Cd Projekt Sa Unsp/Adr

Ladies and gentlemen, thank you for standing by and I would like to welcome you to CD Projekt first half 2026 earnings conference call on the 2nd September. At this time, all participant 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 like now to pass the line to Mr. Michał Nowakowski, the Joint Chief Executive Officer. Please go ahead, sir. Good evening.

Thank you for joining us today. My name is Mihał Nowakowski. I'm the joint CEO of CD Projekt Red. And I'll be hosting today's earnings call concerning the first half of 2026. Presenting alongside me is our CFO Piotr Milubowicz. And after the presentation, we'll open the floor for Q&A, where we'll be joined by Karolina Gnasch, our VP of Investor Relations. If I were to sum up this half year in one sentence, I would say this. Both our franchises are stronger than ever, and we are ushering in the next chapter in the growth. So let me show you what I mean, starting with Cyberpunk. Nearly six years after the launch of Cyberpunk 2077, it has sold over 14 million copies and continues to sell well. This reflects deliberate lifecycle management, platform expansion, broadening player reach, and continuous support for the game itself. The results speak for themselves. In the first week of July, the peak concurrent player figure on Steam exceeded 100,000, the highest value observed since October 2023. Meanwhile, Phantom Liberty has reached its own milestone in July, crossing the 15 million copies sold threshold. Today, Cyberpunk is an evergreen franchise, and, as you'll see in a moment, its value compounds well beyond the game itself. We keep expanding the Cyberpunk ecosystem through selective license-based partnerships that fit our world. In the first half of the year, Night City was featured, among others, in Wuthering Waves and Apex Legends. For its part, the Cyberpunk trading card game raised $28 million, becoming the most funded tabletop game project in Kickstarter's history. These partnerships generate visible revenue while maintaining global brand engagement between our core game releases. The new season of the Cyberpunk Ed Runners anime series is launching on Netflix on October 20th. In 2022, the release of the first season drove a resurgence of interest in Cyberpunk 2077 among players, which led directly to a visible spike in game sales. With Hydronus 2, we want to re-engage audiences with VIP and encourage players to come back to Night City. Now, let me turn your attention to the Witcher franchise. The Witcher 3 Wild Hunt has now sold over 65 million copies. They created one of the best-selling games of all time. Across the whole franchise, we have now sold over 90 million Witcher games. These numbers provide us with a solid foundation for upcoming releases in the universe. And the first one comes on September 29, 2026, when we are launching The Witcher 3 Wild Hunt Remastered. This new edition brings a slew of upgrades and enhancements to visuals, performance and gameplay. Remastered also includes a dedicated edition of the game for Nintendo Switch 2. Existing owners will receive Remastered along with both expansions Hearts of Stone and Blood and Wine at no additional cost. With this move, we're reactivating players' interest in The Witcher franchise and attracting new ones to The Witcher 3 Wild Hunt. Remastered builds momentum ahead of the release of Songs of the Past and The Witcher 4. In 2027, we're launching Songs of the Past, the third full expansion for The Witcher 3 Wild Hunt, with a scope comparable to Blood and Wine. It acts as a natural bridge, keeping player engagement high and directly leading into the launch of the next saga. And we're also gearing up for The Witcher 4, with a target release window in 2028. The game marks the beginning of a new saga and is the biggest All this in most ambitious projects in our history so far. To sum up, three subsequent years, three major releases, each bigger than the one before, in one unified universe. And I want to be clear, this is not the full list of what we are working on in this universe. In this context, it is encouraging that a recent experience of Gamescom only reaffirmed my conviction, players do want more Witcher content. Our hands-off demo gameplay showcase of Songs of the Past attracted nearly 9,000 players, alongside 1,500 media representatives and industry professionals. During the event we conducted over 50 interviews with global media outlets, securing broad coverage for the coming weeks. The reception of our materials presented during Gamescom confirms that player enthusiasm for The Witcher remains strong. Taken together, the Songs of the Past teaser trailer, its Gamescom demo supercut, and the announcement trailer of The Witcher 3 Wild Hunt Remastered generated 26 million views across our own channels, of course not counting opening night livestream views. Additionally, our games became the two most hotly discussed releases announced during the opening night live, according to data from tracked social media platforms, within the first 12 hours of the event. CD Projekt Red also took home three official Gamescom Awards, Best Trailer for the Songs of the Past reveal and Best Merch, all voted by the Gamescom community, and the Jury Award for the Best Booth. This momentum translated into measurable results. 900,000 players added Songs of the Past to their wishlist within a week. Getting back to our growth plans for both franchises, we continue to expand our teams to deliver this ambitious pipeline. As of the end of July 2026, our total development team grew to 1,045 people. The Witcher 4 team remains our largest unit, with 519 developers on board. Over the last three months, we expanded the Cyberpunk 2 team to 184 developers to support the game's current development phase. With the other projects, We aligned our headcount with the project's current needs. And now we'll hand over the floor to our CFO, Piotr Niewoldowicz, who's going to walk you through the financial results for the period. Piotr, it's your turn. Thank you, Michał. And good evening, everyone.

Let's start with our consolidated profit and loss account on slide 16. Our sales revenue for the first half of 2026 reached over 435 million zloty, an impressive 23% increase compared to the first half of 2025, when Cyberpunk 2077 premiered on Nintendo Switch 2. The majority of sales came from our own products, particularly the Cyberpunk family. In Q1, we also recognized 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. But what really made a difference in the first six months of 2026, compared to a year ago, were revenues from IP licensing. A new line in our presentation and report We booked almost 95 million zloty here, which included licensing revenues from some of the already announced and mentioned by Michal products and partnerships, like cyberpunk trading card game developed by WordCo, the CoLab with Wuthering Waves, as well as some other initiatives that are still unannounced. With cost of sales being a bit lower year on year, our gross profit on sales reached nearly 406 million zloty, up 28% compared to the first half of 2025. Operating costs slightly increased by 6%, reaching over 160 million zloty, driven mainly by administrative expenses, while selling expenses remained pretty stable. Finally, our net profit for the first half of 2026 reached nearly a quarter of a billion zloty, a solid 37% increase year on year. We're also very satisfied with the net profitability we've achieved, which is why I'd like to share a slightly longer-term view with you. On the next slide, you can see CDPK's semi-annual simplified financial results along with the net profitability for each period over the last four years. This year's net profitability of 57%, combined with an increasing revenue stream, have allowed us to achieve a nearly threefold increase in net profit over three years. The next slide, number 18, presents our consolidated balance sheet on the asset side. The main position remains the expenditure on development projects, which grew by 364 million zloty to surpass 1.5 billion zloty. During the first half of 2026 alone, we invested nearly 385 million zloty in new development work. Main investments for the period are related to the development of Witcher 4, Cyberpunk 2 and the Sons of the Past expansion. We also recorded an increase in property, plant and equipment and investment properties altogether by 69 million zloty. It was driven mainly by investments in our campus expansion and ongoing construction works on it. On the current asset side, trade receivables increased to 160 million zloty due to high sales at the end of the reporting period, while other current assets decreased to 102 million zloty, primarily following the settlement of receivables from the sale of GOG shares and historical prepayments. At the bottom of the table, you can see our total liquid reserves, combining cash, bank deposits and bonds, which stood at nearly 1.29 billion zloty at the end of June, maintaining a resilient financial buffer. As usual, I will discuss this in more detail on the dedicated cash flow slide. Moving to slide 19, equity and liabilities. Driven by the strong net profit for the period, our total equity grew by 8% to surpass 3.5 billion zloty as of the end of June. Total liabilities remained stable at 227 million zloty. Now please move to slide 20, our expenditures on research, works, development and cost of product maintenance, presented here on a quarterly basis over the last six quarters. The chart clearly illustrates the steady ramp-up in our production effort. Investments in our projects, mainly publicly announced alongside some unannounced, are constantly growing. The vast majority of what we present here, shown in blue, relates to capitalized development projects. The increase comes both from projects developed internally and those created in cooperation with our partners. And finally, let's look at our aggregated cash flow drivers on slide 21. Cash-wise, the 249 million Zloty book net profit from continuing operations was supported by 47 million Zloty in amortization, depreciation and non-cash costs of our share-based incentive programs. At the same time, 59 million Zloty was spent on the acquisition of tangible and intangible assets as discussed on the balance sheet slide. The overall changes in working capital decreased our cash flows by 21 million Zloty, driven mainly by increased level of receivables related to high sales, decreased provisions mainly related to 2025 annual bonuses being paid out in Q2. Summing it all up, we generated an estimated positive cash flow of 229 million zloty from our ongoing business in the first half of 2026. Additionally, in January, we received a payment for the sale of GOG shares, which, after transaction costs, bolstered our cash position by 87 million zloty. And last but not least, our cash outflows associated to progressing development expenditures. These amounted to 356 million zloty in the first six months of this year. All in all, during the reporting period, our financial reserves capped in cash, bank deposits and bonds decreased by 39 million zloty, standing up at nearly 1.3 billion zloty at the end of June. To conclude my part of the presentation, let's look at slide 22. which tracks our progress towards the earnings conditions of incentive program B. The goal for the first tranche for financial years 2023-2026 requires generating 2 billion Zloty in cumulative net profit from continuing operations over four years. Thanks to the 249 million Zloty net profit booked in the first half of 2026, we have now completed 86% of this target. This is 14%, or approximately 273 million zloty, to be realized over the remaining two quarters. This is more than we earned during the first two quarters of this year. With strong back catalogue performance, the upcoming Witcher 3 Remastered Edition, planned also for Nintendo Switch 2, the Edronis II Premier, and other partnerships and initiatives, we believe in reaching this ambitious goal. At the same time, I would like to add one key remark regarding the Incentive Programme. Taking into account the company's current release schedule, the Group will most likely not meet the performance conditions set for the second stage of Incentive Programme B for the years 2024-2027, which was set at 3 billion PLN. Consequently, 70% of the entitlements granted to participants under this tranche will most likely not vest. As a result, we reversed the previously recognized non-cash costs of Stage 2 of the program in the portion corresponding to these entitlements in the amount of 11 million PLN. I should note, however, that assuming things go in line with our plans, we remain optimistic about the prospects of achieving the third and fourth earnings targets under the incentive program, respectively four and five billion zloty in subsequent four-year periods. Thank you. We are now ready for the Q&A session.