CD PROJEKT Q3 2018 Financial Results: Conference Call Transcript

Key insights

6 takeaways

01
CD PROJEKT reported a 21% year-over-year revenue decline in Q3 2018, driven by lower sales of existing products and the GWENT development cycle.See it on page 1
02
The company maintained a net profit of 15.5 million PLN, with the CD PROJEKT RED segment acting as the primary earnings driver.See it on page 1
03
R&D expenditures increased by nearly 30 million PLN during the quarter to support the development of Cyberpunk 2077, GWENT, and Thronebreaker.See it on page 4
04
Management identified 2018 as the most intensive development period in the company's history, with Cyberpunk 2077 currently in a phase of content expansion and polishing.See it on page 6
05
Initial sales for the title Thronebreaker fell below internal expectations, though the company plans to pursue long-term viability through console and platform expansions.See it on page 3
06
The GOG platform reported a negative result for the quarter due to its involvement in the GWENT development consortium, despite steady growth in its core distribution business.See it on page 1

Summary

CD PROJEKT’s third-quarter 2018 financial results reflect a period of intensive investment and strategic transition as the company focuses on the development of its upcoming title, Cyberpunk 2077. The Group reported a 21% year-over-year revenue decline, primarily attributed to reduced sales of existing products and the impact of the GWENT development cycle. Despite this, the company maintained a net profit of 15.5 million PLN, with the CD PROJEKT RED segment serving as the primary driver of earnings. The GOG platform, while reporting a negative result due to its participation in the GWENT development consortium, demonstrated steady growth in its core distribution business when adjusted for currency fluctuations and product release schedules.

The company’s balance sheet highlights a significant commitment to research and development, with expenditures increasing by nearly 30 million PLN during the quarter. These investments are directed toward Cyberpunk 2077, GWENT, and the standalone title Thronebreaker. Management emphasized that 2018 represents the most intensive development period in the company’s history. While Thronebreaker’s initial sales performance fell below internal expectations, the company remains optimistic about its long-term commercial viability and plans to support the title through console releases and platform expansions.

Operationally, the company is prioritizing high-quality output to compete in a market increasingly dominated by major hit releases. Management confirmed that the development of Cyberpunk 2077 is progressing according to plan, with a focus on content expansion and a rigorous post-development polishing phase. The company continues to utilize government-backed R&D subsidies to support its technological infrastructure, which provides synergies across multiple projects. Looking forward, CD PROJEKT maintains a strategy of global distribution through market-leading partners, mirroring the successful model established with The Witcher 3.