CD Projekt Q1 net profit misses expectations By Reuters

© Reuters. FILE PHOTO: Boxes with CD Projekt’s game Cyberpunk 2077 are displayed in Warsaw, Poland, Dec. 14, 2020. REUTERS/Kacper Pempel/File Photo

(Reuters) -CD Projekt’s first-quarter net profit fell 64.7% to 32.5 million zlotys ($8.87 million), missing market expectations, hurt by the costs of fixing its flagship “Cyberpunk 2077” game after its troubled launch, while foreign exchange losses also hit results.

“Cyberpunk 2077,” featuring Hollywood star Keanu Reeves, was one of the most anticipated games last year. It was delayed three times, and after a bug-ridden premiere it has been delisted from Sony (NYSE:)’s PlayStation Store for more than five months.

CD Projekt did not say how many units of “Cyberpunk 2077” it sold in the quarter. Analysts have said sales were likely low, due to its absence from the PlayStation Store and release of a major patch just in late March.

“Lower than usual net profitability is mainly due to continuing depreciation of Cyberpunk 2077 development expenditures, work on updating the game, and R&D activities related to future projects,” chief financial officer Piotr Nielubowicz said in a statement.

Analysts had expected net profit of 80 million zlotys and revenue of 219 million zlotys.

CD Projekt has been working on fixing Cyberpunk since it premiered. Selling costs rose 79.6% to 62.1 million zlotys in the quarter.

It booked 16.2 million zlotys in financial costs in the quarter compared to 107,000 zlotys a year earlier due to negative exchange rate differences, resulting also from settlements of large volume of trade receivables generated by the December 2020 release of “Cyberpunk 2077”.

Battered by Cyberpunk’s launch, CD Projekt plans to start parallel high-budget developments from 2022, as well as look for merger and acquisition opportunities.

Its future sales growth, though, depends on its ability to re-engage Cyberpunk players. It confirmed plans to publish free downloadable content and update both Cyberpunk and The Witcher 3 to next generation consoles in the second half.

Last year, the company’s shares hit an all-time high of 464.2 zlotys in the run-up to Cyberpunk’s launch, but have lost over 60% of their value.

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