CD PROJEKT CAPITAL GROUP ACTIVITIES - MANAGEMENT BOARD REPORT ON
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MANAGEMENT BOARD REPORT ON CD PROJEKT CAPITAL GROUP ACTIVITIES BETWEEN 1 JANUARY AND 30 JUNE 2019
Disclaimer This English language translation has been prepared solely for the convenience of English speaking readers. Despite all the efforts devoted to this translation, certain discrepancies, omissions or approximations may exist. In case of any differences between the Polish and the English versions, the Polish version shall prevail. CD PROJEKT, its representatives and employ- ees decline all responsibility in this regard.
Table of contents
7 Brief description of the CD PROJEKT Capital Group
8 Activity profile
11 CD PROJEKT Capital Group growth outlook
15 CD PROJEKT Capital Group activity profile
16 Organizational structure of the CD PROJEKT Capital Group
18 Disclosure of business segments, products and services, outlets, suppliers
and clients
34 Disclosure of external and internal factors affecting further growth of the
CD PROJEKT Capital Group
36 Disclosure of factors which, in the issuer’s opinion, will affect its financial result
during at least the coming quarter
36 Disclosure of significant agreements
37 Risk management at the Capital Group
38 Financial statement of the CD PROJEKT Capital Group
39 Overview of key economic and financial indicators disclosed in the consolidated
and separate financial statement
57 Corporate governance
58 Entity contracted to audit financial statements
58 Shareholders controlling at least 5% of the vote at the General Meeting
59 Agreements which may result in changes in the proportions of shares held by
shareholders and bondholders
63 Composition of the Management Board of CD PROJEKT S.A.
64 Changes in Management Board composition
65 Composition of the Supervisory Board of CD PROJEKT S.A.
65 Changes in Supervisory Board composition
66 Corporate governance policies
66 Disclosure of significant legal proceedings
16.04.2020
CYBERPUNK 2077 A A
Keanu
Reeves
Starring as one
of the main characters
of Cyberpunk 2077 7 000
participants
att nd d r nk
presentations at E3
12 000
participants
att nd d r nk
presentations at gamescom
Cyberpunk 2077
has already received
over 200 awards
Over 30
million*
i ws across a at orms
of the E3 2019 Cyberpunk 2077
cinematic trailer
6.5 thousand
articles
— the most extensively
covered game of E3
Strong launch
of the preorder
campaign
of Cyberpunk 2077 – 09.06.2019
Cyberpunk 2077 announced for
Google Stadia
* As of 31 July 2019
The Witcher 3 for
Nintendo
Switch
announced for
iPhone edition 15.10.2019
of GWENT announced
P K A mark t ca ita i ation
22.1 billion PLN*
214.4 million PLN
in sales revenues
wo GWENT expansions released:
Crimson Curse 51.7 million PLN
and in n t ro t d rin
Novigrad
beta version of 40
A A million
arn rin c nt r i ws rom copies of The Witcher
the media and gamers alike games sold
B i ard c assics CD PROJEKT
A ai a on com
RED STORE
now a ai a
to EU residents
* As of 31 July 2019
Brief description of the CD PROJEKT Capital Group
8 | Brief description of the CD PROJEKT Capital Group
Activity profile
CD PROJEKT S.A. (also referred to as CD PROJEKT or the Company), headquartered in Warsaw,
conducts business activities in the dynamically growing global digital entertainment segment.
These activities have been ongoing for 25 years and originally focused on the Polish market.
The Company – then called CD PROJEKT – began by distributing foreign games in Poland
(note that the corresponding activity segment, handled by the Group’s CDP.pl subsidiary, was
disaggregated in 2014). A pivotal moment in the Group’s history came in 2002 with the esta-
blishment of the CD PROJEKT RED development studio, which initiated work on the Company’s
first major RPG1 – The Witcher.
Map 1 CD PROJEKT – worldwide sales
Warsaw
Wrocław
Kraków
Berlin
Seoul
Paris
Tokyo
Milan
Shanghai
Los Angeles
São Paulo
Headquarters (CD PROJEKT RED studio and GOG.com)
Dev teams
Branch offices
Community managers
1 Role Playing Game – a storyline-driven game based on a consistent narrative.
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
9 | B I IP I N P K API A P
h P K ro c rr nt cond cts o ratin acti iti s in two k s m nts
CD PROJEKT RED
o m nt and ishin o id o am s and ti in rod cts as d on th om an s
proprietary brands.
GOG.com
i ita distri tion o id o am s sin th om an s ro ri tar com at orm and th
a a a ication
CD PROJEKT S.A. headquarters in Warsaw
rin th r ortin riod o th a ita ro s
sa s r n sw r n rat d orts with North
America accounting for 66% of sales and Europe coming
in second at 24%.
GOG sp. z o.o. headquarters in Warsaw
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 a r s ot d in P N tho sands n ss stat d oth rwis
10 | Brief description of the CD PROJEKT Capital Group
Business philosophy
The business philosophy of the CD PROJEKT Capital Group rests upon two pillars: uncompro-
mising dedication to quality in the videogame and service development process, and retention
of financial and creative independence (itself necessary to facilitate the former goal). The Board
regards these two factors as decisive in ensuring success on the competitive global digital
entertainment market. CD PROJEKT RED stands apart from other major videogame developers
and publishers in that it emphasizes control over every stage of the game development and
marketing process – from initial design, through work on technological solutions, publishing
activities, promotion and distribution, all the way to gamer community relations. This model is
implemented by operating a proprietary digital distribution and online gaming platform – part
of a broad user-friendly and gamer-centric ecosystem.
Scheme 1 Videogame development business model at CD PROJEKT RED
CREATION DISTRIBUTION
TECHNOLOGY
IP ownership and full creative Global reach by carefully selected retail
control. Internally developed REDengine distribution partners in 109 countries.
tailored for story-driven open world
Focus on 2 franchises and limited RPG. Ready for next hardware Direct consoles and PC digital distribution
number of projects. iterations. including our digital store – GOG.com.
DEVELOPMENT PUBLISHING COMMUNITY
In-house experienced Own publishing operation Honest and direct
development team with ensures our GAMERS FIRST communication with
quality being an absolute core business philosophy is not gamers.
priority. compromised.
Full control over
messaging.
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)11 | Brief description of the CD PROJEKT Capital Group
* Własne marki The Witcher i Cyberpunk
Employment structure
Scheme 2 CD PROJEKT Capital Group employment structure at the end of 2018 and at the
end of H1 2019
953
Individuals employed at the
CD PROJEKT RED
777
CD PROJEKT Capital Group 698
as of 30.06.2019
Women (25%) GOG.com
Men (75%) 176
189
887
Individuals employed at the Developers
CD PROJEKT Capital Group 632
as of 31.12.2018
583
Women (24%) 30.06.2019
Men (76%) 31.12.2018
At the end of the first half of 2019 the CD PROJEKT Capital Group employed 953 individuals,
82% of whom were employed in the CD PROJEKT RED segment, with the remaining 18% repre-
senting the GOG.com segment.
The dynamic growth in employment over the past year is mostly due to the upscaling of busi-
ness and development activities.
CD PROJEKT Capital Group
growth outlook
The CD PROJEKT Capital Group conducts its business in the global videogame market which is
among the fastest growing branches of the global economy. The cumulative annual growth rate
(CAGR) for the 2018-2022 period is estimated at 9%, with an estimated 2019 market volume of
152.1 billion USD.2 According to the PWC “Global Entertainment & Media Outlook 2018-2022”3,
consumers devote ever more time and money to media and entertainment, with computer
games currently ranking as the second most popular pastime.
The growth outlook of the Capital Group is affected not only by the increasing popularity of
this form of entertainment as an approachable and attractive mass market offering, but also
by the increasing sophistication and realism of products offered, increasing availability and
2 Key numbers, Newzoo, accessed on 26 August 2019; newzoo.com/key-numbers/
3 Perspectives from the Global Entertainment & Media Outlook 2018–2022, PWC, accessed on 19 January
2019, pwc.com/gx/en/entertainment-media/outlook/perspectives-from-the-global-entertainment-and-media-o-
utlook-2018-2022.pdf
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)12 | Brief description of the CD PROJEKT Capital Group
affordability of gaming hardware, new methods of engaging potential gamers and new game
distribution channels.
CD PROJEKT S.A. on the securities market
The CD PROJEKT brand has been present on the Warsaw stock exchange since 2010, when –
as a result of an investment agreement concluded in 2009 by CDP Investment sp. z o.o.4, and
Optimus S.A., along with their respective shareholders – Optimus purchased 100% of shares in
CDP Investment while existing shareholders of CDP Investment acquired Optimus S.A. shares.
The formal merger between both companies was carried out in December 2010.
As of the publication date of this report 96 120 000 Company shares are traded on the Main
Market of the Warsaw Stock Exchange under the continuous trading system. Key shareholders
of CD PROJEKT S.A. are its co-founders – Marcin Iwiński and Michał Kiciński. Other major
shareholders who are also members of the Company’s Management Board are Adam Kiciński –
President of the Board, and Piotr Nielubowicz – Vice President and CFO.
Figure 1 Company shareholding structure as of the publication date of this report
Marcin Iwiński (12.64%)
Michał Kiciński (10.91%)
Piotr Nielubowicz (6.38%)
Founders
Adam Kiciński (3.46%) and Board
Members
Adam Badowski (0.16%)
Michał Nowakowski (0.04%)
Piotr Karwowski (0.01%)
Free float (66.40%)
The shareholding structure is updated on the basis of formal
notifications submitted by shareholders in accordance
with the applicable legal regulations.
On 25 June 2019 Nationale-Nederlanden Powszechne Towarzystwo Emerytalne S.A. notified
the Company that the percentage of Company shares held by itself dropped below the 5%
threshold.5
Free float accounts for 66.40% of CD PROJEKT S.A. stock.
In March 2019 the Warsaw Stock Exchange launched its WIG.GAMES sectoral index. As of
29 June 2019 Company stock contributes 41.78% to the value of this index.
4 Former holding company of the CD PROJEKT Group
5 CR 15/2019
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)13 | Brief description of the CD PROJEKT Capital Group
Figure 2 CD PROJEKT S.A. stock price and WIG20 index at the Warsaw Stock Exchange
between 1 January and 30 June 2019.
270
CD PROJEKT WIG20
250
230
210
190
+43%
170
150
+1%
130
110
01.2019 02.2019 03.2019 04.2019 05.2019 06.2019
Between 1 January 2019 and 30 June 2019 the Company stock price fluctuated between 148
PLN (3 January 2019) and 228.50 PLN (10 June 2019). During this period the stock price incre-
ased by 43%, to 215.30 PLN at the close of the trading day on 28 June 2019. Over the same
period the WIG20 index gained 1% while the main WIG index gained 3%.
On 30 June 2019 the Company market capitalization was 20.7 billion PLN, while by the end of
July 2019 it increased to 22.1 billion PLN.
Figure 3 Average daily turnover of CD PROJEKT S.A. stock by month; 1 January 2019 –
30 June 2019 (PLN millions).
100
90
80
70
Average daily turnover in H1 2019: 60.6 million PLN
60
50
40 Average daily turnover in H1 2018: 38 million PLN
30
20
10
0
01.2019 02.2019 03.2019 04.2019 05.2019 06.2019
In 2019 the liquidity of CD PROJEKT S.A. stock, measured in terms of turnover, increased
substantially. The aggregate turnover for the first half of 2019 was 7.4 billion PLN, which is 68%
more than during the corresponding period in 2018. The average daily turnover was 60.6 million
90
PLN, compared to 36 million PLN during the reference period. A substantial increase was also
80
observed in the number of transactions per trading day – from 2686 to 4014.
70
60
50
40
30
Management Board report on CD PROJEKT Capital Group activities
20 for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
10
014 | Brief description of the CD PROJEKT Capital Group
Table 1 Key indicators of CD PROJEKT S.A. stock
H1 2019 H1 2018 Change
Net earnings per share (PLN) 0.54 0.55 -1.43%
Quantity of shares in trading (in thousands) at end of period 96 120 96 120 -
Highest closing price during fiscal year (PLN) 228.50 172.00 32.85%
Lowest closing price during fiscal year (PLN) 148.00 98.00 51.02%
Price at beginning of period (PLN) 151.00 100.00 51.00%
Price at end of period (PLN) 215.30 161.80 33.07%
Average price during period (PLN) 194.81 124.64 56.30%
P/E ratio at end of period 398.7 294.18 35.53%
Market capitalization at end of period (PLN thousands) 20 694 636 15 552 216 33.07%
Average number of transactions per trading day 4014 2 686 49.44%
Average daily turnover (PLN thousands) 60 568 38 031 59.26%
Average daily trading volume (shares) 307 524 278 337 10.49%
As of the publication date of this report 17 brokerage houses, both foreign and domestic, issue
recommendations concerning Company stock. A full list of analysts and brokerage houses
which issue recommendations concerning Company stock can be found on the CD PROJEKT
website at: cdprojekt.com/en/investors/analysts/.
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)CD PROJEKT Capital
l16 | CD PROJEKT Capital Group activity profile
Organizational structure
of the CD PROJEKT Capital Group
On 14 January 2019 a new company was incorporated in the framework of the CD PROJEKT
Capital Group under the name CD PROJEKT RED STORE sp. z o.o.
As of 31 December 2018 the CD PROJEKT Capital Group consists of the parent entity –
CD PROJEKT S.A. – and five subsidiaries: GOG sp. z o.o., CD PROJEKT Inc., CDPROJEKT Co.
Ltd., Spokko sp. z o.o. and CD PROJEKT RED STORE sp. z o.o.
Scheme 3 Structure of the CD PROJEKT Capital Group at the end of H1 2019.
CD PROJEKT S.A.
100%
100% 100% 100% 75%
CD PROJEKT RED
GOG sp. z o. o. CD PROJEKT Inc. CD PROJEKT Co. Ltd. Spokko sp. z o.o. STORE sp. z o. o.
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)17 | CD PROJEKT Capital Group activity profile
Table 2 Summary of business activities of the parent company and other members of the
CD PROJEKT Capital Group as of 30 June 2019
Company Activity profile
The core activities of the company, carried out by its CD PROJEKT RED studio, include development
of videogames, publishing its own videogames, selling the associated distribution rights as well as
CD PROJEKT S.A. manufacturing, selling and/or licensing tie-in products which exploit the popularity of brands owned by
the company. CD PROJEKT S.A. also acts as the holding company of the CD PROJEKT Capital Group and
coordinates the activities of other companies belonging to the Group.
This company concerns itself with online distribution of videogames, enabling customers from around
the world to purchase games, remit payment and download game binaries to their personal devices.
To this end the company owns and maintains the global digital distribution platform at GOG.com.
GOG sp. z o.o.
In addition, GOG sp. z o.o. has formed a consortium with CD PROJEKT S.A. to develop and operate
GWENT: The Witcher Card Game. Within the framework of this consortium, GOG sp. z o.o. is responsible
for the game’s online features and handling in-game transactions in the PC edition.
This company coordinates publishing and promotional activities covering the Group’s own products and
CD PROJEKT Inc. the GOG.com platform throughout North America. To facilitate this goal, the company operates an office
in Los Angeles.
This company coordinates publishing and promotional activities covering the Group’s products in the
CD PROJEKT Co. Ltd. People’s Republic of China, which includes managing a local team tasked with coordinating publishing
and promotional activities related to GWENT: The Witcher Card Game.
Spokko sp. z o.o. Gamedev studio focusing on mobile releases.
CD PROJEKT RED A company which engages in online marketing of tie-in products associated with CD PROJEKT RED
STORE sp. z o.o. releases throughout the European Union.
The above member companies of the CD PROJEKT Capital Group, with exception of CD PROJEKT
Co. Ltd., Spokko sp. z o.o. and CD PROJEKT RED Store sp. z o.o., were subject to full conso-
lidation as of 30 June 2019. Detailed information can be found in the Consolidated Financial
Statement of the CD PROJEKT Capital Group for the first half of 2019.
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)18 | CD PROJEKT Capital Group activity profile Disclosure of business segments, products and services, outlets, suppliers and clients In the first half of 2019 the Capital Group conducted business activities in two segments: ♦ CD PROJEKT RED, ♦ GOG.com. CD PROJEKT RED Target and scope of business activity Videogame development is the main area of activity of the CD PROJEKT RED studio, which is a subunit of CD PROJEKT S.A. (domestic holding company of the CD PROJEKT Capital Group), CD PROJEKT Inc. (USA) and CD PROJEKT Co., Ltd. (China). Videogame development is based on two brands owned by the Company: The Witcher and Cyberpunk. This activity covers creation and publication of videogames, licensing the associated distri- bution rights as well as manufacturing, distributing or licensing tie-in products which exploit the commercial appeal of brands held by the Company. In the scope of its publishing activities the Company also assumes responsibility for its promotio- nal and advertising campaigns, and maintains direct relations with the player base via electro- nic and social media channels (see the Communications section) as well as through regular participation in trade fairs. Management Board report on CD PROJEKT Capital Group activities for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
19 | P K API A PA I I P I
K rod cts
id o am d o m nt comm nc d in and initia oc s d on th st dio s P d t
The Witcher his am s t in Andr a kowski s antas wor d was r as d in to
o a acc aim arn rin o r awards and acco ad s
As o th ication dat o this r ort k r as s in th om an s ort o io inc d
The Witcher The Witcher 2: Assassins of Kings and The Witcher 3: Wild Hunt a on with its two
expansion packs: Hearts of Stone and Blood and Wine.
In th om an r as d th rsion o GWENT: The Witcher Card Game d o-
d in co a oration with s o o as w as a sin a r am Thronebreaker:
The Witcher Tales i t aro nd simi ar am a m chanics
Scheme 4 i r im in o P K r as s
31.05.2016
The Witcher 3: Wild Hunt – expansion pack: 23.10.2018
Blood and Wine (PC, Xbox One, PS4) GWENT: The Witcher
Card Game (PC)
17.04.2012 19.05.2015
30.10.2007 The Witcher 2: The Witcher 3: Wild Hunt Thronebreaker:
The Witcher (PC) Assassins of Kings (X360) (PC, Xbox One, PS4) The Witcher Tales (PC)
2008 2010 2012 2014 2016 2018
17.05.2011 13.10.2015 4.12.2018
The Witcher 2: The Witcher 3: Wild Hunt – expansion GWENT: The Witcher
Assassins of Kings (PC) pack: Hearts of Stone (PC, Xbox One, PS4) Card Game (Xbox One, PS4)
Thronebreaker:
The Witcher Tales (Xbox One, PS4)
A to th r id o am s at rin th ro ssiona monst r h nt r ra t o i ia ha r c i d
o r awards
A Nint ndo witch r as o The Witcher 3: Wild Hunt and a mo i dition o GWENT: The
Witcher Card Game or i d ic s ha oth n anno nc d or
P K is contin in its d o m nt work on th ar st P r as in th t dio s
history: Cyberpunk 2077 s t in a i rant t chno o ica ad anc d wor d P a rs ass m th
ro o ac r nk who has r c nt mi rat d to th most crim ridd n cit o th t r
Cyberpunk 2077 is based on the Cyberpunk 2020 n and a r P s st m cr at d
Mik Pondsmith
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 a r s ot d in P N tho sands n ss stat d oth rwis20 | CD PROJEKT Capital Group activity profile Key sources of revenue Sales of CD PROJEKT RED games are mainly carried out under the following business models: ♦ sales of territorial distribution rights (for box and digital editions), settled post factum on the basis of monthly or quarterly sales reports / licensing reports submitted by the Company’s business partners, ♦ supplies of physical box editions to the Company’s business partners for retail resale, ♦ supplies of batches of activation codes which permit games to be downloaded and installed, ♦ sales carried out through optional microtransactions in GWENT: The Witcher Card Game (incl. kegs and meteorite dust) via GOG and proprietors of console platforms. Sales of CD PROJEKT S.A. products are governed by several dozen long-term licensing and distribution agreements concluded with publishers and distributors, both international (e.g. BANDAI NAMCO Entertainment Europe S.A.S., Microsoft, Sony, VALVE Corporation, Warner Bros. Home Entertainment) and domestic (including cdp.pl and GOG) Digital distribution agreements are typically settled in monthly cycles, while distribution of physical videogame editions follows quarterly reporting cycles. Depending on the specific partner or contract, the Company also collects licensing reports – these are submitted 30, 45 or 60 days following the end of each reporting period (typically each month or quarter). In the first half of 2019 the most important CD PROJEKT RED products from the point of view of revenues were: ♦ The Witcher 3: Wild Hunt, together with its expansions – Hearts of Stone and Blood and Wine, ♦ Thronebreaker: The Witcher Tales, ♦ GWENT: The Witcher Card Game. Additionally, the Company offered earlier instalments in The Witcher franchise, including The Witcher and The Witcher 2: Assassins of Kings, both of which continue to attract players and generate revenues. Management Board report on CD PROJEKT Capital Group activities for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
21 | CD PROJEKT Capital Group activity profile
Key suppliers and clients
Within the CD PROJEKT RED activity segment, the Group carries out active distribution of its
games for various hardware platforms, using both traditional distribution channels, in coope-
ration with leading global distributors (such as BANDAI NAMCO Entertainment Europe S.A.S.,
BANDAI NAMCO Entertainment Australia PTY LTD, cdp.pl sp. z o.o. and Warner Bros. Home
Entertainment), and leading digital distribution platforms (e.g. Steam, PlayStation Store, Xbox
Games Store, Origin, Amazon, Humble Bundle and AppStore, along with its own proprietary
GOG.com platform).
In the first half of 2019 sales to two clients exceeded 10% of the Group’s consolidated sales
revenues and totaled 45 897 thousand PLN and 43 406 thousand PLN respectively (21.4% and
20.2% of the Group’s revenues respectively). These clients are not affiliated with CD PROJEKT S.A.
or any of its subsidiaries. No other client accounted for more than 10% of the Group’s consoli-
dated sales revenues.
The videogame development process relies on certain bought-in tools and technological solu-
tions; however, these do not result in significant concentration of supply. No CD PROJEKT RED
supplier accounted for more than 10% of the consolidated revenues of the Capital Group in
the first half of 2019.
Communications
CD PROJEKT RED prides itself on direct and honest communications with the global gaming commu-
nity under the “Gamers first” policy. Player relations are carried out primarily through social media
channels. CD PROJEKT RED actively manages over 90 social media profiles in over a dozen
languages, both global and local (such as the BILIBILI and Weibo platforms in China and the
Naver Cafe platform Facebook
in Korea). Twitter YouTube LinkedIn Instagram Twitch Pozostałe
296 tys. 426 tys. 142 tys. 44 tys. 287 tys. 142 tys. 91 tys.
obserwujących obserwujących obserwujących obserwujących obserwujących obserwujących obserwujących
Scheme 5 Number of users and subscribers of CD PROJEKT RED social media profiles as of
1 August 2019
Facebook
324 thousand followers
Twitch
148 thousand followers
YouTube
163 thousand subscribers
Instagram
Twitter 399 thousand followers
LinkedIn
44 thousand connections 527 thousand followers
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)22 | P K API A PA I I P I
K rod ct and mark tin nts
Cyberpunk
h most nota nt o th rst ha o was th r s ntation o Cyberpunk 2077 at
th wor d s r mi r amin air h d ann a in os An s n n at th o cia
Microso t con r nc th om an o cia anno nc d th am s r as dat A ri
P K took this o ort nit to n i th cont nts o th am s o dition in oth
standard and co ctor s ariants o owin th r a th om an to th r with its sin ss
artn rs an acc tin r ord rs o th am
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 a r s ot d in P N tho sands n ss stat d oth rwis23 | CD PROJEKT Capital Group activity profile
At the Microsoft conference the Company furthermore announced that Johnny Silverhand would
be played by Keanu Reeves. As part of his collaboration with the studio, the acclaimed actor
participated in a series of motion capture sessions and lent his visage as well as his voice to
the character (the latter refers to the game’s English localization).
During the same event a new cinematic trailer was also unveiled – as of the publication date
of this report, it has been viewed 30 million times across all of its distribution channels.
Figure 4 Viewership of CD PROJEKT RED promotional content on the Studio’s Youtube channel
(first 4 weeks following release).
The Witcher 3: Wild Hunt Cyberpunk 2077
Killing Monsters Cinematic Trailer
14 000 000
“The Trail” Opening Cinematic
Launch Trailer ("Go Your Way")
The Sword Of Destiny Trailer
Official Gameplay Trailer
10 500 000
Official E3 2018 trailer
Launch Cinematic
Gameplay Reveal
Official cinematic
7 000 000
48-minute demo
trailer E3 2019
3 500 000
0
08.2013 06.2014 10.2014 04.2015 05.2015 05.2015 06.2018 08.2018 06.2019
At this year’s E3 Cyberpunk 2077 demos were showcased in both the public and the business
sector. CD PROJEKT RED held a series of closed presentations for media and business partners,
showcasing a nearly hourlong gameplay trailer of Cyberpunk 2077 for approximately 2000
attendees. In the public sector 54 presentations were organized over the course of three days,
attracting over 5000 spectators.
These events were very favorably received by journalists and the game received over 85 awards
for E3 excellence. Following the close of E3 Cyberpunk 2077 was featured on the covers of
numerous gaming magazines throughout the world, with over 6.5 thousand related articles
appearing in both gaming and mainstream media. According to data published by GameIndustry.
biz, Cyberpunk 2077 was the most widely covered videogame of E3.
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)24 | P K API A PA I I P I
o owin th a anc sh t dat on A st at hina o the largest gaming fair in
hina th om an r s nt d hin s oca i ations o th Cyberpunk gameplay trailer and
cin matic trai r Pr s ntations o th am w r att nd d r r s ntati s o s ra do n
ma or m dia o t ts and oca in nc rs
n A st th om an took art in amescom in o o n the largest such event
on the European videogame market. Cyberpunk d mos displa d in two th at rs attract d
12 000 s ctators inc din m dia r r s ntati s in nc rs and sin ss artn rs
rom aro nd th wor d
At th air th om an a so h d th rst a i in ro nd o th o cia Cyberpunk cosplay compe-
tition. The winn r Katarina P trasko a wi ac o a ainst th winn rs o rth r a i in
ro nds in a rand na or a chanc to c aim 40 000 in ri s and s c r a co r hoto
s ssion d a with on o th wor d s or most nt rtainm nt ma s
A t r th c os o th r ortin riod th om an a so anno nc d its co a oration with s d
which wo d a ar as th in ni rs AM AI and h co a oration in o s com osition
Instagram
and recording of clips inspired
Facebookby Cyberpunk
Twitter n and a Discord
2020YouTube r dition son s as w asVK
Reddit
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d s ci 448
ca
o s rw c ch s skr
tys.
or 65,8 tys.
Cyberpunk 2077. 129 tys.
c ch o s rw c ch s skr
45,9 tys.
c ch o s rw c ch
o s rw c ch
Scheme 6 N m ro s rs and s scri rs o Cyberpunk 2077 socia m dia ro s as o
1 August 2019
other media
8 thousand followers
Twitter
558.3 thousand followers
VK
71.8 thousand followers
Discord
108.6 thousand followers
Facebook YouTube
364.8 thousand followers 630.5 thousand subscribers Instagram
172 thousand followers
Reddit
221 thousand subscribers
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 a r s ot d in P N tho sands n ss stat d oth rwis25 | P K API A PA I I P I
GWENT
n March th om an anno nc d that GWENT wo d comin to smart hon s
h iPhon r as is sch d d or th a o and wi o ow d th Android r as
wo GWENT ansions w r r as d in th rst ha o th rimson rs ansion
on March and th No i rad ansion on n th att r introd cin GWENT to one of
the most important locations of The Witcher 3: Wild Hunt.
Another GWENT n to rnam nt was h d on March with a tota ri oo o
tho sand his tim th main ri was c aim d th hin s am r Ni wan id i ao
Instagram
20,7 tys.
o s rw c ch
Facebook Twitter YouTube VK Weibo Wechat Reddit Po ostał
520 tys. 100 tys. 80 tys. 86,6 tys. 56 tys. 41 tys. 71,6 tys. 25,2 tys.
o s rw c ch o s rw c ch s skr c ch o s rw c ch o s rw c ch tkownik w tkownik w o s rw c ch
Scheme 7 N m r o s rs and s scri rs o GWENT socia m dia ro s as o
1 August 2019
Twitter
101.6 thousand followers
Weibo
57.2 thousand followers
Facebook VK
524 thousand followers
85.5 thousand followers
z ł
Reddit 32.2 thousand followers
78.6 thousand subscribers
YouTube
Wechat 83.1 thousand subscribers
37.4 thousand users
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 a r s ot d in P N tho sands n ss stat d oth rwis26 | P K API A PA I I P I
th r nts r at d to h itch r id o am s ri s
n r ar add on cont nt ins ir d The Witcher 3: Wild Hunt was r as d or
Monst r nt r or d
n n d rin an o cia Nint ndo ir ct i str am th om an anno nc d that The
Witcher 3: Wild Hunt om t dition wo d comin to Nint ndo witch as th rst am
in th s ri s histor h om t dition at r s th main am oth ansions Hearts
of Stone and Blood and Wine as w as a on s cont nt ish d a t r th am s o cia
a nch h Nint ndo witch r as is in d o d in co a oration with a r Int racti
and has n sch d d or cto r
Facebook Twitter YouTube VK
1,4 mln. 1,11 tys. 300 tys. 84 tys.
o s rw c ch o s rw c ch s skr c ch tkownik w
Scheme 8 N m ro s rs and s scri rs o The Witcher socia m dia ro s as o
1 August 2019
Twitter
1.1 million followers
Facebook
1.4 thousand followers
VK
92 thousand followers
YouTube
310 thousand subscribers
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 a r s ot d in P N tho sands n ss stat d oth rwis27 | CD PROJEKT Capital Group activity profile
GOG.com
Target and scope of business activity
The GOG.com platform was launched in August 2008. Its initial mission was to revitalize major
PC cult classics and offer them for sale to international customers with particular focus on
English-speaking countries, i.e. United States, Canada, United Kingdom and Australia. The plat-
form is now offered in English, French, German, Russian, Chinese and Polish – this includes full
game localizations as well as dedicated customer support and integration with locally popular
payment channels, accepting payments in thirteen currencies. GOG.com also carries releases
for the macOS and Linux operating systems.
GOG.com activities focus on:
♦ digital distribution of videogames via the Company’s proprietary GOG.com distribution plat-
form and the GOG Galaxy application, based on contracts concluded by GOG sp. z o.o. with
producers, IPR holders and external publishers. The platform enables customers to purchase
games, remit payment and download game files to their personal devices.
♦ development and support for the Company’s proprietary GOG Galaxy application to provide
user-friendly and straightforward purchase, launch and update features for all games from
the GOG.com catalogue, and to facilitate cross-platform online gameplay. GOG Galaxy
is currently responsible for all networking features of GWENT, including in-game sales and
payment processing in the PC edition.
♦ collaboration with CD PROJEKT S.A. in the framework of a consortium set up to develop
and operate GWENT: The Witcher Card Game and Thronebreaker: The Witcher Tales.
Facebook Twitter YouTube Twitch Pozostałe
In this scope, GOG sp.348
437 tys. z o.o.
tys.is responsible
51,3 tys.for handling
58,2 tys. in-game
60,5 purchases
tys. in the PC edition,
obserwujących obserwujących subskrybujących użytkowników użytkowników
and for delivering the required IT infrastructure and implementing networking features.
Scheme 9 Number of users and subscribers of GOG.com social media profiles as of
1 August 2019
Twitter other media
348 thousand followers
60.5 thousand followers
Facebook
437 thousands followers
Twitch
58.2 thousand followers
YouTube
51.3 thousand subscribers
Payments collected by GOG sp. z o.o. from customers are split with the Company’s suppliers
as agreed upon in distribution contracts. Typical contracts require the Company to submit
sales reports in monthly or quarterly cycles, not later than 30 days following the close of the
given reporting period. With regard to certain older products the company may be contractu-
ally permitted to adapt them to the requirements of modern operating systems, or to enable
multiplayer gameplay if such features were originally provided by the given game.
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)28 | P K API A PA I I P I
K rod cts
As o th ication dat o this r ort th com cata o com ris s n ar rod cts
rom mor than ish rs and rod c rs o id o am s inc din s ch w known
rands as Acti ision B i ard B th sda isn ctronic Arts iso t and arn r Bros h
k di r nc tw n com and its com titors i oth r ind nd nt at orms t am
am rs at m B nd tc is its s t o cor rinci s As a r th com an ns r s
that a o its am s ar r o c m rsom M m as r s Prod cts o r d on com ar
rich at r d and s a inc d on s cont nt s ch as so ndtracks ma s and wa a rs
com a so ns r s com ati i it o its am s with c rr nt rsions o M indows
Mac and o ar distri tions o in and ro id s t chnica s ort in cas o insta ation
ro ms I a am cannot mad to r n on th s r s com t r it can r t rn d within
da s o rchas or a r nd win to th s a s com has com on o th
most o ar di ita id o am distri tion at orms in th wor d
h ro s s com to mark t its own rod cts dir ct to nd s rs this inc d s
The Witcher and The Witcher 2: Assassins of Kings The Witcher 3: Wild Hunt a on with its
ansion acks Hearts of Stone and Blood and Wine a so o r d as th am o th ar
dition Thronebreaker: The Witcher Tales and The Witcher Adventure Game hanks to
aa s ort or GWENT n tworkin at r s distri tion o GWENT to P s rs can tak
ad anta o th sa s and a m nt m chanisms o r d com
K so rc s o r n
n s o tain d in th com s m nt ar dir ct d nd nt on th o arit o th
o r d am s and th ir r s cti sa s o m s h om an contin o s ands th
sco o its coo ration with s i rs and s ks acc ss to n w attracti rod cts com
is a so hom to s asona and on o sa s cam ai ns inc din s mm r a and hristmas
ar ain acka s as w as oth r nts which introd c n w m ans o attractin am rs
th r nota so rc s o r n inc d Thronebreaker: The Witcher Tales and GWENT:
The Witcher Card Game In this sco r n s attri t d to th com s m nt com ris
th s o o shar o r n s rom in am sa s to na c stom rs in th P dition
c din th hin s mark t as sti at d in th consorti m a r m nt
th s o o shar o r n s rom in am sa s hand d t rna artn rs
inc din th hin s artn r as sti at d in th consorti m a r m nt
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 a r s ot d in P N tho sands n ss stat d oth rwis29 | CD PROJEKT Capital Group activity profile Key product and marketing events GOG Galaxy 2.0 In the second quarter of 2019 GOG unveiled GOG Galaxy 2.0, which has now entered its beta testing phase. The goal of the application is to enable players to integrate all their game shelves into a single library, to communicate with friends and to track their progress regardless of their preferred gaming platforms. Its functionality will span PC and console platforms, extending beyond the GOG.com user base. The application is being developed in response to the growing fragmentation of the gaming market, where new digital distribution platforms are emerging and an increasing number of games are released on a platform-exclusive basis. During this year’s E3 fair demo versions of the applications where showcased to invited repre- sentatives of top gaming media (including Gamespot, IGN and Game Informer). Following the launch of the beta testing phase, access to GOG Galaxy 2.0 was provided to several hundred media editors and influencers from around the world, resulting in a large volume of positive reports and recommendations. Beta subscriptions are still available – see: gogalaxy.com/en/ for details. Management Board report on CD PROJEKT Capital Group activities for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
30 | CD PROJEKT Capital Group activity profile New games in the GOG.com catalogue In the first half of 2019 the list of classic PC games offered on GOG.com was extended with several cult classics from Blizzard Entertainment games. Remastered games, such as Diablo (along with its long-unavailable Hellfire expansion pack), Warcraft: Orcs and Humans and Warcraft II Battle.net Edition quickly topped the list of fastest-selling classic games in GOG.com’s history, becoming the most important external products marketed on GOG.com in the first half of 2019 – in terms of revenues. Other notable fresh releases and new games introduced in the first of the year include Imperator: Rome, Mutant Year Zero: Road to Eden, Spec Ops: The Line, Blood: Fresh Supply, Bioshock Infinite: Complete Edition and Vampyr. In terms of the total transaction volume, the most important product of the first half of 2019 was Cyberpunk 2077, whose preorder campaign began on 9 June. During this initial period approximately one third of all Cyberpunk 2077 digital PC preorders were placed using the GOG.com platform. Transactions which correspond to Cyberpunk 2077 preorders will not be aggregated with GOG.com or Capital Group revenues until the game’s official release. Prior to this release, all such inflows will instead be reported as deferred revenues. Sales support With regard to digital distribution sales support focuses primarily on securing distribution rights to new, appealing videogames, and on seasonal sales campaigns. The most important sales-related event of the first half of 2019 was the annual Summer Sale, which covered nearly 2500 games. With regard to revenues, it was the biggest single sale in GOG.com’s history. The theme of this year’s edition was the summer music festival. Daily recommended game packages were published, featuring videogame characters as vocal talents – including Geralt and V from Cyberpunk 2077. In addition to its other themed events, such as the Spring Sale, Hot Sale, Lantern Festival Sale and Indie Week, GOG.com also hosts weekly sales. Management Board report on CD PROJEKT Capital Group activities for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
31 | CD PROJEKT Capital Group activity profile
Key suppliers and clients
GOG.com markets games via online channels directly to millions of individual users worldwide.
As such, the segment does not have key clients in the usual sense of the term.
Figure 5 Sales of products and goods by GOG.com in the first halves of 2018 and 2019 by
territory.
Other
Other territories (22%)
territories (23%)
USA (34%) USA (30%)
The
Sweden (2%) Netherlands (2%)
H1 2019 Sweden (2%) H1 2018
Australia (4%)
Australia (4%)
Russia (4%)
Russia (4%)
Canada (5%) Germany (14%)
Canada (4%)
France (5%) Germany (13%)
France (5%)
United Poland United
Kingdom (5%) Poland (6%) (6%) Kingdom (6%)
In the first half of 2019 the largest group of GOG.com customers comprised residents of the
United States (34%), followed by Germany (13%), Poland (6%) and the United Kingdom (5%).
Key corporate events
On 14 January 2019 a new member company was incorporated in the framework of the Capital
Group – CD PROJEKT RED STORE sp. z o.o., fully owned by CD PROJEKT S.A. On 8 May the
new company launched an online store which sells high quality collector’s items inspired by the
studio’s videogames. The store’s catalogue will be progressively expanded with new products
and categories. Currently CD PROJEKT RED STORE serves European Union member states;
however, its geographical reach will soon expand to cover – among others – the US and Canada.
On 4 April 2019 Oleg Klapovskiy tendered his resignation from the Management Board of the
Company, effective on the date of the nearest General Meeting, which took place on 23 May
2019. The stated reason behind the resignation was the need for full involvement in the affairs
of a subsidiary Company – GOG sp. z o.o. – including further expansion of the GOG.com plat-
form and work on new projects which will affect the operation of the online store and the
GOG.com platform as a whole.
On 23 May 2019 the Ordinary General Meeting of the Company adopted a resolution concer-
ning the payment of a dividend in the amount of 100 926 000.00 PLN, i.e. 1.05 PLN per share.
The dividend date was set to 31 May 2019, with payment occurring on 13 June 2019.
Events occurring after the balance sheet date
No significant events occurred after the close of the reporting period which would merit inclusion
in this semiannual report on CD PROJEKT Capital Group activities.
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)32 | CD PROJEKT Capital Group activity profile
Disclosure of seasonal or cyclical activities
CD PROJEKT RED
The revenues and financial result of the CD PROJEKT RED segment are strongly affected by
the videogame release schedule. CD PROJEKT RED usually takes between 2 and 4 years
to produce a game. Initial development work occurs before the previous game in the series
is complete and ready to be released.
CD PROJEKT RED also engages in smaller-scale projects – such as add-ons for its own games
or adapting existing products to work on new gaming platforms. Such projects may be carried
out directly by the Company or by its external partners, and their implementation may take
several months (up to about a dozen).
With regard to games which have already been released, their yearly sales distribution is depen-
dent on the schedule of periodic sales campaign. In most cases, strong sales are reported in
the second and fourth quarter, while the first and the third quarter (the latter of which overlaps
with the summer vacation season) see weaker sales.
Figure 6 CD PROJEKT RED release quarters – sales of products, goods and materials in
2011-2019 (PLN thousands)
500 000
450 000
400 000
350 000
300 000
250 000
200 000
150 000
100 000
50 000
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Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)33 | CD PROJEKT Capital Group activity profile
GOG.com
The digital videogame distribution market, which is the main area of activity of GOG.com, is
characterized by seasonal fluctuations in revenues. On an annual basis, the highest revenues
are typically obtained in the fourth quarter while the lowest revenues correspond to the third
quarter. Sales in Q2 and Q4 are boosted by promotional activities organized in these periods.
The sales volume is also strongly dependent on the timing of new releases in each reporting period.
GOG.com also obtains revenues from microtransactions carried out within GWENT: The Witcher
Card Game. The volume of such revenues depends, among others, on the game’s popularity
and on new content released to gamers during each period.
Figure 7 Quarterly sales of goods and materials in the GOG.com segment; 2018-2019
(PLN thousands).
50 000
2018
45 000 2019
40 000
35 000
30 000
25 000
20 000
15 000
Q1 Q2 Q3 Q4
Management Board report on CD PROJEKT Capital Group activities
for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)34 | CD PROJEKT Capital Group activity profile Disclosure of external and internal factors affecting further growth of the CD PROJEKT Capital Group Future growth of the Company and its Capital Group is critically dependent on the ability to retain world-class creative professionals and experts, and to attract a growing number of specialists, both Polish and foreign, to work on the Group’s future releases. Ongoing expansion of the company also calls for effective management of production and publishing activities rela- ted to several projects carried out in parallel at the Company HQ in Warsaw and at its branch offices in Kraków, Wrocław, Berlin, Los Angeles, Shanghai and Tokyo. The market performance of each new release is an important aspect of the Studio’s reputation as a developer of top-qu- ality, highly sought-after entertainment products. It also underpins the value and recognition of brands such as The Witcher, Cyberpunk and CD PROJEKT RED, upon which the long-term development strategy of the Company and its Capital Group is founded. Moreover, the activities of CD PROJEKT Capital Group member companies are affected by external factors such as the global macroeconomic conditions, legal reforms and changes in taxation. In this sense, CD PROJEKT is in a similar position to many other companies conducting business on domestic and international markets. Key internal and external factors which may, in the Board’s opinion, prove detrimental to the Group’s activities and growth prospects are listed in the risk assessment section of the Mana- gement Board report on CD PROJEKT Capital Group and CD PROJEKT S.A. activities in 2018. With regard to further quarters of 2019, the CD PROJEKT Capital Group intends to develop its activities in parallel in two key segments: CD PROJEKT RED and GOG.com, while also pursuing new initiatives in the framework of its subsidiaries – Spokko and CD PROJEKT RED STORE. A description of further growth plans can be found in the Strategy of the CD PROJEKT Capital Group for the years 2016-2021, announced in March 2016. The full text of this document is available on the Company’s corporate website at: cdprojekt.com/en/capital-group/strategy/. CD PROJEKT RED Key factors which will guide activities in the CD PROJEKT RED segment include ongoing projects, the scale of development work associated with those projects and their perceived popularity among players. In this context, the most significant factors shaping the current results of the CD PROJEKT Capital Group include the popularity of previously published games set in The Witcher universe, as well as – in future periods – the progress of development and market reception of the Company’s new releases, including Cyberpunk 2077 and further products. To-date enthusiastic reception of the Studio’s new product by gamers and experts alike sugge- sts strong potential of the brand, both in terms of PR and commercial appeal. Commitment to product quality, maintaining the pace of the Cyberpunk 2077 marketing campaign, PR activities, hype management and fostering community relations are all important aspects of the game’s anticipated market success. In addition, global recognition and popularity of the Cyberpunk 2077 brand may entice gamers who are not yet familiar with The Witcher games to seek access to the Company’s earlier products. Future results of the CD PROJEKT Capital Group will also depend on the popularity and progress of development of GWENT: The Witcher Card Game. The GWENT team currently focuses on Management Board report on CD PROJEKT Capital Group activities for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
35 | CD PROJEKT Capital Group activity profile porting the game to mobile devices, on adding new content, card sets and vanity items as well as organizing regular in-game events with the aim to attract and retain gamers. GWENT: The Witcher Card Game is the first multiplayer game developed by the CD PROJEKT Group in which CD PROJEKT and GOG collaborate to jointly create new technological solutions while extending their knowledge and experience in terms of provisioning online products. These technologies and know-how are strategically important for the Group and its future development and publishing capabilities. The Company believes that maintaining the observed growth dynamics and expansion of its activity profile will depend on further enhancement of its world-class videogame development skillset and on maintaining effective communication channels with the global gaming commu- nity. Managing two separate major franchises (The Witcher and Cyberpunk), along with several independent development teams, enables the Company to conduct parallel work on several projects and smoothens its long-term release schedule. This migration towards a dual-franchise model supported by several independent product lines also permits optimization of manufac- turing and financial activities, mitigates important risk factors and makes it easier for Company employees to seek professional fulfillment. GOG.com In the GOG.com segment, maintaining the current high sales volume should be supported by the customers’ increasing tendency to turn to online channels for purchases. GOG.com growth also depends on seeking additional brand-new products. Accordingly, GOG sp. z o.o. actively communicates with leading global developers and publishers of videogames, continually expanding its list of business partners and products offered. Each new release on GOG.com contributes to the platform’s popularity and drives up sales. In addition to adding new products GOG sp. z o.o. also seeks to expand its user base by attracting new players – those who have not yet set up a GOG.com account. The Company has been successful in this regard, owing to its PR activities and synergies resulting from cooperation with CD PROJEKT S.A. The GOG.com customer pool continues to grow at a steady pace. Expanding the reach of services operated by GOG.com may strongly depend on the community reception of GOG Galaxy 2.0. Conceptually, this newest edition of GOG’s proprietary technology aims to provide convenient access to games purchased by customers regardless of platform, as well as facilitate social interaction. GOG Galaxy 2.0 is currently in its closed beta stage. Further growth of activities in the GOG.com segment, including the potential to acquire unique know-how and experience, and to fully leverage the Company’s technological expertise, will be influenced by the Company’s involvement in the GWENT project, where GOG.com is responsible for networking and online sales. Participation in the GWENT project and applying GOG Galaxy in the development of a free-to-play online game marks GOG.com’s entry into a new market segment. The resulting technologies and experience will, in the Board’s opinion, strongly affect future growth prospects of GOG.com in this heretofore unexplored area of the market. Management Board report on CD PROJEKT Capital Group activities for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
36 | CD PROJEKT Capital Group activity profile Disclosure of factors which, in the issuer’s opinion, will affect its financial result during at least the coming quarter The coming, third quarter of the year, coincides with the vacation season and therefore with a drop-off in sales activities which affect the sales volume of previously released games. The Group’s publishing schedule foresees no significant product releases in the third quarter of 2019. At the same time, the Group’s financial result will be impacted by costs related to the ramp-up of the Cyberpunk 2077 promotional campaign, including (among others) participation in gamescom and China Joy. Regarding the fourth quarter of the year, the Group has announced the release of The Witcher 3: Wild Hunt for Nintendo Switch and GWENT for mobile iOS devices. Both releases are expected to bolster the Group’s sales revenues and financial result during this period. The coming year will be dominated by the release of Cyberpunk 2077, scheduled for 14 April 2020, along with the associated tie-in events. Disclosure of significant agreements6 No agreements meeting the significance threshold were concluded by the Company in the reporting period. 6 An agreement is regarded its significant if the sum of liabilities arising under that agreement exceeds 10% of the Capital Group’s consolidated assets. Management Board report on CD PROJEKT Capital Group activities for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
37 | CD PROJEKT Capital Group activity profile Risk management at the Capital Group The CD PROJEKT Capital Group carries out ongoing assessment and mitigation of risk factors which may affect its financial or material standing. The Group is exposed to common risks typical for commercial entities which carry out economic activities in Poland, export products and maintain subsidiaries (including foreign subsidiaries). Pursuing complex, innovative projects which call for multiple iterations to ensure that the final product meets the stated requirements involves higher-than-average operating risk. With each new release the Group gains valuable publishing and development experience, enabling it to adapt its practices in the scope of project management, progress monitoring and risk mitigation. A detailed risk assessment can be found in the Management Board Report on CD PROJEKT Capi- tal Group Activities for 2018, available for download on the Company website at cdprojekt.com. Management Board report on CD PROJEKT Capital Group activities for the period between 1 January and 30 June 2019 (all figures quoted in PLN thousands unless stated otherwise)
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