Cd Projekt Sa Unsp/Adr

Ladies and gentlemen, thank you for standing by and I would like to welcome you to CD Projekt's first quarter 2026 earnings conference call on the 28th of May. 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.

Thank you and good afternoon everyone. I'm Jan Nowakowski, joint CEO of CD Projekt and it's a pleasure to welcome you to our first quarter 2026 result presentation. I'll be sharing the stage today with our CFO Piotr Nielubowicz. As usual, we'll reserve time at the end of our Q&A session where Karolina Gnasch, our VP Investor Relations, will step in to join us. As you probably already know, yesterday We announced that we are working on Songs on the Pass. That is a brand new, fully fledged third expansion for the Witcher 3 Wild Hunt that we previously referred to as one of our unannounced projects. We are absolutely thrilled about this development and incredibly happy with the community's super positive reaction. Our expansion announcement is officially the second most liked and shared tweet ever on the Witcher profile. Surpassed only by our official announcement of the new saga. It got 16 million impressions within just 24 hours of the reveal. With that in mind, we really look forward to welcoming newcomers to the Witcher universe as well as returning players eager to hit the trail with Geralt of Rivia one more time. At the same time, we are well aware that stepping back into such a beloved universe comes with high expectations and a great deal of responsibility. That's why we're working hard to deliver to players an authentic and memorable experience. I can share that the expansion is now in an advanced phase of production. Around 190 developers, most of them from our trusted partner at Fools Theory, are currently working with us on the project. At the same time, CD Projekt Red provides the creative oversight to safeguard the quality of the Witcher experience. We are launching the expansion in 2027 on PlayStation 5, Xbox Series X and S, and PC. We look forward to sharing more details about it during Gamescom. Stay tuned. Staying with the Witcher brand for a moment, I have another huge milestone to share. According to our latest numbers, The Witcher 3 has now sold over 65 million copies globally, making it one of the most successful titles in gaming history. For us, this is obviously a perfect setup for everything we're planning next for the franchise. Beyond these major announcements, I would like to summarize other key business events from early 2026. Over the past few months, we focused on strategically expanding the reach of our flagship titles. We introduced the Witcher 3 Wild Hunt Complete Edition, as well as the base version of Cyberpunk 2077 to the Xbox Game Pass Premium and Ultimate catalogs. Offering these titles for subscription services allows us to attract new players to our universes. Drawing our audiences works well both for our future games and for other projects within our franchises, such as the highly anticipated expansion for The Witcher 3 Wild Hunt and the upcoming Cyberpunk Adr2 anime series. Alongside expanding our player base, we remain committed to ensuring our existing titles deliver the highest possible technological quality. In April 2026, we successfully rolled out a dedicated tech update for Cyberpunk 2077. It allows the game to fully leverage the expanded hardware capabilities offered by the PlayStation 5 Pro console, ensuring that exploring Night City remains a cutting-edge experience even years after the release. We believe this will contribute to the game's lasting appeal and support its sales over the long term. While we aim to continue delivering high quality games, our long term growth relies on building strong IPs. The Cyberpunk trading card game Kickstarter campaign proved to be the biggest gaming project ever on the platform and the third largest of all time. which proves to us that the excitement surrounding the universe goes far beyond video games. While only a portion of the final total of $28 million raised for the campaign is recognized as CD Projekt Group revenue, it's still a very meaningful result for us as it reveals the continued strength of the Cyberpunk brand. As this is a license-based corporation, we will also participate in the game's financial performance once the game launches. Concluding my part, let me briefly comment on the current project allocation. Since the last update, as you may see on the chart, our projects have seen only some adjustments in team size, aligning with their ongoing progress and evolving workload requirements. As we are now in the most intensive phase of the Witcher 4 development, the team has grown to 513 developers, while the Cyberpunk 2 and series team also grew by a dozen or so. This reflects a stable organizational setup that has the right capabilities and expertise in place. And with that, I'll pass it over to Piotr, who will walk you through our Q1 financial results.

Thank you, Michal, and good evening, everyone. Let's start with our consolidated profit and loss account on slide nine. But first, a technical reminder. Following last year's sale of GOG, we no longer report separate business segments. And secondly, the corresponding period for 2025 has been adjusted for comparative purposes, meaning GOG has been excluded from what we had reported in last year's Q1. Therefore, the columns for both Q1 2025 and Q1 2026 present separate credit only. The operation will continue. The net result from discontinued operations for the first quarter of the previous year has been presented separately at the bottom of the table. And now we can move on to the numbers. Our sales revenue for the first quarter of 2026 reached over 191 million Zloty, a 6% increase year on year. Naturally, the majority of this revenue came from sales of our own products, particularly the Cyberpunk family. Additionally, we recognize revenue from the inclusion of the base edition of Cyberpunk 2077 and the Witcher 3 Wild Hunt Complete Edition in Xbox Game Pass Premium and Ultimate subscriptions. With the cost of sales remaining flat compared to Q1 2025, our gross profit stood at 177 million PLN. Selling and administrative expenses slightly increased over the period, amounting to a combined 81 million Zloty. Finally, our net profit for the first quarter of 2026 reached 106 million zloty with the net profitability at a solid 56%. The next slide, number 10, presents our consolidated balance sheet. On the asset side, we see the usual expenditures on development projects. The balance here increased by 169 million zloty driven by nearly 180 million zloty in new development Expenses offset by 10 million Zloty in amortization of previously launched games. There was also a visible increase of 51 million Zloty in the property, plant and equipment line item. This was due to further expenditures on construction works and the acquisition of a property related to the plant expansion of our campus. The decrease of other current assets was driven mainly by the reduction of other receivables related to the sale of GOG shares at the very end of 2025 and some of our previously made prepayments. The total value of cash, deposits and bonds included in the three asset items marked with an asterisk is summed up under the table and amounts to 1,411,000,000 zloty as of the end of March. As usual, I will discuss this in more detail on the dedicated cash flow slides. Moving forward to equity and liabilities, slide 11. The most significant impact here came from the net profit generated in the current period, which helped our equity surpass 3.4 billion PLN at the end of March. Now, please move on to slide 12, where the project writes expenditures on research works, development and cost of product maintenance. presented here on a quarterly basis over the last five quarters. Looking at the charts, the trend is clear. We continue to scale our investments in both public and anonymous projects as development progresses. The increase over the last quarter comes from both the projects developed internally as well as those created in cooperation with our partners. And finally, let's look at our aggregated cash flow drivers on slide 13. The 106 Zloty BookNet profit was supported by 27 million Zloty in amortization, depreciation and non-cash costs of our share-based incentive programs. At the same time, 43 million Zloty was spent on the acquisition of tangible and intangible assets. The overall change in receivables, liabilities, provisions and deferrals bolstered our cash flows by 34 million Zloty. mainly thanks to the natural decrease of trade liabilities after the intense end-of-year sales. Other cash flows were mainly driven by the difference between the income tax recorded in our P&L and actual transfers related to income tax during the reported period. Excluding investments in currently developed products, our ongoing business generated 148 million Zl in positive cash flows during the first quarter. At the same time, most of our team was engaged in work on new projects, hence the nearly 150 million Zloty outflow associated with development expenditures. Additionally, at the beginning of January, we received the already mentioned payment for the sale of GOG shares, which after transaction costs, bolstered our cash position by 87 million Zloty. All in all, during the reporting period, our financial reserves, kept in cash, bank deposits and bonds, increased by 86 million zloty, standing at over 1.4 billion zloty at the end of March. To conclude my part of the presentation, let me briefly walk you through where we currently stand in achieving the goal for the first stage of our share-based incentive program. Please move to slide 14. The earnings condition for the 2023-2026 period was set at 2 billion PLN in cumulative net profit from continuing operations. Following a solid first quarter, we still need 418 million PLN to reach this target. The goal remains highly ambitious. Nevertheless, with both gaming and non-gaming projects in a fairly advanced stage of production, and some initiatives we are working on, we believe we have a chance of meeting the goal. That's all from me. We are now ready for the Q&A session.