Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CD Projekt SA (OTGLF, Financial) reported a significant increase in group sales revenue for the first half of 2024, reaching PLN425 million, driven primarily by the success of Cyberpunk and its expansion, Phantom Liberty.
- The company achieved an 88% increase in net profit compared to the previous period, amounting to PLN170 million, with a net profitability of 40% for the group.
- The company has been successful in maintaining strong community engagement and sales longevity through initiatives like free trials, seasonal sales, and mod kits.
- CD Projekt SA (OTGLF) continues to invest in future growth, with a PLN34 million increase in property, plant, and equipment, including a new building on their Warsaw campus.
- The company has a healthy financial reserve, with cash, bank deposits, and bonds totaling PLN1.37 billion at the end of June 2024.
Negative Points
- The first half of 2024 was a quiet period for CD Projekt SA (OTGLF) in terms of big announcements, with a focus on development rather than new releases.
- Operating costs increased due to the amortization of Phantom Liberty and Cyberpunk, impacting overall financial performance.
- The company experienced a decrease in trade receivables by PLN110 million, which could indicate challenges in collecting payments.
- There were no one-off transactions to support results in 2024, unlike the previous year, which had a positive balance from partial reversals and write-offs.
- The company is still in the early phases of several projects, such as Orion, Canis Majoris, and Hadar, which require more time and resources before reaching the pre-production stage.
Q & A Highlights
Q: In Q2, you had PLN57 million loss of cash spend on development projects. Is that a sensible way to think about Q3 and Q4 levels? Or should it logically continue to increase as your two main areas of focus in terms of development build?
A: (Piotr Nielubowicz, CFO) Yes, we are slowly progressing and increasing our expenses in development. As mentioned with Orion, we are close to moving from the research phase to the development phase, which will soon be treated as capitalized in our balance sheet.
Q: Have you had any discussions with third parties regarding the licensing of your IP for the creation of mobile games?
A: (Michal Nowakowski, CEO) We don't have any announcements to share regarding licensing IPs for mobile games. Should there be anything to share, we will do so in the future.
Q: Can you tell us more about your work with Unreal Engine? Does working on a game with such a large open world as Witcher 4 pose a challenge for this technology?
A: (Michal Nowakowski, CEO) We feel confident with our choice of Unreal technology and our collaboration with Epic. We are working on tailored tools for ourselves, and we are confident in making this technology viable for open-world games.
Q: After redefining the framework of the Sirius project, do we still have to consider it an experimental project that may be abandoned if it does not meet expectations?
A: (Piotr Nielubowicz, CFO) Work on Sirius is progressing, and it is being developed by Molasses Flood. It is a different type of game compared to our AAA single-player RPGs, so it may be treated as experimental, but we are satisfied with the development results.
Q: How is the team building going for the Orion project? When can the team growth for this project be expected to accelerate?
A: (Piotr Nielubowicz, CFO) We plan to double the Orion team over the next year. The team currently works from three locations: Poland, Vancouver, and Boston, and we definitely plan on growing it.
Q: When creating the framework for the new Polaris saga, did you rely on any surveys about what players expect, or are the assumptions based on your own intuition?
A: (Michal Nowakowski, CEO) We do not rely on surveys. It's a mix of knowing our niche, being experts in it, and relying on our intuition. We do conduct research on user experience and interface but not on storyline development.
Q: Once a AAA game enters the production phase, how long does it usually take to be ready to launch? Is there any reason why Polaris will take a shorter or longer amount of time?
A: (Michal Nowakowski, CEO) The timeline varies from game to game. Historically, our games take about four to five years from start to launch. Polaris has all the tools to progress on a regular path without any specific reason for delay.
Q: You mentioned that your work on the unannounced project is progressing. Are we talking about a potentially new game that you have not announced?
A: (Piotr Nielubowicz, CFO) It's too early to share details on unannounced projects. We are researching, testing, and assessing new ideas internally.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
