level will be as low as to let gamers not see them. And fortunately, some bugs extended previous were caused by some general -- I would say general features and many of them are already fixed. So, what gamers will get will be different from what -- and what we viewers will get in this final review is it's better than what previewers, got.

Piotr, can you take the second -- I can take the second.

Piotr Nielubowicz

Yeah. Sure.

Adam Kiciński

All right. So go ahead.

Piotr Nielubowicz

Yeah. The Witcher: Monster Slayer is fund for release next year. Right now, we are in soft lunch. We are in capital of territories, including Russia, which is the biggest territory. So far the soft lunch goes well. The game is very well reviewed or judged by gamers on iOS as the soft lunch run on iOS devices. So everything looks promising. And we are looking to next year to release its full course to gamers.

One more comment on my end, we were thinking of announcing the date this year, but having the Cyberpunk release on 10th of December, we might probably skip this original plan because there's a lot of communication around Cyberpunk and we don't want to communicate. We don't want to be lost the communication of Witcher: Monster Slayer. So we need some more quiet time for this.

Vladimir Bespalov

Okay. Thank you very much.

Piotr Nielubowicz

Thank you.

Operator

The next question is from Matilde Durazzano of Barclays. Your line is now open.

Matilde Durazzano

Hi. Good evening. Thanks for taking my question. I apologize if this question has already been asked, but I was disconnected earlier. I just wanted to know if you could give us any color on how preorders have been going in the past weeks. Now that we're so close to the launch date and that's when we expect them to pick up. Thank you.

Adam Kiciński

Yeah. So, as I already answered. We are not really going into revealing more details on preorders right now, more than we included in our financial report in the deferred revenue section. However, nothing's changed from our previous meeting. We are really happy about the preorder level right now is visibly higher than anything we had shipped on The Witcher and it keeps increasing at the expected pace comparing to The Witcher sales, historically. So, from just perspective, everything goes according to the plan and the results are really good.

Matilde Durazzano

Thank you.

Operator

The next question is from Robert Berg of Berenberg. Your line is now open.

Robert Berg

Hi. Thanks. Just one left. One of the advantages, I guess, of going last or after your peers is that you can actually see their reception -- the reception of the hardware sales, et cetera. And I'm sure you have some good contacts in the industry. You get to hear color of how things have been progressing. Without talking about any particular games or consoles, which I'm sure you aren't wants to do, how are you feeling about the health of the video game industry this holiday season, perhaps compared to what you might score last time we spoke? Thanks.

Adam Kiciński

It seems the industry is very healthy, even though circumstances -- pandemic circumstances are generally tough for most industries, our industry seems to be healthy. And for us releasing on the actually previous current/previous gen and the current/next-gen NPC and Stadia at the same time is a unique opportunity. I mean, we are reaching unprecedented number of potential gamers, potential customers. So for us, this window seems to be very sweet.

Robert Berg

Right. And there's nothing so far you would say is the evidence of a weak economic climate or the opposite, in terms of versus what you previously thought.

Adam Kiciński

Nothing I'm aware of.

Robert Berg

Okay. Thank you.

Adam Kiciński

Thank you.

Operator

[Operator Instructions]

The next question is from Matti Littunen of Bernstein. Your line is now open.

Matti Littunen

Good evening. First question on back catalog sales. So, it looks like the year-on-year growth rate has slowed down quite a bit from H1, but the revenue drivers you listed seem to be pretty similar. Could you give us a bit more color into as to why that growth rate has slowed down year-on-year and sequentially as well from Q2?

And the other one relates to the marketing efforts you mentioned that. So, as advertising spend kicks off properly in start of December, I was specifically asking about the TV investments between yourselves and your publisher partners. On an absolute level, will this part of the marketing mix be much higher than it was for Witcher 3? Thank you very much.

Adam Kiciński

So, first answering about back catalog sales, I would say that the first and the second quarter were spectacularly strong, especially the time -- by the end of April, May. And I see three major reasons behind it. First of all, The Witcher franchise got more popular, thanks to The Witcher series release on Netflix. Secondly, we had the pandemic situation, which in general supports sales of video games. And that was one of the few forms of entertainment available to people being locked down at home. And thirdly, at the end of last year, we've dropped the Witcher 3 on Switch. That was a nice revenue driver for us and that performed really well comparing to the previous times.

The third quarter is always the dry season, as I mentioned already. The lockdown ended so people have finally and things got, we're able to leave homes and probably this is also somehow affected let's say, we had likely the affects every year, I would say, but this time it also included the fact of finishing the lockdowns all over the world, basically. So, I would say this is the major reason behind the disproportionality between the first and the second quarter and the third one finally.

But what's worth mentioning this was the best third quarter in recent years for us, both on the revenue side and on the net profitability side. So, I would rather say that we are happy about it, especially. The whole company was focused on Cyberpunk on preparing the launch of this game. And definitely that's what most people were thinking about and being involved in.

I'm not sure if I properly understand the second question. The standard scheme for our marketing campaign arrange to by us together with our distributors is that we are responsible for preparing most of the assets. So in case of TV commercial, we created, we finance it. And then this TV commercial is broadcasted territory by territory. And this is prefinanced by local distributors. And then just expense on promotion of our game is deducted in our royalty reports -- or in the royalty reports that the distributors sends us after each quarter. And it's one of the deductible costs. So, it's prefinanced by them, but at the final calculation, we will be made liable for all of the costs of the marketing, supporting the revenues on our games.

And I cannot -- some about comparing Witcher 3 to Cyberpunk. Obviously, this time we are gravitating to online, definitely. So that's the major change. In terms of TV, it depends on territory because we are not only -- we think assets, we are those who create whole campaigns. I mean, we are those who decides where money spent. So depending on the territory we're working with professionals, we decide what would give us the best effects. So, for examples, TV is fairly strong in the U.S., not necessarily across Europe. And the whole campaign of Cyberpunk, it's, multi-cloud Witcher campaign, but it's hard to generalize how to compose TV of -- the TV campaign of Cyberpunk to Witcher 3.

Matti Littunen

Okay. Very clear. Thank you both.

Adam Kiciński

Thank you.

Operator

If there are no further questions, I hand it to the speakers.

Adam Kiciński

So we have a couple of questions on chat. The first one from Rubil [ph] is good evening everyone. Could you tell us what are your plans for the multiplayer mode?

So, first, we don't call it modes. It's a separate dedicated production, a big production. And we plan -- we think about it as a standalone product. Obviously, it's not entirely standalone as it comes from the universe of Cyberpunk and is very much related to the concept of single player Cyberpunk we -- I came up with. But from our perspective, it's -- is another independent production and independent team of people works on it. And there's -- I said already we are not focusing right now on talking too much about other future products, products that are to be released after Cyberpunk. So please be with us in the first quarter of next year when we plan to share some strategy update. And I believe Cyberpunk multiplayer will be possible.

The question is from Piotr Łopaciuk DM PKO BP. When exactly embargo, no reviews will be lifted? Before release, but we are not revealing the exact date -- the exact day, actually. So far -- but definitely before we release we let gamers read about the game. Before the buy -- before they buy the game.

And I can take the next one from Piotr as well. The game has been not presented on basic, not pro console PS4 and Xbox 1 so far. What is the performance of the game on this machine?

Of course, a bit lower than on pros, but surprisingly good, I would say for such a huge world. So, bit lower, but very good. That's the answer.

Another question comes from Albert. Long-term, what percentage of CP preorders comes from GOG.com and how many more CP preorders were sold compared to preorders of Witcher percentage wise. So, first, GOG operates on just one platform on PC, and the PC will have some physical sales and some digital sales. And within the digital sphere, steam is definitely the dominant platform. So from the perspective of all our expected sales, GOG is sort of presenting some single number percent of -- all of the sales, including preorders. But in general, I may say that GOG's representation in preorders of our Cyberpunk is naturally higher than GOG's market share in the global video gaming business.

How many more CP preorders were sold comparing to the Witcher? We were not revealing this info. But as I said, we are very happy and Cyberpunk preorders are visibly higher than -- and seeing what we achieved on the Witcher 3 for comparable time.

The next question …

Operator

We continue at the moment.

Adam Kiciński

The next question from [indiscernible], has Keanu Reeves played the game? Yes. Yes. He played the game. But as far as I know haven't finished yet. So -- but definitely, he played the game and he loves it.

Next question are QA testers in demands [ph] now. Embracer acquired the Romanian based company, which is specializing in this segment. Yes. We still QA the game. We boasted -- but we do it both internally and externally. We used to tour three, I'm not sure, external teams. So, we cooperate with some companies and the game will be tested by the launch date and that's natural part of the process.

Inwestycje Aviva Investors Poland TFI, are QA testers in demand now? I basically answered this question already. All right.

[Indiscernible], when do you plan to announce and start selling season pass for CP 2027? The initial plan was to do before release, but after the recent delay, we decided to wait for the release to provide gamers with the game and then start talking about future projects. So, after release.

Another question comes from, [indiscernible]. The question is in Polish. So try to translate on the fly. What profit did the company generate on Cyberpunk preorders? What was the level of canceled preorders due to the delayed release date? And what costs -- what part of costs is to be allocated to the international advertising campaign of Cyberpunk?

So, first, what profits did we make on Cyberpunk before release? All the revenues we generate on Cyberpunk are not booked directly into our profit and loss account. All of them are presented in our balance sheet as deferred revenues, and we will show them upon release of the game. So, the first quarter when we will start generating revenues in Cyberpunk, will be the first quarter of this year. Therefore, there is no profit, which we could relate to. Obviously, we have certain costs. The expenses on developments are not costs that are put into the P&L directly. They are also capitalized on our balance sheet. However, all the costs of the marketing campaign go directly into cost of each of the periods. So, from this perspective so far, the result on Cyberpunk in our books was negative. But each quarter, historically, the revenues and gross profits we generated on the Witcher franchise were much higher than Cyberpunk related marketing customer side.

What was the lever of counsel's preorders? I would say marginal comparing to the number of preorders we collected. There were some people who decided to abandon the preorder. I hope we'll make them come back. And we are reactive in promoting them, talking to our gaming community, but comparing this to the day-to-day sales or the cumulative number of preorders that was not really influencing the overall level of them.

What part of costs is to be allocated to international campaign of Cyberpunk? I am not sure how to understand it. Absolutely vast majority of our sales 96%, 97% comes from exports international sales. Poland, our domestic territories are responsible usually for 2%, 3%, 4% of our revenues. So by far most of the expenses for Cyberpunk promotion are related to the international markets as we sell the game really on the global sphere. I hope I managed to answer all of the questions.

All right. I'll take this the next one. Łukasz Kosiarski from Pekao, Łukasz is asking, did you receive conditional or full certification from Microsoft and Sony? If conditional, did you fulfill all their conditions? We got full unconditional certification from both platforms because we won the gold. So, the game is certified. But having said that, we have to bear in mind that every patch has to be certified. It's a simplified truck. So, the zero patch will go through simplifies certification, but the game is already certified.

The Next question, what are the general player feedback on the game trailer? Is the feedback in line with your expectations or above your expectations? What is the anticipated impact from recent alleged gameplay leak? The next question probably is for you and the third is for you. So I'll stop here, for you Piotr. So, I'll stop here.

So, the feedback is great. I mean, we are really happy. We're always happy with number of viewers. So, it's a little above our expectations, I would say, but we try to stay humble. So -- but it's obviously great.

And regarding the leak, fortunately, there were not too many spoilers because this is the ugliest thing installing the game before it is released. So, it was not harmful, even though every leak is backed. But as I'm concerned, there are no impacts -- no negative impact from the leak.

Piotr Nielubowicz

The second question of -- from Lyra is you mentioned Q1 next year to discuss future strategies, just to confirm, do you mean as the financial year 2020 full year results in Q1 next year. The truth is we haven't decided yet we will arrange a dedicated event, specifically to this -- update on strategy or we will merge it together with the annual results.

Please stay tuned. I mean, we will definitely announce it when the time comes. But right now I can't precise the answer, except for the fact that yes, I confirm we would like to share the update in Q1 next year.

Adam Kiciński

And the next one is, are you considering providing the number of preorders before the release date? Well, it's not decided yet. As we said before, it might be before release date, might be only release date. We haven't decided yet. We are discussing, the right moment for this.

Piotr Nielubowicz

Yes. And one more question from, Lyra from Jefferies. Any update guidance on the marketing expenditures related to Cyberpunk? We're not revealing any guidance on that, except for the fact that we confirmed that the marketing campaign of Cyberpunk will be visibly grow bigger than what we had for The Witcher 3. Sometime ago based on discussions with our marketing team, we confirmed that the scope of it should be approximately three times bigger, three times a wider than what we had for The Witcher 3. But I believe that closer to the release, the bigger it seems to be. So, I wouldn't say this is still an updated comparison that's for now.

Adam Kiciński

So, it seems that are all of the questions. If anyone wants to add additional one, that's last call. All right. The last one, I'll take this. Piotr Łopaciuk from DM PKO BP. When after the lease, are you planning to release the first sales numbers of Cyberpunk? Same like with preorders. We'll see what we'll have on the table in terms of reliable data. We have to have a global picture. And of course, in terms of digital, we have them almost on fly. In terms of physical, sometimes take some time. Bear in mind that we use local distributors. So there's a middle man between retail and us. So, we'll work on having as fresh data as possible -- and as possible and to release them as soon as possible we'll have the whole picture.

All right. Thank you very much. Thank you for joining the call. And you ready to play the game in 15 days. Thank you.

Piotr Nielubowicz

Thank you very much. Thanks for joining and a very good Thanksgivings to all our American friends. Goodbye.

Operator

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