CDPR financial status and strategy The Witcher 3 - 15mln sold

[Grape_You_In_the_Mouth]

ugh buybacks are such a conceited cop-out. More buybacks have happened in the last ten years than all net income combined. TW3 should do it to gain independence or just use the money on projects, like an actual company.

 

[Perkel]

ugh buybacks are such a conceited cop-out. More buybacks have happened in the last ten years than all net income combined. TW3 should do it to gain independence or just use the money on projects, like an actual company.

main shareholders in company are studio heads.
Company is the one that decides which shares will be bought.

Which means that main shareholders can increase or decrease their share %

They have a lot of money so they can invest in themselves increasing their hold on company and in case of need of money they can always emit again new shares.

 

[Aenra]

Mustawd thanks for the rundown

 

[Thal]

What this means for gamers is that the company is in excellent shape if it can afford to do this. They're also pretty confident that their new games will sell well.

How do you figure? Stock buybacks are typically done for the benefit of their investors or to improve financial metrics such as EPS, ROA, or the P/E ratio. In fact, it can mean the growth of the company is declining. Meaning that buying back their stock is a better investment to shareholders than if the company expanded into newer areas and projects.

Why do you think it has anything to do with the confidence of their next game? I just find that odd. If they had really profitable games in the pipeline it makes more sense to keep the cash and spend their money on that.

True, it can be a sign of that too. My reasoning was relatively simple. I am going to assume that they will continue diverting significant amount of profits into growth. Such as these plans from OP:

Plans for 2017-2021:
- Release of Cyberpunk 2077
- Release of another AAA RPG
- Expansion of core franchises with additional media content and product lines
- Two fold expansion of the CDPR team - creation of four individual teams, two of them tasked with the development of of games representing new segments

If they can double the size of their team, they're pretty well off. In fact, how much more can you really invest without losing control?
If you look at their financials here, you can see what a smash hit Witcher 3 was for them.
http://www.4-traders.com/CD-PROJEKT-SA-9933587/financials/

P/E ratio 2015 - - 6,14

They can afford it. Now, I get that their business model is very cyclical. They've made all their money in the year they release their AAA title. Now they have 2 in the pipeline and will attempt to level their profits by expanding core franchises.
I think we all know that it's just not possible to release a AAA game every year, unless you're a company of gargantuan size. So they'll use money what they don't need to support share price.

To be honest, I'd still prefer dividends though.

Edit: I mean, dividends, generally speaking. Because CDR can't pay a decent dividends every year, buybacks are probably a better option.

 

[Mustawd]

Fair enough. I'm not at all familiar with the ins and outs of the gaming industry, so the assumption that they decided to give back to investors in a very profitable year is reasonable. I've actually seen that before in a prior audit client. The company was basically an investment company with a set portfolio of securities. And it was a defensive stock, so outside their established portfolio there was only so much they were going to do with extra cash.

I mean there are theoretically some things they might be able to invest in (like an investment portfolio), but outside of large companies like EA I doubt they have the expertise or the desire to do that. Good point. A lot of my recent work experience has been in high growth industries, so I tend to look at things from that filter a lot. But yeah, your explanation makes sense as well.

 

[odrzut]

During the presentation some guy from the audience asked if they realize they are financialy inefficient because they have no debt They responded they don't exclude debts in future, btu they like independence, including independence from banks.

 

[Mustawd]

During the presentation some guy from the audience asked if they realize they are financialy inefficient because they have no debt

That's dumb. Debt, aka financial leverage, is a double edged sword. You default and your company gets liquidated. Good times.

 

[Excidium II]

Pierdoleni Żydzi.

 

[vonAchdorf]

That's dumb. Debt, aka financial leverage, is a double edged sword. You default and your company gets liquidated. Good times.

Well, the guy probably learned the "increasing your debt is increases the profit as long as the cost of debt is lower than the asset's return" formula and never ran a business himself, especially not a business like games, where you just cannot elastically increase production.

 

[Mustawd]

Exactly. Plus games is such a high risk business you kind of need flexibility in your cash flow. You don't need to be worried about debt servicing when you need to make drastic adjustments to the market. We're not selling widgets here.

One big flop and they have serious CF issues.

 

[typical user]

Wow, I'm speechless. What sort of idiot could've said that? If someone wants shekels then he can invest on the stock market. Fucking jews.

 

[Perkel]

Wow, I'm speechless. What sort of idiot could've said that? If someone wants shekels then he can invest on the stock market. Fucking jews.

HE was literally their shareholder who invested on stock market in CDPR :D

Lack of debt usually means you don't invest and don't grow as fast as you can. Which is why nations operate on yearly deficit as growth from those additional invested money will eat up debt and will turn profit.

Problem is that CDPR is making games. How they make product doesn't matter as only what is important is final outcome aka product. Getting 100 new developers won't make game faster if they already have workflow issues. Making few more games of lower quality would also dilute brand they are trying to build. Having in cashflow not connected to debt on other hand is great way to keep company afloat if their next game will fail.