Earnings call transcript: CD Projekt’s Q1 2025 revenue steady, stock dips

CD Projekt SA reported its financial results for the first quarter of 2025, showing stable sales revenue compared to the previous year. The stock experienced a slight decline of 1.65% following the announcement, though InvestingPro data shows impressive year-to-date returns of 88.24%. With a market capitalization of $3.83 million, CD Projekt remains optimistic about future growth, driven by upcoming product launches and ongoing development projects. According to InvestingPro’s comprehensive analysis, the company currently appears overvalued based on its Fair Value assessment.

Key Takeaways

• Q1 2025 group sales revenue remained unchanged at 226 million zloty.
• Net profit reached 86 million zloty, with a net profitability of 38%.
• Cyberpunk 2077 Ultimate Edition is set to launch on Nintendo Switch 2 in June 2025.
• Development teams expanded, with 730 developers now on board.
• Proposed dividend and share buyback demonstrate strong financial health.

Company Performance

CD Projekt’s performance in Q1 2025 was marked by steady revenue while achieving an 18% year-over-year increase in EBIT, reaching nearly 96 million zloty. The company maintained its position as a leading game developer, supported by strong sales of existing titles and strategic expansions into new platforms like the Nintendo Switch 2. InvestingPro analysis reveals a strong current ratio of 5.89, indicating robust short-term financial health, though the overall Financial Health Score stands at FAIR. Discover more detailed insights and 12+ additional key metrics with an InvestingPro subscription.

Financial Highlights

• Revenue: 226 million zloty (unchanged year-over-year)
• EBIT: 96 million zloty (+18% YoY)
• Net profit: 86 million zloty
• Cash reserves: 1,490 million zloty
• Proposed dividend: 100 million zloty (1 zloty per share)

Outlook & Guidance

CD Projekt anticipates a boost in Q2 revenues with the release of Cyberpunk 2077 on the Nintendo Switch 2, with the next earnings announcement scheduled for June 10, 2025. The company is progressing with the development of Cyberpunk 2 and The Witcher 4, alongside three unannounced projects. These initiatives are expected to drive future growth and solidify CD Projekt’s market position. With a beta of 1.2, the stock shows slightly higher volatility than the market. For comprehensive analysis including growth projections and valuation metrics, access the detailed Pro Research Report available on InvestingPro.

Executive Commentary

Mihael Novakowski, CEO, highlighted the success of The Witcher 3: Wild Hunt, which surpassed 60 million copies sold. CFO Piotr Nielubovic emphasized the company’s strong cash position, enabling strategic decisions such as the proposed dividend and share buyback. Novakowski also expressed confidence in the development of the next major cyberpunk game.

Risks and Challenges

• Market competition remains intense, with other developers releasing new titles.
• The timeline for Cyberpunk 2’s development, estimated at 4-5 years, could impact investor expectations.
• Economic uncertainties and potential supply chain disruptions may pose challenges.
• The success of new platform launches, such as the Nintendo Switch 2, is crucial for revenue growth.
• The gaming industry is rapidly evolving, requiring continuous innovation and adaptation.

CD Projekt’s strategic focus on expanding its game portfolio and entering new markets positions the company for long-term success. However, the company must navigate industry challenges and maintain its competitive edge to achieve sustained growth.

Full transcript - CD Projekt SA (CDR) Q1 2025:

Conference Operator: Ladies and gentlemen, thank you for standing by, and I would like to welcome you to TD Products Q1 twenty twenty five Earnings Conference Call on the May 28. At this time, all participant lines are in 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. Michal Novakovsky, the Joint Chief Executive Officer of TD Project.

Please go ahead, sir.

Mihael Novakowski, Joint Chief Executive Officer, CD Projekt: Hello. Sorry. Good afternoon. My name is Mihael Novakowski, and I’ll be your host during today’s conference where we sum up the first quarter of twenty twenty five. I will be co presenting with Piotr Nielubovic.

After the presentation, we will invite you to participate in a Q and A session where we will be joined by Karina Ignace, our VP and Head of Investor Relations. Starting off, please let me highlight some truly exciting news for Cyberpunk 2,077. On April 2, during the highly anticipated Nintendo Direct Conference, we revealed that Cyberpunk 2,077 Ultimate Edition would be a launch title for the brand new Nintendo Switch two, debuting alongside the console on June 2025, which is just a week away. This is a milestone moment for us, marking the very first time one of our games will be a launch title on a new platform. The anticipation surrounding Nintendo Switch two is immense, and we believe this presents a fantastic opportunity to introduce the world of Night City to a whole new wave of players.

And this isn’t just a simple part. Our teams have worked diligently to tailor the Cyberpunk 2077 Ultimate Edition experience specifically for the innovative capabilities of Nintendo Switch two. Initial reactions from the media and players who have had hands on time with Cyberpunk twenty seventy seven on the Switch two at Nintendo’s global preview events have been very encouraging. And while the ultimate judgment, of course, rests with the players, we feel quite optimistic about the upcoming launch. Building on the excitement and continued growth of the cyberpunk universe that we just highlighted with the upcoming Nintendo Switch two launch, I’m also thrilled to announce a significant milestone for the Phantom Liberty expansion, which has now surpassed 10,000,000 copies sold worldwide since its release back in September 2023.

And this achievement reached in just over twenty months is a powerful testament to both the quality of the expansion and the enduring appeal of the Cyberpunk franchise. And that appeal, along with our desire to tell the new captivating stories, is precisely what fuels our ongoing work on the future of the Cyberpunk franchise. I’m pleased to share that Cyberpunk two, which we have previously referred to as project Orion, successfully concluded its concept phase a few weeks ago and has transitioned into preproduction. Thus, we are well on our way towards delivering the next big cyberpunk game in due time. Now shifting gears, let’s move to the Witcher franchise.

On May 19, just over a week ago, We proudly celebrated the tenth anniversary of the release of the Witcher three Wild Hunt. And this groundbreaking title is not only a pop culture phenomenon that has captured the hearts of millions of players worldwide, but it also represents cornerstone of city projects of our success over the past decades. And looking back at these past ten years, the commercial success of The Witcher three: Wild Hunt has been nothing short of phenomenal. And I am incredibly proud to announce that the global sales of The Witcher three have now surpassed an astounding 60,000,000 copies. And reflecting on the premiere that happened ten years ago, we we had no idea what lay ahead.

And even in our wildest dreams, we couldn’t have imagined how significant this would become for all of us. I would like to here extend my deepest gratitude to everyone who was part of that journey, whether as a team member, a dedicated fan, or a fan who ultimately became a team member. This remarkable figure of 60,000,000 copies firmly establishes the Witcher three as one of the best selling games of all time, a testament to its enduring quality, immersive world, and unwavering support of our global player base. Our goal is now to introduce them along with those who are not yet familiar with our franchise to a new saga that will begin with the upcoming fourth installment of the Witcher. And over the past decade, The Witcher free Wild Hunt has generated an impressive 2,400,000,000.0 Polish zlotis in revenue.

The remarkable financial performance underscores the enduring value of the franchise and its continued contribution to CDPRX strong financial foundation, enabling us to dive into new projects and pursue our creative vision independently as we shape the future of both the Witcher and the Cyberpunk universes as well as a third IP code named Haddar. Regarding your current project allocation, as of the April, our dev team has expanded slightly, now consists of over 730 talented developers, The Witcher four team with over 420 developers on board focuses on production phase work, while the Cyberpunk two team has entered the preproduction phase and will be our primary recruitment focus for this year. Beyond these undertakings, our other pipeline projects have seen minor adjustments in team sizes aligning with their ongoing progress and evolving workload requirements. And that’s all for me for now, and now it’s time for Piotr.

Piotr Nielubovic, Chief Financial Officer, CD Projekt: Thank you, Micha, and good evening, everyone. As usual, let’s start this part of the presentation with the consolidated profit and loss account on slide 10. Our group sales revenue for the first quarter of twenty twenty five reached 226,000,000, the same as in the corresponding period last year. Despite the passing of another year, games from both product families, Cyberpunk and The Witcher, generated revenue levels similar to those of the prior year. Our sales of goods and materials reached 45,000,000 zloty and recorded 11% growth.

This growth was entirely driven by GOG.com platform, where we saw an increase in sales, particularly for classic titles, which we attribute to initiatives focused on game preservation and the GOG preservation program. Our cost of products and services sold consists mostly of Phantom Liberty, Cyberpunk, and Witcher three amortization. This position is lower in q one twenty five compared to q one twenty twenty four mainly for two reasons. Firstly, due to the use of a declining amortization model, and secondly, because we extended the estimated useful lives of our assets at the end of last year. A decision which appears fully justified given the strong performance of our games again this year.

More details on our amortization schemes can be found in our recent annual report. Moving on to operating costs. In twenty twenty five q one, they also remained stable versus last year. However, the structure changed. On the one hand, the research work cost decreased after the Cyberpunk two project changed its IFRS status in September 2024 from research to development, which qualifies for capitalization.

And on the other hand, this year, we had some extra expenses related to the implementation of our new ERP system, which just went live, as well as increased costs of our incentive programs due to a new tranche

Conference Operator: Ladies and please stand by as we reconnect with the host.

Piotr Nielubovic, Chief Financial Officer, CD Projekt: Am I on the line? Okay. So I’ll start once again from our operating costs. Moving on to operating costs in twenty twenty five q one, they also remained stable versus last year. However, the structure has changed.

On the one hand, the research work costs decreased after the Cyberpunk two project changed its IFRS status in September 2024 from research to development, which qualifies for capitalization. And on the other hand, this year, we had some extra expenses related to the implementation of our new ERP system, which just went live, as well as increased cost of our incentive program due to a new tranche of entitlements being granted. All in all, our EBIT reached nearly 96,000,000 zloty, 18 percent more than a year ago. Negative income tax for the first quarter of the previous year was not typical for our business, neither is the relatively high income tax we recorded for the first quarter of this year. Most of this amount, nearly PLN 22,000,000 came from adjustments relating to our prior years driven mainly by corrections to our bookings related to the withholding taxes, events of a one of nature.

And finally, our net profit for the first quarter of this year reached 86,000,000 zloty. The overall net profitability of the group was 38, while the Telepriaq while for Telepriaq alone, this factor was 47%. Now we can move on to the next slide, number 11, our consolidated balance sheet. On the asset side, the core of our business, expenditures and development projects. The balance here increased by nearly 90,000,000 zlot.

The new developments mainly the Witcher four, Cyberpunk two, and Sirius, but also some projects that are still unannounced were responsible for a 104,000,000 zloty increase, parallel to the decrease coming from amortization driven mainly by the already launched Cyberpunk 2077 and Phantom Liberty. And while we are on the topic of development expenditures, we estimate that the dev budget of the upcoming version of Cyberpunk twenty seventy seven for Nintendo Switch two will be around 10,000,000 zloty. We believe this investment will help us make Cyberpunk more accessible to new clients, extend its life cycle, and further strengthen the franchise flywheel. We also continue investing in our local physical assets as visible in the 21,000,000 slot increase of the property plant and equipment line item. This was mainly driven by the final phase of the construction of a new building at our Warsaw campus where the Witcher four will continue to be developed beginning this June.

Our trade receivables decreased over the first three months of this year, which is typical after the juicy q four sales period and the high level of trade receivables recorded at the end of last year. 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 PLN 1,489,000,000 as of the end of this March. Our financial position increased by 17,000,000 zloty over the first quarter. Within this change, GOG was responsible for a decrease by 10,000,000 zloty driven by payments to its games outliers related to q four sales, which is typical for first quarters. At the same time, so the project RAD generated a PLN 27,000,000 increase in its financial reserves.

I will have a separate slide to provide some more insight on our main cash flow drivers this quarter. Moving forward to liabilities and equity, Slide 12. The most noticeable change here is the increase in our equity driven by the strong financial performance of the recent Q1, Along with a decrease in trade receivables by 80,000,000 zloty, our liabilities also decreased by 36,000,000 zloty. This occurred in both segments and is also typical for first quarters. Now please move on to the next slide, number 13.

To the prior grads expenditures on research works, development, and cost of product maintenance presented here on a quarterly basis over the last five quarters. We keep investing more and more while our projects move from research to development and become more and more advanced. Currently, nine projects of different types and sizes are in the development stage, three of which are still unannounced. And finally, our main cash flow drivers on slide 14. The 86,000,000 zloty book net profit was supported by 24,000,000 zloty in amortization, depreciation and non cash costs of our share based incentive programs.

At the same time, PLN36 million was expensed for the acquisition of tangible and intangible assets as discussed on the balance sheet side. The overall change in receivables, liabilities, and provisions boosted our cash flows by nearly 40,000,000 zloty. At the same time, most after the project was engaged in working on new gains, hence the investment of 100,000,000 zloty into development projects. All in all, our financial reserves kept in cash, bank deposits, and bonds increased by the already mentioned 17,000,000 zloty over the reporting period, reaching 1,490,000,000.00 zloty. And putting investments into currently developed products aside, our ongoing business generated 117,000,000, is over 36% more than the net profit for the period.

That ends my commentary on the most recent results and allows me to move to a pretty nice conclusion. Our strong cash our strong cash position and longevity of our products have allowed us to make two important decisions. We propose to the general meeting a dividend from 2024 profits in the amount of nearly 100,000,000 zloty, precisely 1 zloty per share. And we also asked our general meeting to approve a share buyback that would allow us to settle the first tranche of our incentive program next year. It involves up to 89,601 shares with a current mark market value of around 20,000,000 zloty.

And I can’t wait to see what impact the Cyberpunk Ultimate Designer Edition premiere on Nintendo Switch two will have on our q two end this year. The big day is only a week away. That’s all from me for now. We can now move on to the q and a session. Thank you.

Conference Operator: Thank you very much for the presentation. We will now be moving to the q and a part of the call. If you are dialed in via the telephone, please press star two on your keypad. That is Thank you. Our first question comes from Mr.

Nick Dempsey from Barclays. Please go ahead, sir. Your line is open.

Nick Dempsey, Analyst, Barclays: Yes. Good evening. I’ve got two questions, please. So the first one, would you naturally expect that the Switch two release would mean that your sales of products and services would be higher in Q2 twenty twenty five than we’ve just seen in Q1 twenty twenty five? Or would it be just sort of balancing out or slowing in other sales?

The second question, for Cyberpunk two, as we’re now calling it, I believe that The Witcher four went into preproduction in May 2022. We know that game will not be released during ’26. So maybe we can say that we’re looking at somewhere between five and six years for that period between the preproduction phase and release. So that would put Cyberpunk two in late two thousand thirty or early two thousand and thirty one. Is that a broadly sensible way to think about it?

Piotr Nielubovic, Chief Financial Officer, CD Projekt: Hello, Nick. What I can say for now is that Nintendo switch to sales should have visible impact on our revenues from sales of products for the second quarter of this year. But as for now, I wouldn’t like to be guiding how much better or not the second quarter versus the first quarter will be.

Mihael Novakowski, Joint Chief Executive Officer, CD Projekt: Okay. And I’ll try to deal with the second question. So I I I can reiterate in a way what I what I said in one of the previous calls, which which was basically that our journey from the preproduction to the final release takes four to five years on average. So a little bit less than I think what you said in the question. Having said that, keep in mind that each project is unique and and and there are many variables that influence the final outcome.

So so I will not lead you into specific years, but but yeah. I mean, this is this is pretty much how it looks like. Okay. Thank you, guys.

Conference Operator: Okay. Thank you. Thank you very much. We’ll now be moving to a couple of text questions. The next question is next text question is from mister Mihabodzikowski from Ipopema Securities.

What exactly do you understand by the three unannounced projects? For example, do you count in projects like Hadar in the number, which is not revealed yet, but it is mentioned in the pipeline or projects where we have not mentioned before?

Mihael Novakowski, Joint Chief Executive Officer, CD Projekt: Okay. Okay. So it’s Mihael Avakoski again. I’m I’m happy to deal with this one. So unannounced projects are the projects which have not been hinted at specifically at any point.

So Hadar would not be one of these projects because while we haven’t said anything specific about Hadar or or didn’t go into any details with it, we we’ve been talking about it for a while. So these are the projects that have not been mentioned in any kind of communication by us before. I hope that addresses the question. Thank you.

Piotr Nielubovic, Chief Financial Officer, CD Projekt: And I would also like to add something from my side as I’ve mentioned the unannounced projects when commenting the capitalized projects and our expenditures and development projects. Haydar is absolutely not capitalized yet. We are not at this phase of production. So the three unannounced projects that I mentioned are projects that are already in development phase according to IFRS standards.

Conference Operator: Okay. Thank you very much. The next text question comes from Mr. Piotr Poniatowski from Embank, Dom McClarsky. Could you please update us on the mobile project?

Anything more except that you are cooperating with Scopely?

Mihael Novakowski, Joint Chief Executive Officer, CD Projekt: Okay. I’ll I’ll take this one again, Mihana Wakowski. Unfortunately, there’s nothing more we we have to share, you know, on that matter on this on this call.

Conference Operator: Okay. And then the second part of the question, how many of these three unannounced projects are there being capitalized are gaming projects?

Piotr Nielubovic, Chief Financial Officer, CD Projekt: Two projects are gaming projects, and one is not.

Conference Operator: Okay. Thank you very much. We’ll give another minute or so for any additional questions to come through. That’s star two for any additional voice questions. I see no further questions at this point.

Perhaps I’ll pass the line back to the management team for any concluding remarks.

Mihael Novakowski, Joint Chief Executive Officer, CD Projekt: All right. Since there are no further questions, would like to thank everybody who’s who’s been with us on this call, and I guess we’ll be in touch with you in due time during the next quarter call. Thank you so much. Goodbye, everybody.

Conference Operator: Thank you very much. This concludes today’s conference call. We’ll now be closing all the lines. Thank you, and goodbye.

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