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edicated for CFA Research Challenge 2015
Description
Video Game Development,
Digital Distribution]
Team J Student Research This report is published for educational purposes only by student competing in CFA Institute Research Challenge
Date 12/02/15
Recommendation: Hold
Main revenues growth drivers: Market profile On-going triple-A games 26-week price range (PLN) 16
The business is driven by a high Shares outstanding (in mn) 94
and adjusting to their hardware
GOG which will start selling triple-A games and will introduce its new platform A very good reputation of The Witcher saga
the success of the company is determined by a very good reception of the W2
We do not believe that the company will be capable of sustaining its very dynamic growth in the future and our assumption is that the CDP will suffer from a decrease of its CAGR
According to our calculation,
the sales of The Witcher 3 and Cyberpunk 2077 will reach 7mn and 6
We estimate that 2016 is going to be the best year in terms of generating cash flows for the company due to the W3 release
The main factors affecting the CDP’s future is currency risk and perception of gamers
transformation into CD Projekt Red S
6 4 2 0
Volume (in mn)
Figure 1 Structure of CD Projekt Capital Group
Business Description CD Projekt Capital Group is a Polish company which operates on the global digital entertainment market and is especially known for its video games development department
but the contemporary form of the business was adopted due to association with Optimus enterprise
The brand became internationally recognized among investors in 2002 thanks to initial public offering at the Warsaw Stock Exchange
The main business domains are:
GOG Ltd
GOG Poland Sp
CD Projekt S
Brand Projekt Sp
CD Projekt Brand S
what gives it the opportunity to physically distribute on 109 markets (see the Figure 2)
The scope of sales is enhanced mainly by distribution through digital platforms such as Steam,
Games development
Q2 2014
Q1 2013
Q3 2012
Q2 2012
Q1 2012
Digital distribution of computer games via GOG
pl operating in the Polish market
Consolidation eliminations
Source: The company data
Piotr Nielubowicz Aviva OFE Aviva BZ WBK Adam Kiciński Free float
The company’s main product is an action-RPG The Witcher saga based on Andrzej Sapkowski’s novels
The consumer’s perception of the market position of the game is going to be strengthened by titles like Cyberpunk 2077 and The Witcher Battle Arena
Over 200 high-class specialists have got involved in the process of creating adventures of Geralt of Rivia
Not only graphics,
but also musicians and screenwriters have been engaged in the process of game developing
The Witcher saga total sales have reached about 8 million copies worldwide (until the end of 2014)
almost 240k gamers (a colloquial word for a player) from the U
have purchased the newest title (The Witcher 3: Wild Hunt) via 3 game platforms (PS4,
XboxOne,
Game has won over 170 international awards before its release,
including the biggest global public-voted gaming award
gross profit from sales of games via GOG
distribution and publishing in Poland (CDP
pl) constitutes respectively 35% and 30% of the total profit
makes a gross profit on sales in the amount of PLN 16
[the above calculation was prepared on the basis of the last 11 quarters] The company’s strategy for the upcoming years can be summed up in the following points: Release of new products
their developers’ primary focus lies in the highest quality of their products (‘tripleA video games’),
they employ highly advanced technologies to achieve that aim,
Maintenance of the customers’ loyalty
although such products are mid-range (circa 20 hours of gameplay),
they will also be characterized by the highest quality,
the company has constantly invested in R&D projects to develop platform’s facilities and also strengthen its position in the global market,
Commercialization of proprietary technology
to third-party developers: the newest version of this multiplatform engine is powering their major releases,
Entrance into the new domain
so that they are creating new products for users of mobile devices,
The structure of shareholders by the amount of shares and by the amount of votes at AGM are coincident
there were several changes in CD Projekt shareholders’ structure
there are three institutional shareholders (each one holding more than 5% of shares): PKO TFI S
MetLife PTE S
The majority of votes belongs to business founders and Board Members and is split as follows: Marcin Iwiński (13
Michał Kiciński (12
CD Projekt’s management is represented by professional and highly devoted people
after the merger with Optimus,
the company evolved into a leading video games developer in the Polish market
Its franchise has started to be internationally recognized after release of the first part of The Witcher saga
Board are: Adam Kiciński – President and Joint CEO,
Marcin Iwiński – co-founder and joint CEO,
thanks to its effective management,
has taken advantage of many opportunities appearing on the developing Polish market as a grantee of European Regional Development Fund
Since December 2007 it has managed to carry out six projects,
Figure 5 Projects co-financed by the European Regional Development Fund,
2007-2013
EUR 100k
One of them is dedicated to the upcoming production The Witcher 3: Wild Hunt
As company listed on WSE CD Projekt is obligated to comply with corporate governance rules stipulated in ‘Good Practice of Companies Listed on Warsaw Stock Exchange’
In connection with that,
which are not obeyed by it along with explanation
minority shareholders are authorized to revoke shareholder’s resolution,
a special procedure for appointing members of the supervisory board which allows minority shareholders to nominate candidates,
Audit and Oversight – the whole board of directors creates audit committees,
annual reports are audited by PKF Consult a well-experienced consulting company
compensation and benefit scheme was made public
On the basis of our evaluation we claim that CD Projekt follows standards of best practice in corporate governance
Lack of special committees the supporting supervisory board as well as the corporate governance officer arises from facts that both the company’s structure is not extensively developed
Project Value
EU financing
Industry Overview It is estimated that global expenditures on entertainment and media are going to increase from USD 1
Analysis of the global results reveals that inhabitants of the Asia-Pacific region are world’s top spenders in entertainment and media in comparison to inhabitants of other regions
It is worth noting that Central and Eastern European market growth will be significantly faster than the growth of Western Europe’s markets,
although Latin America will be the fastest-growing region over the next four years,
In countries with a stable economy,
society citizens’ wealth has increases and thus spending on entertainment are greater
However,
thanks to the Internet and facilities provided by other technologies,
people from all over the world have more possibilities to fulfill their needs in the ways they really want
These days lots of traditional methods of distribution have been replaced by digital countertypes/equivalents
For more information,
Gamers (in mln)
Out-of-Home
Consumer Books
Video Games
worldwide game revenues amounted to USD 75
growing by approximately 14% as compared to the previous year
where the game industry generated 42% of total income
Moreover,
revenues of the global games market are expected to increase to USD 102
By contrast,
on the basis of data from Forecast: Video Game Ecosystem,
revenues of the game industry reached USD 93bn in 2013 (Appendix 10 and 13)
revenues from sales of PC/MAC games will grow at 3
while the annual growth rate of games on TV will be four times lower
94m units
Please refer to the Appendix 7 and 8
Games are the most frequently purchased by 36 years old gamer on average
nearly one in three gamers choose the action genre and also every fifth sold video game is the shooter
the Polish games market generated revenues in the amount of USD 280mn and it consisted of 13
They are mainly young men,
who spend an average of 21 hours a week playing games
the vast majority of Polish gamers plays games via PC platform
Source: McKinsey&Company’s,
Figure 8 Global Games Market,
2013-2017
80% 60%
(Mid)-Core PC/Mac Games
we should take into consideration the fact that the company consists of three businesses functioning in different market environments
but we should remember to analyze each industry very carefully
We want to determine the position of CD Projekt in comparison with its competitors,
its future position in the next years
we have analyzed CD Projekt Red Studio,
com as compared them to both local and global leaders of their industries,
using analytical methods such as Porter’s five forces analysis and SWOT analysis
Advantage of differentiation of buyers and products’ substitutes
Pre-owned
77% 75%
20% 23%
performing a part of media industry,
has wide perspectives of development,
because both customers from developed and emerging markets spend much money on its products: about USD 590mn in 2013,
which is 5% growth as compared to 2012 (please refer to Appendix 9)
We have analyzed the gaming market from a global perspective
The gaming market is characterized by huge bargaining power of mature and aware buyers with specific expectations
What is more,
an easy access to entertainment poses a considerable threat to product substitution
please refer to the Porter’s five forces analysis in Appendix 11
Potential buyers are gamers from all over the world and their number is estimated at nearly 2bn people
The majority of purchasers of games are people who consciously choose products: they are aware of their consumer needs and they also know how to meet them
high product differentiation and unlimited access to substitutes,
bargaining power of buyers is constantly increasing
Another characteristic which has a significant impact on the game industry is wide access to substitute products
Traditional entertainment products such as movies,
board games are becoming slightly old-fashioned in the ‘digital age’,
but they still have its supporters
participation of these products in a total global spending on entertainment in 2013 is estimated at 35% compared to 12% spent on video games (Appendix 9)
Furthermore,
there is clearly noticeable phenomenon in vogue
Bargaining Power of Suppliers
Threats of New Entrants 5 4 3 2 1 0
Competitio n in the Industry
Spike Chunsoft,
and Megarom Interactive) have entered into cooperation with CD Projekt,
working together on releasing the newest game The Witcher 3: Wild Hunt
the operational risk of dependence on the only one publisher decreases
the company does not have to be concerned about promotion and distribution,
because it has signed agreements with major local sales partners,
what enables CD Projekt Red Studio to distribute its products in 109 countries
Its main product will be physically available in North and South America,
Europe,
Asia Continental and Pacific,
Bargaining Power of Buyers
Threat of Substitute Products
it also has sold the majority of shares in cdp
which is functioning only in the Polish market
the company downscaled its shares in cdp
pl still is going to publish The Witcher 3: Wild Hunt on the Polish market,
but its cooperation with the Capital Group depends on achieved bottom line
but on the other hand they have a sideeffect in the form of an extremely fast increase of number of potential competitors
CD Projekt has changed the date of the premiere a few times
That fact confirms us in our conclusions that main product of CD Projekt Red Studio competes globally
over the next few years there will be following key factors leading to rise in market value: Developed markets – increase of the share of paying players
in twoyears time number of paying gamers will rise from 36% to 46% in Western Europe and the US combined
Developing markets – rapid growth in number of smartphones and tablets will make global market larger
It will be an essential trigger of rise in revenues
Hardware innovation – fierce competition among tablet and smartphone manufacturers will drive constant and rapid growth in mobile technology,
creating new opportunities for game developers toattract more gamers and improve the quality of games
Figure 11 Competitive positioning of GOG
Software
Media Gallery with Trailers
console game producers have a comparative advantage in mobile phone game segment
that a certain game is a sequel of games that gamers used to play before
Gamers also stated that a knowledge of a publisher is one of the most important reasons to choose a particular game
Number of games offered on mobile phones is extremely high due to lower cost of production and other factors
The Witcher Battle Arena
CD project is engaged in a process of developing first free-to-play mobile games
We think that the company has a huge potential in this segment
The console game producers have an advantage of well-known game brand which can help them to obtain a high number of downloads
the company is gaining experience and it's first games will probably not be very profitable
Although,
we think that in long term the company will make profit on mobile game segment
Graphics of Webpage (Our Personal View)
Figure 12 Best-Selling Video Games by Units Sold 2013 Strategy Other Games/Complications Action Adventure Arcade Casual Children's Entertainment Family Entertainment Fighting Flight Racing Role-Playing
Figure 13 Share of digital distribution and physical copies in selected countries
Belgium Netherlands Italy Spain France Germany UK Europe US
According to ‘Entertainment Software Association and the NPD Group in 2013,
digital distribution accounted for 53% of distribution in comparison to only 29% in 2010
The growth is driven both by the rapid development of the game market for mobile phone and smartphone as well as increase in popularity of digital distribution among gamers
Highly Concentration in Industry
Steam webpage offers the great variety of functionality for the users and is not only a virtual shop but also a platform for communication between gamers
Digital distribution provides a higher profit margin for Developers
Digital distribution offers consumer unlimited access to a great variety of games for people around the world
According to the CDP data,
the net receipt from digital distribution of each The Witcher 3 will be about twice higher than in retail distribution
GOG is the leader in digital distribution of older classical games
Based on analysis of revenue structure of GOG,
we assume that classical games are mostly attractive for gamers who used to play in those games (developed markets)
Global market growth is driven by increase the number of new gamers who could not have a sentiment for older games
which could attract gamers is limited
we assume that GOG Galaxy will be offering new functionality
Technology gap between Steam and GOG will become smaller
Advantage of GOG is base of loyal customers who support DRM-free policy of platform but the mainstream publisher still relies on DRM and do not want to cooperate with GOG because of lack of DRM protection
We assume GOG Galaxy due to a new technology will be able to limit unauthorized copying without the necessity of internet connection
GOG have loyal customers who support DRM-free policy of platform
DRM-free supporters could change platform only because of their personal belief
com is a digital distribution platform offering a wide range of computer games,
and also to identify external opportunities and threats
One of its strengths is an international cooperation with publishers and developers from all around the world,
which supports product diversification
whose distribution isn’t as profitable as distribution of the newest releases,
especially ‘triple-A video games’
Moreover,
the fast-growing digital industry offers opportunities for effective development of the business and acquirement of new competitive advantages
one of the threats is that Steam will further strengthen its position in the market
Source: NewZoo
Figure 15 CD Projekt S
stock price and WIG20 index performance in the last 5 years CD Projekt
It also do not use long-term loans
the fact that Polish companies can utilize European Funds as members of EU with developing economies
Mobile Game Revenues
The CD Projekt financial situation in short-range forecasts is acceptable for current investors and for those who would like to invest short-term basis,
especially among Polish stock companies
namely The Witcher 3: Wild Hunt,
which seems the most significant driver for the growth of the company’s future value
Investors should be aware of two risks with the highest impact on the company and its profitability,
apart from high fluctuations of exchange rates
adapt to rapidly changing trends in consumers’ needs and also keep on updating its strategic goals
the final sales results will be significantly lower than our estimates
the huge impact on the structure of CD Projekt’s revenues has seasonality of the game sales
Our recommendation for CD Projekt S
is to Hold stocks with a target price PLN 16
which is very similar to its current price of 16
The analysis in terms of attractiveness of the whole industry and prepared valuations confirms strong position of CD Projekt S
CD Projekt has a leading position within the Polish WIG Informatics index and it is the leader on the domestic market as a video game developer and as a provider of different types of entertainment
Valuation Methods
Data as of January 29,
Our target price was derived by using the Discounted Free Cash Flow method
By 6 years period,
we captured 2 such periods which lasts 3 years each
Our terminal growth (3%) derives from the strong fundamentals of the Polish economy
We assume that both video game development and digital distribution will still grow but slower while the physical distribution in Poland business will be sold in 2016
Consumers are spending more on entertainment and media YoY – 6
The rapid development of new technologies and continuously rising consumer demand are the reasons for which further growth directions have been appearing
its revenues are expected to increase to over $102bn,
with its fastest-growing market segments being mobile phone and tablet games as well,
2% and 28
Digital distribution
1 493 100
614 900
2 108 000
3 348 000
1 397 900
4 745 900
According to our calculations nearly 70% of the company’s future assets of the company are going to consist of cash
This fact may lead to a conclusion that the management should implement a well-thought-out strategic plan to guarantee stable long-term prosperity of the company
it should use its own funds to create and implement a new investment project
the business is going to be unprofitable
4 841 100
2 012 800
6 853 900
1 255 000
598 000
1 853 000
Europe and the rest
2 936 000
1 425 000
4 361 000
4 191 000
2 023 000
6 214 000
In order to valuate CD Projekt S
we used 2 methods – DCF model and ratios model,
The first method consists of the estimated cash flows in the following 5 years (2015-2020,
with taking into account different scenarios
The ratio analysis has a zero weight because we assume this business too cyclical
Several ratios,
such as P/E may be not too accurate because Price discounts expectations of future earnings while Earnings (Net Profit) are strictly accounting-driven measure
DCF Model Sales
The most convenient video game which is comparable in both production cost and genre is Destiny (Appendix 17)
We consider it also as a game heavily based on preorder sales
Additionally,
it was released in the middle of 2014
Also counted how does the game sales outside the EU and US (Appendix 26) The next step were estimations of the console base
It is important to notice that The Witcher 2 was released when there had already been dozens of millions of PS3
To estimate how much the fact
Figure 16 Estimation of Sales as a percentage of Total Sales of The Witcher 3 and Cyber Punk 2077 in the following years after a game release 60
Our assumption is that a fraction of gamers who will buy the CDP’s product is going to be the same as in the case of Dragon Age 3: Inquisition
We consider the mentioned game as a good indicator as it is also from RPG genre and had a similar budget
we used the median value of sales for 7 AAA video games (Call of Duty,
which was released in the 1st or 2nd quarter of the year
of a lower number of consoles affects sales of The Witcher 3,
we have used historical data of the new generation consoles in the last months
we have assumed that in the first year,
in conjunction with very high hardware requirements we decided,
to flattening of sales to 50% in the first year (Appendix 14)
Five independent report results are that video games market is going to grow dynamically with the medium value equals to 8
we calculated how it will shape the relation of sales between consoles and PC and average growth (Appendix 18-19)
The CybePunk77 estimate is performed in the same way as in the case of the W3,
we believe the total sales will cover only 85% of total sales for the W3
It is due to the fact that The Cyberpunk,
is relatively unknown outside the U
100 000
Poland 10Y Bond YIELD (R F rate)
Adjusted monthly beta
Source: The team estimate,
we assume the stabilization of Sales (low price,
more customers in the emerging markets)
It is because there is a limited number of old titles to acquire that can be sold on the GOG platform
We think that the growth in Sales will be partially driven by entering new segments of the market,
such as movies and newer titles (from 2010s)
Margins
150 000
total units sold will be divided equally between the U
and Europe while the rest of the world share will equal to 16
Africa,
though video games market will be growing,
this tendency is going to shrink in the developed countries
Video games development We have assumed that margins will be lower in case of video games developing and GOG
it is due to the increasing cost of labour
We believe that salaries of high specified knowledge workers will converge to the Western Europe and North America numbers
The strategy of acquiring old titles is going to change because of capacity of the old video games market,
as mentioned in the previous section
we believe it will surely affect margins in a negative way
Having a position of a monopsonist helps the company to improve its additional markup
With newer titles,
by which we mean video games from 2010s,
the entity is going to position itself in a much broader and competitive market
margins will remain constant as the company does not consider any changings in the near future,
except for eventual selling this part of the business
calculated Weighted Cost of Capital equals to 10
We have utilized CAPM model by performing regression of CD Projekt’s stock monthly returns against monthly returns of WIG20
which is still game development and digital distribution,
We think that diminishing share in revenues from retail distribution will be offset by a greater share of GOG,
which operational risk is the similar
The company does not have any debts,
and does not wish to have any in the future
Most of its costs are incurred immediately,
for salaries for its employees
we think CAPEX will equals to roughly 1
Dividends We assume that the company is going to continue no dividend policy
so we assume it wants to have some buffer in the future
This assumption captures the whole cycle for the company – from a year before a game release,
to a year after a game release
Additionally,
we assumed terminal growth to be 3% as we believe it is the long-term GDP growth in Poland
159 882
499 659
250 223
251 052
567 195
228 405
146 548
150 473
172 633
187 383
173 326
188 162
+ Depreciation = Net Operating Cash Flow CAPEX
Change in NWC
-18 461
-72 697
-98 738
=Free Cash Flow
108 553
162 441
159 451
133 967
481 816
1 063 389
Equity Value
1 545 205
Number of shares (in mln)
Source: The team estimate
Sensitivity Analysis In this section,
we have performed the sensitivity analysis with WACC and Terminal growth as variables
12% and 3%
we have shown the dependence of price on WACC and Terminal growth
The values differ significantly and this is determined by the fact that we have estimated only 31% of value by Discounted Cash Flows in years 2014-2019
the results are especially sensitive when Terminal growth converges to WACC
Terminal growth
Comparable Valuation We think that comparable valuation approach is not suitable for CD Projekt
First of all,
CD Projekt releases one game for every few years
Profits from developing games are the most important drivers of earrings but are very violate due to the fact that roughly 60% of them is generated in the first year
International peers release games every year,
in last quarter’s ,due to lack of release of new games,
the major international competitor in digital distribution,
is not a public-listed company and its financial data are not distributed into public and hence could not be used for valuation
and other game developers and distributors
we have excluded Ubisoft Entertainment from comparable valuation because its impact on mean has been too huge due to extremely high P/E in comparison to others
Financial Analysis We have used financial ratio analysis to research the ways in which CD Projekt is currently performing and compare these results with the past performance and financial situation of the company
Self-financing and cash generation abilities The company mainly uses internally-generated funds to finance and expand its activities
In our opinion,
cash generation ability of the company’s core activities,
especially future earnings from sales of The Witcher 3: Wild Hunt and Cyberpunk 2077,
and also revenues from distribution via digital platform will be enough to cover expenses in a long-term perspective
The liquidity ratios have confirmed CD Projekt’s ability to meet its obligations without any difficulties (Current Ratio 2012: 2
48 2013: 2
We predict such a trend will increase in the estimated period
The amount of the most liquid possessed assets will be 3 times greater than shortterm debts in 2017 (Cash Ratio 2017E: 3
it took the company only 66 days on average to collect account receivables
Payments are being carried out so quickly in view of the most commonly used method – made by credit cards
That’s why,
this trend will continue in the projected period
The average inventory days ratio was 97 days during the period between 2011 and 2013,
the ratio for 2013 amounted to more than 133 days due to ongoing preparation for the huge release
We expect that the ratio will increase to an average of 132 days in the period of forecast due to the work of games development in progress and the physical delivery of future titles
The changes of margins may depend on the product lifetime
Developing of the main product – video game,
which generates the majority of changes in revenues and costs of sales,
Gross Profit Margin is expected to remain above 50%
Other businesses (GOG
pl) are generating a rather sustainable profit YoY
Costs are balanced by revenues
Maintaining constant correlations,
the Gross Profit from sales increases while the costs are lower or while the scale of sales expands
the company was still building up their core business – developing of video games
The quality of their products improves so that total costs were constantly growing
which has the main impact on gross profit from sales
but the Gross Profit Margin of CD Projekt Capital Group is rather stable thanks to profits from other businesses
Operating Margin as well as Gross Profit Margin could be analysed in the context of product lifetime and thus Operating Margins is expected to reach the highest rates in years 2015E: 29
while the company’s’ main products will be released
To confirm,
it is worth noting that the highest ratio in 2011-2013 was recorded while The Witcher 2: Assassins of Kings was released (2011: 20
Calculation of a Net Profit Margin shows us that every PLN of sales allowed to the company earn: 17
5% in 2013
the CD Projekt will be able to cover its operating costs including indirect costs
We expect future level of return on assets ratios to be an average of 8% in mid-term
ROA is estimated to amount only 1% in 2014E due to delays in the process of game development
Return on Equity forms as follows: 19
9% in 2013
In comparison with CD Projekt ROEs,
Polish Treasury 10-Y Bonds return was about 6
73% and 4
Our analysis shows that levels of ROE in 2015E-2019E will be attractive for investors,
however it should be taken into consideration that a potential for further and stronger growth is highly limited
There is a strong correlation between results of ROE and games’ releases
The company's profits depend on the quality of developed and sold products and therefore the purchasers’ satisfaction
Investment Risks Concentration of Revenue Among Top Titles ‘Hit’ titles earn a significant portion of total revenue in each segment
in 2013 the Top 10 bestselling titles accounted for 38% of the sales in the industry in the USA in comparison to 30% in 2012
Market participants expect that trend will be continued in the industry
otherwise revenue could significantly drop
Annual Report 2013,
Please be informed that detailed analysis of Investment Risks is presented in Appendix 34,
35 and 36
Console and Equipment Figure 20 Estimated sales vs Metacritic rating
Constant improvement in game quality is the effect of increasing computing power of hardware
The CDP success will depend on ability to develop the best game on upcoming platforms
Piracy Risk Entertainment software industry is highly affected by data piracy laws and consumer attitude to piracy
Intellectual protection on the internet is the key issue for the whole entertainment industry
the global rate at which PC software was installed without proper licensing was 43% in 2013 in comparison to 42% in 2011
Figure 21 Monthly salaries across industries in Poland and USA
perception of a whole franchise may be harmed
They have a freedom to set rates that the CDP must pay to provide games via online channels
It could adversely impact costs,
which led to a loss in profitability and margins
Sony and Microsoft need to accept a game before release
According to ‘PWC Global entertainment & media outlook 2014-2018’ Hong Kong total game consumer spending on PC games will decrease 13% from 2013 to 2018 but spending on console game grows 22% from 2013 to 2018
It is highly probable bargaining power of console producers will increase
Good reception of CD Projekt-produced games opens their personnel opportunities to work for other companies
Salaries offered by top entertainment software producer located in the USA are greater than these offered by the CDP
this brain drainage is highly possible
Video games are a substitute for watching TV,
going to the cinema and watching movies
According to Entertainment Software association,
about 45% gamers who play more video games than they did three years ago are spending less time watching TV,
going to the cinema and watching movies
Change in public preferences connected with spending a leisure time could have a negative impact on the industry
The company need to fulfill all provisions of agreement in other case will be obligated to return all money
Risk of Change in primary devices used to play video games Constant and rapid development of personal devices like tablets and smartphone could change public preferences
Improvement of hardware system could lead to switching game player from PC and console to tablets and smartphone
According to ‘Newzoo Global Games Market Report’ global mobile games revenue is forecast to rise at CAGR of 19
Main drivers of growth will be rising smartphone ownership which will lead to increasing access to mobile phone games
Risk of Seasonality Video Games business is seasonal with the highest quantity of sales in the 4th quarter due to Christmas time
All delays in production could adversely impact revenue if a game would be not finished on time
earns in foreign currencies (U
Hedging position is possible only in short-time and generates costs
the market volatility for those quotations were especially high during the crisis
right axis contains 60 days standard deviations of log returns for quotations
108 690
122 588
194 413
442 647
479 997
557 208
810 400
799 950
177 124
339 565
416 360
511 008
670 459
166 498
189 003
Fixed assets
100 339
104 305
108 564
113 136
Long-term investments Goodwill Other non-current assets Total assets LIABILITIES Current liabilities
918 964
913 085
196 661
125 498
106 390
182 475
130 081
104 954
119 140
Other current liabilities
120 672
196 661
125 498
123 809
151 530
167 368
175 578
350 165
443 604
524 607
715 652
780 937
201 655
200 150
208 256
220 834
220 834
220 834
220 834
220 834
220 834
101 530
111 530
161 748
274 274
113 522
112 526
185 726
202 892
217 635
288 619
539 291
580 336
661 513
918 964
913 085
Source: The team estimate,
CD Projekt data
136 210
164 040
142 172
159 882
499 659
250 223
251 052
567 195
228 405
114 214
215 619
112 426
117 567
239 636
118 207
284 040
137 797
133 485
327 559
110 198
138 044
180 679
146 548
150 473
Other net expenses EBIT Net Financial Revenues
149 351
160 677
Tax Expense Profit from continued operations Profit from discontinued operations
172 633
187 383
172 633
187 383
Source: The team estimate,