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The Q1 report for 2020.
Yes. Welcome.
How are you, Alex?
I'm good. I'm getting a bit bored working from home. How about you?
I'm good. I'm also a bit bored working from home. But at the same time, I feel pretty fortunate that we can. We work in a company that we have -- where we've been able to move to work from home. So yes. But it -- yes, I agree with you. It would be nice to go back to the office. Today, we are actually in the office because this show is a lot easier to do from the streaming room that we have here in Stockholm.
Exactly.
Anyway, shall we kick this off?
I think so in more ways.
So we released our report for the first quarter this morning. And it's a very mixed feeling this report. Great results, but of course, really, really difficult times for a lot of people. We see a huge impact on society and huge impact on a lot of our employees and family and friends, et cetera. So while we're very happy, it is a bit of a mixed bag, so to speak. It -- COVID has, of course, affected us and Paradox as well. But nowhere near as much as it's affected a lot of others. We see all of our staff, as I said in the beginning, all of our offices all over the world are working from home, and we currently don't know exactly when we'll go back. We will try to open up step-by-step once we decide on that. But yes, it's -- all things considered, it's worked really well. I mean, we're very fortunate to be in a digital business where, first of all, we sell in digital channels, primarily. We have some retail sales, but mainly digital. And also, as I said, we can move our work. We've also moved some workstations home and made it a little bit easier for our guys and girls to work from home. But of course, it is also -- it is challenging to sit at home at all times. And we don't know exactly how this will impact us longer term.We see that short term, it seems that sales are doing well and especially engagement from our fans is very high. And also, the projects that are in the end of their development cycles, they perform very well. It's a little bit harder to say with earlier -- with projects that are earlier because it's creativity. A lot of that is about meeting and discussing, and our games are very much about creativity, both when you play and when we make them. Last -- well, actually, I had one more thing to say. No, but I would also like to say that we are very happy that we've been able to do stuff for our communities. First of all, we did a sale together with all of you, our fans and friends on Steam, where we generated more than $0.5 million that we donated to COVID fund that we're very happy about. But we've also done smaller things in the community, both for hospitals and elderly care homes and for our staff with care packages. And now we have a walking competition. So we're trying to keep the -- trying to keep the spirit up and trying to engage a lot.
It's a good point.
Yes, if we move to the numbers then, it's highest revenue and operating profits that we've ever seen in this quarter. So if we look the revenues, it's over SEK 400 million this quarter, it's up 68% compared to last year. And if we look at profit before tax, it's SEK 166 million, which is also a record for us. As I say always and will say now as well, quarters vary a lot, and it's not always relevant to compare because it depends on what we release. This quarter, the Q1, we had 3 of our largest games doing big releases, big expansions: Hearts of Iron IV and Stellaris and Cities: Skylines. So all of those are, of course, a big contributing part of this great quarter. I would like to mention Stellaris, especially. Today, we released a new trailer that I think is beautiful.
That's very good.
So you should check it out. It's really good. And also, we today also announced that we have sold more than 3 million copies for the 4 years that it's been up and running this game. So we're very proud, and it's cool to see how it's really growing over the years. And the same goes for all of these games. We also -- the last day of the quarter, we released a content pack for Imperator: Rome. Now it was the first thing we have charged for, for the game, and super happy with the result and the reception of that content pack. And also, again, very happy with how we've managed to turn the sentiment around for Imperator. And even though it was a very tough release, it's great to see a year on, it's actually doing well. So we're happy about that. Another game that we soft launched was Stellaris: Galaxy Command, which is our mobile game for Stellaris. It's in soft launch, and it's doing well, and we're hoping to hard launch it at some point during the year. But we'll see because the whole point of soft launch is that you can iterate and change and build on the experience, which we're currently doing. We also had higher revenues from Europa Universalis IV and Surviving the Aftermath. Surviving the Aftermath is a game that we released in Early Access in the fall. So that's currently only on the Epic store and on Xbox, and we're doing monthly updates to that game. And it's really cool to see that it's growing and it's working very well. And it's a really iterative process, and it's very based on feedback from players. So it's -- yes, it's been great, actually. We get a lot of really good feedback and managed to change the game pretty much every month. Yes. And then in general, we continue with our strategy. There's been quite a few questions on if we're changing strategy due to corona, but we're not. Our strategy is very much having this portfolio of games with a long life. And as you saw on the previous page, all the expansions had records. Those games are, on average, 4 years old. So it is very much a building for the future thing. Very much about building strong brands, of course, the ones we already have and also trying to expand that for the future. And really working together with our players and growing the player base and also taking in a lot of feedback. I think that's always been one of our core things, the close connection with our communities and listening to what you like, but also what you don't like and build on that.
So all 3 expansions for Cities, for Stellaris and Hearts of Iron IV broke sales record in the sense that they sold more copies within the first month than any expansion previously...
On those games. Yes, it's very good.
On those games. And that happens in average on their fourth or fifth year.
Yes. That's very impressive.
And it's a trend that we have seen for some while, so it's not the first time.
Another thing that's part of our strategy and something that I'm super proud of is that we continuously invest more and more in game development. So this quarter, up 57%. It's the highest investment level we've ever had. And I think I have said that every single quarterly report since I started, so it's just building on what we have. And we hope to continue to do that, of course. That means that we make, hopefully, really cool things that you will see in the future, not all of them announced yet. Now in Q2, we're focusing very much on what's happening in the fall, both the changes and challenges in working from home and development and these big games that are coming. We have Crusader Kings III. We have Bloodlines 2. We also have Empire of Sin, and we have continuous updates on Surviving the Aftermath. It's a little bit different this time around because all of the big shows are canceled. I just saw today that Paris Game show is canceled and also Tokyo Games Show. So that means that we're doing -- we're lucky actually because we've always done a lot of marketing digitally. We've done a lot of digital events. But this means we go back even more to that. We've done press events that have been digital. We're also -- I don't know, maybe you saw yesterday, we're doing together with a lot of other developers, we're doing what I think will be super cool a thing when E3 was supposed to be. It's called -- with the Guerrilla Collective. So you can check it out on either on Twitter or on the website, where we're going to do a show together with a bunch of other studios. That should be cool. We've also -- last week, we did an event with Xbox. They are doing a monthly event until they release their new generation console, and we were a part of that with a new trailer from Bloodlines. I loved it. I think some people thought it was really scary or weird. I loved it. So you should check that out as well. And that's just -- there was also a question on will you be on the new generation consoles. So that was a game that we will be there with. So we're really looking forward to this incredibly ambitious period where, fingers crossed for no delays, we don't know because it really depends how long this will go on, working from home. But our intention is, of course, to work hard to have no delays. And we really can't wait to go back to working in the office and a bit more normality in our lives. But we stick to what we have for now, and we're also happy that we're pretty lucky. So over to the numbers a bit more?
Yes. Let's dig in. So first quarter of the year, as Ebba mentioned, first time, we are over SEK 400 million in revenues, so SEK 400.4 million. And that can be compared to SEK 238 million Q1 last year, and that is a growth of 68%. Operating -- and as we have pointed out several times, our business don't have any large -- often don't have any large seasonal trends. So that means that the same quarter from year-to-year don't need to match. And I think Q1 is a good example. I mean, this year, we released expansions of 3 of our biggest games, 3 of our games that have the biggest followers. So of course, when we do those expansions, they are going to sell a lot. Last year, we made one expansion on Hearts of Iron IV, which sold a lot. But that was the only PC expansion we make.
And at the time, it was the highest selling expansion ever for Hearts of Iron, right?
That's right. That's right. So no more PC expansions, and they are the ones that often generates the most. But we did release Stellaris for console and a couple of Cities console games as well. But that explains this very high revenue growth. But also, we have grown the business and added on cooperation like the cooperation with Microsoft for Game Pass and the cooperation with Epic Games regarding Surviving the Aftermath. So that has added on, of course, to the revenue this year. Operating profit, also a record for one single quarter, SEK 166 million compared to SEK 63 million last year, and that is a 164% year-on-year increase, so quite a lot. Profit before tax, SEK 165 million and compared to SEK 63 million last year, and profit after tax, SEK 128 million compared to SEK 49 million last year. So we have, of course, when we have -- when we release expansions in the quarter and get high revenues, normally, we get high operating margins and no difference in Q1 this year, 41% compared to 26% last year. And I think these numbers show quite clearly the impact of releasing expansions in a quarter compared to not doing it.
Yes. And it fluctuates so much because of that.
Exactly. Yes, definitely. Profit margins means after tax, 32% compared to 21%. And then we have this equity through asset ratio which has gone down from 70% to 62%.
And what is that?
What is that? So yes, so it's -- the reason to this is the change in accounting rules. That means that we now put all our lease contracts onto the balance sheet as an asset and as a debt.
Is that the same, the jump from 70% in Q1 last year to the full year, where it's only 58%?
Yes. So it has -- yes. So last year, so what has happened since Q1 last year? Well, we moved here on Stockholm.
Yes, of course.
And we moved in Delft and moved in Seattle and enter into new lease agreements for many years. And so those -- so therefore, the balances go up. And then every quarter, we depreciate this so then the balance goes down. So therefore, this equity to asset ratio has improved since year-end from 58% to 62%. So it will probably increase slightly. Number of employees, 423 end of Q1 last year. Now we have increased with 80 employees, so we are 503 at the end of the quarter.
A lot of people.
A lot of people. And in that, no acquisitions, no new studios, really. So...
I saw -- there was a question on the channel, what the plans are for recruitment for this year. So our plans are pretty set. We set them in the beginning of the year, depending on what we're doing with games. And we said earlier this year that we are planning to recruit around 200 people this year, and that we are sticking to. We've already recruited quite a few of those in all honesty, but yes.
Yes. So it's an increase of 24 since -- in Q1.
Yes, yes.
Okay. So let's go to the next slide. So this is a slide that shows our revenue, how it moves quarter-to-quarter. And it shows our 3 main cost groups, how they move. So we have cost of goods sold, we have selling expenses and we have administrative expenses. And all in all, these 3 costs, they go from -- they are SEK 255 million in Q1 this year, and they were SEK 180 million first quarter of 2019. So that is a 42% increase compared to the 68% increase of revenues. And I will do a quick walk-through of the cost. I won't be too detailed, but the cost of goods sold. So that is mainly the cost for developing our games partly.
It's going up a lot here.
It's going up a lot, and that has to do with several things. So development of games, we capitalize that. I mean that they don't show up on the -- as a cost in the profit and loss statement until we release a game. But with time, we release more games and bigger games, so this cost goes up. But also when we develop games, there are costs surrounding this -- the proper development, like manager cost, research and development and we don't capitalize that. So that would take up costs and raise it.
And research and development is like prototyping of new games. So I think fair to talk about because we do that a lot. And it sometimes, it becomes a game and sometimes not, but it's a very important part of figuring out new games.
Yes. And in the cost of goods sold, we also have royalties. So royalties is what we pay to either IP holders, which is very rare nowadays because we want to own all the IPs ourselves. And out of the active games, I think it's only BATTLETECH, where we don't own the IP properly. It's a license. But also to external development studios, and so when we do a lot of revenues on those games, for example, Cities: Skylines, it means that the royalties to the developer goes up a lot. And then the cost also includes depreciation of brands that we have acquired like the World of Darkness catalog, Prison Architect, Age of Wonders and also any write-downs. And this quarter, we had the write-downs of SEK 14 million. It was a game development, a game that we hadn't announced yet, an externally developed game that we decided to not continue with. We thought we could spend the money better on something else. And also an acquired license that we concluded that we should write down.
I think it's fair to point out that I've said it many -- or we've said it many times before, but we cancel about 40% of our projects. So we start a lot of things that we never finish, unfortunately. But sometimes, it's a fantastic idea, but it just doesn't work as a game.
Yes. And I think when we look back 2017, 2018, 2019, we write down between 5% to 8% of the capital development base every year. So this quarter, annualized would be very close to 8%. So it's...
Within the bracket.
It's in within the bracket, but also quarters, like everything else, they vary. So this might look very different in Q2. And then you pointed out, it goes up also because we do quite a lot of development support in Paradox Interactive in the publishing unit. And in Q1 this year, we have realized that quite a lot of that support actually is very closely connected to the game development. So therefore, that goes on to the cost of goods sold. Last year, the tech development being made in Paradox Interactive was an administrative cost. So therefore, the blue line, the -- no, sorry, the red line, the administrative expense goes down from Q1 last year to Q1 this year. Let's see, I think it -- let's see how much it was. Yes, so it was SEK 39 million last year, and it's SEK 36 million this year. Marketing costs increase, of course, as we do more and bigger campaigns, SEK 39 million.
Cool trailers.
Yes. Yes. Yes.
Biased and proud, I should say.
And that's a good point because -- so we have SEK 47 million of marketing costs this quarter. One of those trailers, I mean, they cost between SEK 5 million and SEK 10 million. So if we do one of those one quarter but not the other, it will jump 10%, 15%. So again, as with the revenues, when you look at the marketing costs, remember, it fluctuates between the quarter. So you should always look over a bit of a longer period. But again, so total -- yes. And I've said it, the cost of goods sold came in at SEK 171 million this quarter compared to SEK 102 million Q1 2019. So again, all in all, 42% cost growth year-on-year compared to the 68% revenue growth. So that takes us to the next slide and as...
And just a comment because I see questions here. SEK 5 million to SEK 10 million, we're talking SEK first of all. I think that's important to point out. But that's even -- like they can cost a lot more. If you look at AAA, that's like -- then we're up on a whole different level. So I think that's something -- maybe we should do a Paradox podcast about that actually.
Not all trailers would have cost a lot but...
No, no, no. They vary a lot on the inside. But if it's like an expensive -- especially when it's those -- the ones that look really great, then you know it's going to be an expensive one.
Yes. So on to the next slide, we have our revenues quarter-by-quarter and our operating profits quarter-by-quarter. And here, you can see the impact of having a business with fluctuating revenues but more steadily cost growth. And the effect is -- well, you see it here 2 effects: One is the variation from quarter-to-quarter. The other is the huge impact it has on the operating profit. And a quarter where revenue goes up like 30%, you will see profit go up maybe 80%. That's a fact. That, of course, has to do with us having a lot of fixed costs and very kind of volatile revenues. So therefore, we should look at our business on a bit more long-term period. So this chart, the same numbers as on previous chart, but it has grouped 4 quarters together. So this shows a 12-month period, ending with the current quarter. So here we are, a new record, but with -- both revenue and for operating profit. And it's the first time that our operating profits for a full year exceeds SEK 0.5 billion. So quite a milestone. Quarterly cash flow from operations and investments. We had a very positive quarter cash flow-wise. You, that looked at -- watched the stream last quarter, might remember that in Q4, as you can see, the Q4 2019 bar, green bar is very high. We had an extraordinary event, where we sold a game project for SEK 80 million.
And that actually explains why the bars in Q3 are so low as well. So it's a timing issue.
Exactly, exactly. We actually sold it in Q3, but we received the money in Q4. So that had a double impact on those quarters. But -- so if we wouldn't have done that exercise, this Q1 quarter would have broken the cash flow record as well. And as you can see in the trend, when we get higher and higher positive cash flow from our operating activities, we use that to invest further in the future. So as Ebba mentioned, Q1 2020 is the quarter where we invest the most in new game development. I think it was SEK 153 million, yes. So that's by far, the highest investment we ever done. It's -- well, you can see that Q4 2018 is higher, but that is due to that we acquired a game, Prison Architect, back then. But if you just look at pure game, new game investment, Q1 2020 is a record. And this is -- if we go back a couple of years, it's a 57% increase compared to Q1 2019. And now Q1 2018 doesn't show, but it's a 112% increase. So the business has grown quite a lot over the last 2 years.
And also, the games themselves, each project grows, right? So let's -- just over time, and this is not just for us. I think it's the industry on a whole. New games become more and more expensive to make, which you can see here, but it's also that we have become a bigger company, so we can also invest more.
Yes. Correct. One more slide before we jump to the questions. So this shows our total equity and our total noncurrent assets. And it shows, for example, that our kind of noncurrent assets is mostly the fixed assets we have. So it's our capitalized development, all our investments we do. Our investment into brand and -- sorry, to brands and licenses but now from Q4 2019, when you see a big jump, there is also these lease agreements. So compared to Q1 2019, we have added on SEK 225 million in something that is called right-of-use assets, so an asset and a debt. But what can be shown here is that all our noncurrent assets is well covered by our equity. So nothing of this growth is debt financed.
And I mean that's also pretty -- a part of who we are. It could happen if we want to, for instance, buy something very large. But in general, we tend to invest what we make and that's how we grow over time.
It's not debt financed, but it's not financed through new share issues either. It's all financed through the operating cash flow. Those were the charts I had planned to go through.
Okay. We have like loads of questions. So I will jump right and do it, and I'm looking this way because the questions are here, if you're wondering what I'm doing.
Are CK III, Bloodlines 2, Empire of Sin on schedule for Q4? What aspects of making the games is most challenging working from home? Well, so I said this before, but so far, so good, but it is a little bit challenging and especially the creative parts. And then it also depends on each studio works differently with outsourcing. For instance, some studios work a lot with studios based in Los Angeles, where they are all on lockdown right now. It depends what you need for the game. So it's not -- I said it before, it's a little bit too early to say what delays we will see. We're, of course, hoping and really working towards as few as possible. But we also know that quality wins over release on too early every time. So we do prioritize that. And of course, no one expected this COVID situation to happen, so that has impacted the plans. Alex, for you here, for a Steam purchase, when do payments in foreign currencies get converted to SEK? Is that immediate when the sale is made? Or when Steam sends you the money at some later point?
Right. So when we send the invoice to, for example, Steam, that's an agreement we have in dollars. So we send an invoice of, let's say, $10 million. Then at that point, we take it as revenue over the profit and loss statement at that day's U.S. to SEK conversion rate. But then -- so that is what you will see ending up on our revenue line. But then when we get the revenues from Steam in dollars 1 month later, that might mean something else in SEK because the dollar rate might have changed. And so then if there is a difference there, if we make kind of a gain or a loss, that ends up as other income or other expenses. And during this quarter, in Q1 2019 (sic) [ 2020 ], the dollar rate has gone up. So that means that we have quite a big item as other income this quarter. It's SEK 20 million, I think. And SEK 16 million -- SEK 15 million to SEK 16 million of those millions are due to currency. And the rest...
Yes, okay. Got it. So you can see that in pretty much every report.
Yes, but it's rare that it moves this much. But you can see it in our report.
Next-gen console hardware. We talked about that before. Bloodlines 2 is announced for that. But hopefully, we will have some more games on the new consoles. We have -- console has been growing for us for a while now, and we continue to see it being really a better platform for us than we maybe thought a couple of years ago. So it's important to us, for sure. Does this period of market turmoil change your strategy at all? And very specifically, do you -- are you more likely to buy back shares? Maybe you want to answer that?
I would say that our strategy stands very firm. Of course, we listen and we look what is happening on the market. But at the moment, we don't see any reasons why we should change. Almost on the contrary, we see that our long-term strategy with digitalization is very good. So we're continuing on that. Buyback of shares, that is a shareholder question, but as far as I know, there is no plan to do something like that.
We'll see. But yes. Okay. How do you foresee you'll grow the Paradox group in the next few years? Will it be more established studio acquisitions like we've seen with Triumph and HBS? Or will you put more focus on starting new studios like Paradox Tectonic?
I can answer that. We will continue as we have done so far.
Keep the strategy, right?
Keep the strategy. So last year, we said we've grown 8 individuals organically, meaning that we haven't added on any studio, but we have grown those studios. The quarter previous to that, so Q1 2019, we established a new studio, Tectonic, so that's one way to grow. And the kind of half year before that, we acquired a studio, Harebrained Schemes. So -- and those 3 ways to grow is still very valid for us. We're always on the look for interesting and skilled studios and skilled individuals as well that would like to open a studio with us.
So business as usual.
Yes.
The sudden spike in player base and revenue due to COVID-19, how is that affecting your financial projections for the rest of the year? Well, it doesn't really, I have to say, because this is sort of an extraordinary time. So it would be quite dangerous to redo all calculations going forward based on this. We hope that it won't last for too long. Our -- if you look at our trends historically, they've continued to grow for years now when it comes to our fan base and player base. So that's, of course, something that we hope to continue. But the jump we see now, we also take with a bit of extraordinary caution, I could say so, yes. It's really, really hard to predict what's going to happen when the crisis relaxes. And hopefully, people go back to, at least, more of a normal life before. And there is a very similar question. How are you preparing for the eventual drop in player base once the pandemic is over? We -- again, we're not really planning for that because we're not planning for the increase. So it's not like we're increasing staff or anything because of the pandemic.
A lot of COVID-19 questions, and it makes sense, of course.
I saw another one on the stream here, which was how do you make sure people work and clock their hours? I think the base of all our work is trust. We trust our employees and our teams. And that -- it doesn't matter if that's in the office or at home. We know that people work really, really hard. And I think a bigger problem working from home is almost working too much because you go and you sit in front of what you're doing and you get super focused. So we're actually more focused on making sure that people go out for walks and take lunch breaks and remember to hang out with friends for video drinks or video lunches and stuff like that. So we're not worried about people not working, rather the opposite. Okay. What are the main factors in deciding what games to make next? Now that you're firmly established in the grand strategy genre, can we expect Paradox to favor the green lighting of product in other genres a little more going forward? Well, I, for one, think that we are actually in quite a few genres already: grand strategy, absolutely; also other types of strategy games; management is a very stable base for us. Now we have done RPGs before. Of course, we are expanding a little bit more into that with Bloodlines. But we don't really -- I mean we'd never green light projects just because we -- for a genre. We green light projects because they fit with who we are and what we do. I actually think this is something that is covered in our podcast quite regularly. You should listen to that. It's called The Business of Video Games, and it's done by Shams Jorjani and Daniel Goldberg. So that's a great actually source for information, and you can ask questions. Okay. Can you provide some more information about your plans for the mobile segment development? Are there any targets you have in mind for the midterm?
Well, we have, as Ebba mentioned, we have released a soft launch of Stellaris mobile, Galaxy Command. And we are very eager to keep following that to see how that goes. And we're continuing with mobile as we have, for some years now. It's a platform that we would like to be on, so we are exploring and testing. So far, we haven't really kind of cracked the recipe how Paradox will be successful there, but we'll continue to try. But mobile is one of the many platforms. I mean, we are super happy to continue to grow as we have on PC and consoles. But we will continue with mobile as well.
There's a follow-up question, what does soft launch mean?
Okay. So we have launched this game only in 4 countries and with very limited marketing, and the game is not fully developed. And the reason is that we want to get the feedback before we do the final work in the meantime, as we do the final development and fine-tune the game before an eventual hard launch. So it's a very efficient way to develop the games in conjunction with our fans.
Yes, yes. Okay. After successful expansion into the console market, is Paradox considering getting into other forms of electronic hardware, like VR, cloud gaming, et cetera. We are actually quite active already in the streamed cloud gaming world. NVIDIA has a solution that we're on; and PlayStation, the same. We're working with Xbox. We're hoping to work with everyone. We really want to make our games accessible to as many people as possible. So if the player movement is going towards cloud gaming, we want to be there as well. It's still really early days. We're seeing that it works well in some places and less well in other places. But I think this is the development that we will see moving for years. So it's more about being part of that then jumping on it at a much later stage. VR, we haven't really been very involved in but I can say -- I would -- I actually think the grand strategy games can be quite cool in VR. They would be a whole different game where you would walk around in -- on the field or on the map yourself. We're not quite there yet, but it could be cool. We haven't really seen VR taking off in our genres yet. But who knows? We'll see. How you all doing? Is everyone at Paradox adjusting to the realities of working from home? How is the morale and general well-being of your employees? I think it's okay. I don't think it's amazing. Some people are totally fine working from home, but we also have a lot of members of our teams who have moved to a different country to work in a studio. And it's not always so easy to be where you're not from, might not have your family nearby. Also, Sweden has taken a quite different approach to -- well, it depends who we ask, but at least we have less restrictions than many other countries. And of course, that's also quite stressful if you come from a country where the media is portraying things in one way, and here, it's a little bit different. So it's not amazing, but comparatively speaking, we are doing pretty well. But we're really trying to help our teams to live through these slightly strange times. With Paradox making and announcing video games in multiple genres and not just grand strategy games, what is a Paradox game? Do you want to respond to that?
Yes. Yes, we have been very deep and wide into strategy games. But I would say, we have our game pillars. So we want to make games with a long lifetime, meaning that the game should be either endless or re-playable. We want them to be intellectually challenging. We want them to trigger the players' creativity. All these things, we think, add up to making the game fun to play for a very, very long time. And I think strategy games and management games and now role playing games are genres where it's -- where we can develop games according to these pillars very well. So I think that is how you will, for quite some time, recognize a Paradox game that is being developed according to these game pillars instead of being in specific genres, even though it's very clear that we're going to be in management strategy and role playing games for quite some while.
Yes. Okay. How is the cancellation of major live events like E3 or gamescom affecting your publishing plans? I talked about this before. We have changed a lot, but we are also lucky because we have done a lot of digital events historically as well. So it's not a huge thing. But some really cool and creative solutions are coming up that we like to be a part from. Are you happy with the pace of additional content production, for example, Hearts of Iron IV and other games in 2019? And are you taking all the appropriate actions? If not -- this would be quite the leading question here. I feel this person feels it's not -- to production on additional content.
Yes. But I mean, it's both. Yes, I think we said in the Q4 report that we will have preferred to release more DLCs. We believe our fans would have preferred if we had released more DLCs. There is a constant demand on more content. And yes, we like it. But it's also very important to release DLCs and new games with high quality, and that is more important than coming out with a lot of content, we think. So I think that is prioritized. But yes, we would like to increase the pace, and we are taking all the measures we have to try to do that, but without jeopardizing the quality.
Okay. A few more questions there. I read on [ erbus post ] that PDX is happy with the Magna Graecia reviews. I would like to know if PDX is happy with the Magna Graecia sales. Yes, we are. Is the short answer. About selling expenses, has switching some game sales from Steam to PDX store, Epic and Game Pass helped a lot? I don't know. Kind of the same, isn't it?
Yes. Yes. I mean, we -- it's not much affected by that. We have our marketing strategies regardless of the platforms.
Are there any acquisition targets in mind for bringing new, successful franchises into Paradox? Or is all capital allocation just focused on in-house development? Well, that's -- I mean, we always work on new projects. Sometimes they fly and sometimes they don't. We don't disclose until -- we don't announce until we announce, but we promise to tell you when we have something to share. It's not -- it's always about growing for the future and building for the future.
But it's -- the question is also whether capital allocation is just focus on in-house developments?
No.
No. We say that very roughly, like half of the games we do are made by our internal studios, and half of the games are done by external studios. Still our games, but -- so it's spread. I'm keeping an eye on the time. We are at 44 minutes already.
2 more questions?
Yes.
We'll do 2 financial ones. By how much do you feel you need to beat the consensus estimates in order to issue a reverse profit warning? Will you even use a paid analytics service like Redeye?
No. Does this count as 2 questions? I'll count it as one. No, we don't want to pay for analysis. We think we get better research if it's done without us as a company paying for it in general. And well, it's difficult with profit warnings or reverse profit warnings or perhaps easy for us because as you're aware of, we don't give out much forecast. We don't give any forecast. So it's a bit tricky for us to go out and say that now the market is expecting something that we don't think is going to happen because as soon as we start doing that, we start to giving forecast and...
And we don't, yes.
So far, we don't.
And we are always super clear on the fact that it fluctuates like this, which also balances that up. Okay. Last question. I'm trying to -- do you have a sense of how Game Pass has expanded the player base for Stellaris? And if new players stick around after? That is a really, really interesting question and actually a huge part of why we're even doing all these cooperations, not just with Game Pass, but also with Epic or other distributors. It really changes the way the player comes in because it's perceived almost as a free-to-play game when it's part of a subscription service. So it's more about how do you then stick around. It's too early to say yet because we haven't been on there for that long. But that I think is a very interesting question to come back to in a later report, and we can talk a bit more about that. Again, I think this is something that they cover in the podcast that you can also tune into. Yes.
Three quarters, I think it's a record again.
Yes. It's the longest report we've ever had. Thank you. Thanks for all the questions. Really great questions. And most of them, pretty much all of them are actually answered in the stream as well, so you can go back and listen. Thank you. Thank you for tuning in and see you for the next report, Q2.
Yes, in August. See you then. Bye.
Bye. Thank you.