Cd Projekt Sa Unsp/Adr

Ladies and gentlemen, thank you for standing by and I would like to welcome you to CD Projekt Full Year 2025 Earnings Conference Call on the 19th of March. At this time, all participants' lines are on listen-only mode. The format of the call today will be a presentation by the management team Followed by a question and answer session. So without further ado, I would now like to pass the line to Mr. Michał Nowakowski, the Joint Chief Executive Officer. Please go ahead, sir.

Good afternoon. Hello. My name is Michał Nowakowski. I'm the Joint CEO of CD Projekt and I will be hosting today's conference dedicated to CD Projekt Group's financial results for 2025. I will be co-presenting with Piotr Niedelbowicz, our Chief Financial Officer, and after the presentation, I will invite you to participate in a Q&A session where we will be joined by Karolina Gnasch, our VP and Head of Investor Relations. Starting off, I would like to briefly comment on an important event that took place at the end of 2025, namely the sale of GOG, the digital distribution segment of the Citi Project Group. The rationale behind this deal is pretty straightforward. We want to focus entirely on game development and expansion of our franchises. As you know, we are upscaling our operations, working on multiple AAA projects simultaneously and developing new products around our IPs. This dynamic growth demands our full attention and resources. What I do want to emphasize is that GOG remains an important distribution partner for us. And our plan is to continue releasing our future titles on this platform. Speaking of our games, moving to that subject. The 10th anniversary, as we celebrated the 10th anniversary of The Witcher 3 release, we announced that the game has already sold over 60 million copies. If we include the first two installments of The Witcher trilogy, we arrive at a pretty nice figure of over 85 million copies sold worldwide. That is a stunning achievement, seeing our games reach such a broad audience confirms that our stories and worlds continue to live on and resonate with gamers for years. And this, of course, makes the whole CD Projekt Red team very proud and motivated, especially as we continue to work on The Witcher 4, which will open a brand new saga in this universe. And yet we continue to explore new ways to introduce The Witcher games to new players. The inclusion of The Witcher 3 Wild Hunt Complete Edition in the Xbox Game Pass library is a great opportunity to attract more gamers to our universe. In the 10 years since the release of The Witcher 3, an entirely new generation of players has emerged, many of whom have never fully experienced Geralt's story firsthand. Bringing the game to Game Pass allows us to bridge that gap and lets new players discover why The Witcher 3 became such an important title for so many others. It's also a natural moment to reignite interest in the universe ahead of the new saga. Besides the Witcher games, we are also active in what we call the franchise flywheel area. What you see here is just a part of our recent achievements in this field. From a worldwide concert tour to merchandise, comic books, board games, and collaborations with other titles, We remain active on many fronts. By doing this, we offer our fans the opportunity to interact with the Witcher brand in various engaging ways, enabling them to stay immersed in the universe while anticipating our next major release. Importantly, in addition to the positive indirect effect of supporting sales of the games from the Witcher universe and helping keep the franchise relevant and visible to players, all these activities also have a direct Material Effect. Since the release of The Witcher 3 in 2015, our franchise flywheel projects centered around The Witcher brand have brought in an extra 100 million Polish zlotys in revenue. Moving on to our second pillar, that is the Cyberpunk franchise. In 2025, we had the great pleasure of announcing further sales milestones. The base edition of Cyberpunk 2077 has sold over 35 million copies, whereas sales of the Phantom Liberty expansion crossed the 10 million mark. These numbers are the result of our continuous support for the title and commitment to enriching player experience. And we still periodically roll out new, smaller features and updates to the game, and we intend to continue doing so. Long-term support for our flagship titles is an important part of our strategy, and it's helping us sustain player interest and ensure that the game continues performing well in the long run. Alongside our continuous support, bringing Cyberpunk 2077 Ultimate Edition to new platforms certainly boosted our sales figures as well. Last year, we released the game on Nintendo Switch 2 on the very day of the console's global launch. The title also made its debut on Mac devices with Apple Silicon processors. Furthermore, last July, the base edition of the game was for the first time ever included in a subscription service entering the PlayStation Plus catalog. Following up on that, on Monday we announced that Cyberpunk 2077 will get in the following weeks a free tech update that will take advantage of the expanded hardware capabilities offered by the PS5 Pro console. What's more, over a week ago, the game had joined the previously announced The Witcher 3 Wild Hunt in the Xbox Game Pass catalog. Just as with the PlayStation Plus catalog, the game is offered to subscribers in its base version. Players who wish to delve even deeper into the Cyberpunk world have the option to do so by purchasing the Phantom Liberty expansion separately. As for the franchise flywheel area for the cyberpunk world, we are just as active here as in the Witcher universe. Our creativity and ambitions go really far. Together with our partners, we step beyond standard categories, offering unique products such as dedicated AR glasses, arcade machines straight out of Night City, or an upcoming proprietary cyberpunk trading card game, by the way, whose Kickstarter campaign launched this week, already being the most funded TCG campaign launched on this platform. And those are only a few examples. Since the release of Cyberpunk 2077 in 2020, our franchise flywheel activities have generated nearly 70 million Polish zlotys in additional revenue, which clearly demonstrates the strength and appeal of this brand. But that's not the end. We have an important development update regarding our third franchise, Hadar. on the project is progressing dynamically and the team has established the foundations of this entirely new IP. Now we have clearly defined distinguishing features of this world and established key pillars that will not only provide a foundation for the game itself, but also potentially for other future products. Of course, this does not mean the end of work on IP itself, which will naturally continue to evolve and develop on many fronts all the time. The team is now actively designing specific elements that might be included in a game. We are creating multiple prototypes and implementing them directly into Unreal Engine. This allows us to live test and verify how selected mechanics and gameplay elements can perform. And to conclude my part, let's briefly discuss changes in the size of our development teams. As of the end of February 2026, we had over 900 developers on board, meaning that an impressive number of more than 220 developers have joined our teams over the past year. Compared to October last year, most new hires are now part of the team working on The Witcher 4, where they help improve quality and scale up solutions presented in the Unreal Fest tech demo across the entire game. Having gained greater visibility of the game's scope, we are strengthening our internal teams, while at the same time recruiting top-class talent to provide long-term support in delivering both The Witcher 4 and our future titles. Of course, these headcount numbers only reflect the projects we are developing internally. They do not include projects that we do in cooperation with our external partners, including the one we are working on with Fool's Theory. We plan to reveal more information about this specific project later this year. In the current year, we plan to continue strengthening our development teams, working on key projects, and we want to continually attract the best talent in the industry, offering them a space for safe and inspiring development. Now, that would be all from me, and I'm going to pass you into the hands of the one and only Piotr Milobowicz.

Thank you, Michal, and good evening, everyone. Let's start the presentation of our 2025 financials with the Consolidated Profit and Loss Account on slide 13. First, a technical remark. Following the sale of GOG, which Michal already mentioned, effective January 1st this year, the Group is continuing with activities previously described as the Philippiak Red Segment. so we will no longer distinguish separate segments in the context of our business and reporting. Accordingly, the GOG segment has been excluded from the consolidated P&L and, in accordance with IFRS, is presented as discontinued operations. Thus, the Group's figures for 2024 and 2025, down as far as the net profit from continuing operations line, Do not include GOG and present CELEB PROJECT RED exclusively. And now, after this technical introduction, we can move on to numbers. Our CELEB PROJECT RED sales revenue for 2025 reached 867 million zloty, a 9% increase year on year. The main revenue drivers were sales of our own products, especially the Cyberpunk franchise, which performed 12% better than in 2024. Cyberpunk 2077 and Phantom Liberty's long-term performance is visible on the next slide. In 2025, we recorded solid sales, bolstered by two major events. As mentioned by Michał, the first was the June release of the game's Ultimate Edition on Nintendo Switch 2. The second event, supporting our sales revenue, was the introduction of the base edition of Cyberpunk to PlayStation Plus Extra and Premium subscription services. At the same time, visible on the next page, revenues from The Witcher 3 remained strong, though they were lower than the year before, when we booked significant revenue from making The Witcher 3 available on PlayStation Plus. Coming back to our PML, the Cyberpunk launch on Nintendo Switch 2 also visibly impacted our series of goods and materials line, where the five times year-on-year increase was driven primarily by sales of physical cartridges for the Nintendo console. Cost of products and services sold was reduced by half in 2025, mainly for two reasons. First, the application of a declining amortization model, and second, the extension of the amortization scheme based on a re-estimation of the useful lives of our assets which took place at the end of 2024. The cost of goods for resale and materials sold grew in line with the increased sales in this category and related to the Cyberpunk physical cartridges for Nintendo Switch 2. Moving to operating costs. Our selling expenses grew by 27 million zloty, reaching 119 million. The largest share and growth were attributable to promotion and servicing costs dedicated to Cyberpunk 2077, especially on the new platforms. When it comes to administrative expenses, they were slightly lower than in 2024. This was mainly due to lower research costs for games in the early conceptual phase. For most of the comparative period, these included expenditures related to Cyberpunk 2, which started to be capitalized back in 2024. In 2025, the ResearchWorks line item was driven mainly by work on Project Hadar and some other tech and AI development projects we run in-house. All of the above resulted in an operating profit of over 470 million zlotys, a nearly 30% increase year on year. In 2025, the group reported again over 60 million surplus of financial income over financial expenses, resulting mainly from interest income on bonds and bank deposits. Moving further to our income tax. In 2025, we recorded an effective tax rate of 3.2% within consolidated continuing operations. This relatively low rate was primarily influenced by the application of IP Box and R&D tax release. The offsetting of capital gains income against tax losses from previous years resulting in no capital gains tax and an increase in deferred tax assets resulting mainly from the expected future increased utilization of the R&D tax release. On top of the above, we have adjusted from 2025 to 2024 the correction of withholding tax from previous years. This resulted in a change of nearly 26 million zloty, which reduced the tax this year versus what we were presenting in our intermediate reports and increased the tax level in 2024. As part of the year-end closing process, We decided to change the presentation by restating the comparative period as this approach was deemed more appropriate. As a result, the reported tax and net profit for 2024 you see here differs slightly from the figures we presented a year ago. Finally, our net profit from continuing operations reached 521 million zloty, making 2025 the second best year in our history. This is nearly one-fifth higher than in 2024, a result we are really happy with. The net profitability of over 60% speaks for itself. Adding nearly 74 million zlotys from discontinued operations representing the after-tax gain on the sale of GOG and its 2025 net results, our total net profit reached an impressive 595 million zlotys. I always like to look at results and trends in a longer perspective. Therefore, the next slide presents the financial performance of our continuing operations. Basically, that's the project rep segment. Our sales revenues are represented by the height of each entire bar. The gray part represents costs and taxes, and the remaining green part shows our net profit for each year. This perspective demonstrates not only that the past year was the second best year in our history in terms of net profit, but also that our net profitability reached a historically high level of 60%, comparable only to 2020, the record-breaking year of Cyberpunk 2077's launch. The data reflect our continuing operations with no influence of the GOG transaction. Now we can move on to the next slide, number 18, our consolidated balance sheet. On the asset side, first the core of our business, expenditures and development projects. The balance for the full year 2025 increased by 453 million to nearly 1,150,000,000 Zloty. New developments, mainly the Witcher 4, Cyberpunk 2 and Sirius, as well as several projects that are still unannounced, accounted for over half a billion zloty of new investments. At the same time, there was a 57 million zloty decrease due to amortization driven mainly by the already released Cyberpunk 2077 and Phantom Liberty. In line with the recent and planned expansion of our development activities, we continue to invest in our infrastructure, as seen in the 72 million zloty increase in the property, plant and equipment line item. This was mainly driven by the investments at our Warsaw campus, namely the final touches to the construction and fit-out of our new office building, which since June houses the Witcher 4 team. The second investment has been our new performance capture studio, which is expected to be completed this year. In 2025, we also expanded our Boston office, which required certain investments into fit-out and equipment. The significant growth of our added current assets is the result of increased balance of advance payments to our contractors and suppliers, and outstanding receivables from the sale of GOG shares at the very end of December. This receivable was paid at the beginning of the current year, which will naturally be reflected in the cash flow in Q1 2026. The total value of cash deposits and bonds included in the three asset items marked with an asterisk is summed up below the table and amounts to 1,325,000,000 Zloty as of the end of 2025. I will have a separate slide to provide some more insight into our main cash flow drivers for this year. Moving forward to equity and liabilities, slide 19. The most noticeable change here is the increase in our equity, driven by the strong financial performance of 2025 and the recognition of costs related to incentive programs, which together significantly offset the reduction in equity resulting from the 2024 dividend payout. Anticipating your possible next question, the Board has not yet made a decision regarding the recommendation for the allocation of 2025 profits. When it comes to liabilities, the decrease is mainly due to the absence of GOG's trade liabilities at the end of 2025, as they were part of this line item at the end of the corresponding period. Now, please move on to the next slide. Number 20, Set-April Crafts' Expandages on Research Works Development and Cost of Product Maintenance. presented here on a quarterly basis for 2025 and the comparative period. The bars speak for themselves. Our production capacity is gaining more and more momentum. Investments in our projects, some public, some unannounced, are constantly growing. The majority of what we present here in green relates to capitalized projects, which reflects their stage of advancement as well as our confidence in their future economic potential. And finally, our main aggregated cash flow drivers on slide 21. Cash-wise, the 521 million Zloty BookNet profit from continuing operations was supported by 112 million Zloty in amortization, depreciation and non-cash costs of our share-based incentive programs. At the same time, 125 million Zloty will stand on the acquisition of tangible and intangible assets, as discussed on the balance sheet slide. Our typical cash flow working capital corrections largely offset each other. Summing it all up, we generated an estimated positive cash flow of 512 million zloty from our ongoing business. This figure is almost equal to our spendings on development projects for the full year, which amounted 513 million zloty. We can therefore say that our current cash flows allowed us to fund nearly 100% of our development expenditures in 2025. On top of that, at the beginning of July last year, we shared with our shareholders a nearly 100 million Zloty dividend, which was later followed by a 22 million Zloty share buyback. And the last position here reflects the cash at GOG. Before the transaction, we received a 44 million Zloty dividend from GOG. Following that, on the transaction day, GOG had 23 million zloty on its bank accounts and we sold the company with that cash balance. Therefore, both the company and its cash left the group and we have reflected that in the calculation. All in all, our financial reserves held in cash, bank deposits and bonds decreased by 147 million zloty over the reporting period. which was by far the year of the most intensive investment in development projects in our history. Our financial reserves stood at a solid 1,325,000,000 Zloty at the end of 2025. Moving on, as we are concluding another year, I would like to show you where we currently stand in terms of achieving the goals of our share-based incentive programs, especially the first stage, which concludes at the end of the current year. Please move to slide 22. The earnings condition for 2023 to 2026 was set at 2 billion zloty in cumulative net profit from continuing operations. After three out of four years, we are at 74% of the goal. 527 million zloty still remains to be earned this year to reach the target. As always, I'd like to emphasize we still see it as a very ambitious goal. We continue to believe that with strong back catalog sales performance this year and the new content we are planning to release, we have a fair chance of reaching it. That concludes my part of the presentation. We can now move on to the Q&A session.