CD PROJEKT Group Q1 2019 Financial Results: Audio Webcast Transcript

Key insights

6 takeaways

01
CD PROJEKT Group reported Q1 2019 sales revenues of nearly 81 million PLN, with a net profit of approximately 18 million PLN impacted by development expenditure depreciation for GWENT and Thronebreaker.See it on page 1
02
Development expenditures for Q1 2019 totaled 21.5 million PLN, driven primarily by the ongoing production of Cyberpunk 2077.See it on page 4
03
As of March 31, 2019, the company held 622 million PLN in cash reserves following significant investments in development, property, and pre-production costs for Cyberpunk 2077.See it on page 2
04
GOG.com segment revenues increased by 30% year-over-year, supported by the launch of the GOG Galaxy 2.0 initiative to address digital market fragmentation.See it on page 2
05
The development team for Cyberpunk 2077 has reached its peak size, with future workforce expansion restricted to quality assurance departments.See it on page 5
06
The company maintains a cautious outlook on the Chinese market, noting that its primary revenue streams remain concentrated in Western markets.See it on page 4

Summary

The CD PROJEKT Group’s first-quarter 2019 financial results reflect a period of sustained operational activity focused on long-term development and infrastructure expansion. The company reported sales revenues of nearly 81 million PLN, bolstered by the continued performance of The Witcher 3 and a 30% year-over-year increase in GOG.com segment revenues. Despite these gains, the group recorded a net profit of approximately 18 million PLN, influenced by the depreciation of past development expenditures for GWENT and Thronebreaker, which were not present in the prior-year period.

Capital allocation during this quarter prioritized future growth, with 21.5 million PLN added to development project expenditures, primarily driven by the ongoing production of Cyberpunk 2077. The balance sheet also reflects the adoption of IFRS 16, which necessitated the recognition of lease-related assets and liabilities. Cash reserves stood at 622 million PLN as of March 31, 2019, following significant outflows for development, property acquisition, and advance payments for Cyberpunk 2077 collector’s edition components and marketing materials.

Strategic initiatives highlighted during the period include the introduction of GOG Galaxy 2.0, designed to mitigate digital market fragmentation, and the launch of the CD PROJEKT RED STORE. While the store is currently a limited, albeit profitable, venture, the company intends to scale its operations ahead of the Cyberpunk 2077 release. Management noted that the development team for Cyberpunk 2077 has reached its peak size, with future expansion limited to quality assurance departments. The company maintains a cautious outlook regarding potential market volatility in China, noting that its primary revenue streams remain concentrated in Western markets.