Operator: (Foreign Language) Good morning and good evening. Thank you all for joining the conference call for the Earnings Results of Pearl Abyss. This conference will start with a presentation, followed by a Q&A session. (Operator Instructions) Now, we will begin the presentation on Pearl Abyss third quarter earnings results of the fiscal year 2024.
Kim Yoon (Foreign Language) Greetings, I am Kim Yoon from Pearl Abyss, IR team. First of all, I express my deepest gratitude to the analysts and investors in and out of Korea for taking part in the 2024 Q3 Pearl Abyss earnings presentation despite your busy schedules. (Foreign Language) Before elaborating on today's business results, I would like to ask for your understanding regarding the following. The financial and business results contained in today's earnings release have been prepared for the convenience of investors and is subject to change depending on the final closing of our books.
In addition, the accuracy and completeness of the financial and business results in the earnings results material are not guaranteed, and the company is not obliged to give updates of the accounts given after this date, so please take these factors into consideration. (Foreign Language) I would like to tell you a few things before the presentation. Please note that the financial statements and sales results of the presentation will be changed according to the final decision results for the convenience of investors. We have here with us at the earnings presentation today, Pearl Abyss, CEO; Heo Jin-young; CBO, Kim Gyeong Man; and CFO, Cho Seok-Woo.
We will first hear the business performance presentation highlights from CFO, Cho Seok-Woo, and then engage in a Q&A session.
Seok Woo Cho, Chief Financial Officer: (Foreign Language) (Foreign Language) Greetings, I am Pearl Abyss CFO, Cho Seok-Woo. Thank you once again for taking part in our company's earnings conference call despite your busy schedules. (Foreign Language) (Foreign Language).
I would like to elaborate on Q3 major business activities and performance. Black Desert and EVE, consistently showcase live service and we carried out marketing for Crimson Desert and EVE Valley. We carried out marketing for Crimson Desert and implemented tests for new service of Black Desert China, EVE Frontier, and EVE Galaxy Conquest. Black Desert showcased the Land of Morning Light Soul which showed the charm and beauty of Korean tradition and completed a vast fantasy world encompassing both Eastern and Western elements.
In particular, in Black Desert, which has the background of Western medieval fantasy, we implemented terrain and locations which had the charm unique only to Korea and provided new experiences to global users. In addition, in line with the Land of Morning Light update, we launched a new class Dosa, which captured the colors of Korea and enhanced immersion in the game. In case of Mobile, we launched the Dosa class and Azunak Arena, a combination of PvP and PvE, and worked hard to provide more to provide more fun to the game. In addition, we hosted the Heidel Ball, and along with colorful events, we communicated major second half updates. For EVE Online, we held the Alliance Tournament, which is held each year, and implemented additional update of the EQUINOX Expansion Pack, and provided more things to enjoy to our users. In addition, EVE Vanguard, through the Solstice update, held the largest record ever live event, communicated major improvements, and enabled diverse gameplay experiences. Apart from this, we were thorough in preparing for new services to expand revenues. First of all, Crimson Desert participated in Gamescom in August, and along with four boss character hands-on demos, showcased our footage.
In addition, in September, we provided a 50-minute gameplay video and revealed the story, action, and fun elements that you get to experience through the Crimson Desert vast open-world. After the Chinese license for Black Desert China was issued in June, after a technical test in August, official service started on October 24th. There were various many playtests for EVE Frontier, which is blockchain-based, following the previous quarter, and we perfected EVE Galaxy Conquest, the mobile strategy game, based on our soft launching feedback, and it was officially launched on October 29. (Foreign Language).
Next, I would like to walk you through our Q3 performance. Q3 operating revenue posted KRW79.5 billion, a 2.8% decline Q-o-Q Operating losses posted KRW9.2 billion, and net loss recorded KRW7.8 billion, recording a loss. (Foreign Language). I will cover in more detail regarding operating revenue. First, I will cover major IP operating revenue. Operating revenue from Black Desert IP this quarter posted KRW54 billion, and decreased 10% Q-o-Q EVE IP operating revenue posted KRW20.5 billion, a 5.2% decrease Q-o-Q For regional operating revenue contribution, 20% was from Korea, 24% was from Asia, 56% was from North America and Europe. And for platform operating revenue contribution 76% was for PC, 21% for mobile, and 3% for console. (Foreign Language) Next, I will cover operating expenses.
Q3 operating expenses went up 1.2% Q-o-Q and posted KRW88.7 billion. In the case of labor costs, it posted KRW43.5 billion, a 4.9% decrease Q-o-Q For your reference, Q3 and total number of employees stand at 1,347. The number of employees in development are 771 and take up 57% of the total headcount. Commissions posted KRW17 billion, a 7.5% decrease Q-o-Q In the case of advertising, it posted KRW8.9 billion, a 22.1% increase Q-o-Q due to Crimson Desert marketing, including our participation in Gamescom.
(Foreign Language) Lastly, I will cover Q4 major highlights. (Foreign Language) ( ) Q4 Black Desert will showcase content and events which are full of more interesting adventures. In particular, in celebration of our 10-year anniversary of Black Desert, we plan to hold a Black Desert Festa. At the event, we will introduce new content, which we will showcase in 2025, and also hold diverse events, including art events and concerts to strengthen communication with users. Black Desert console launched the Dosa Quest, which was first introduced via PC and mobile. In addition, to foster a better quality game environment for users, we are accelerating development of versions for next-generation devices. In the case of mobile, we launched the Kurenai class in October, and we will host the Kaopei-On Banquet in December to communicate our future roadmap. Black Desert China, after two rounds of tests, started official service official service on the 24th of last month.
We will launch popular contents like Great Ocean and Land of Morning Light quickly within this year. We plan to launch diverse content for EVE as well, and following the Equinox Expansion Pack, which was launched in Q2, we will launch the new Expansion Pack, Revenant, today. For EVE Vanguard, we plan to continuously refine the gameplay until the release while showcasing new content. We are smoothly implementing preparations for our new titles to secure new growth engines.
First, in the case of EVE IP-based player-led sandbox game EVE Frontier, we revealed that we are developing it as a blockchain-based survival game in September, along with the official game name and game playing experience. We will continue testing Q4 as well as for EVE Frontier, and we'll refine the game until we perfect it. In the case of EVE Galaxy Conquest, we officially launched it on October 29th, and since strategy games are showing strength nowadays, we will focus on service so that we can achieve great results. For Crimson Desert, we plan to participate in diverse game events in Q4 as well and actively promote the game.
First of all, at this week's G-STAR, we plan to show an approximately 30-minute demo build so that users can directly play the game. We are preparing a demo event that will sufficiently satisfy the heightened expectations of many people, and we kindly ask for your continued interest. Starting from last week's Gamescom, we are engaging in active marketing, including at TwitchCon and at Paris Game Week. We met countless media influencers and users, and after getting feedback for Crimson Desert and sharing opinions, we are working very hard to promote the game to more people, so our offices around the globe are very busy working to do this. We will participate in diverse game events, including G-STAR, for the remainder of 2024, and along with hands-on demos, we will communicate more information. Everyone at Pearl Abyss, from our CEO to all our employees, are doing our utmost to always show an improved company. We will kindly look forward to your continued interest and support. Thank you for listening. (Foreign Language) With this, we will conclude the 2024 Q3 Pearl Abyss business results presentation and start the Q&A session.
Questions And Answers
Operator: Question And Answer
Operator: (Foreign Language) Now the Q&A session will begin. (Operator Instructions) (Operator Instructions). (Foreign Language).
The first question will be presented by Jingu Kim from Kiwoom Securities. Please go ahead with your question.
Jingu Kim: (Foreign Language). Thank you very much for giving me the opportunity. I have three questions. My first question is regarding more details related to Crimson Desert marketing. Are you going to participate in TGA this year? And can you also tell us about what is your timeline for the launching of the game? Will it be within this year? If you can give more details, it will be greatly appreciated. My second question is about Black Desert China. So can you give us some updates on user traffic or your revenue trends? It would be also greatly appreciated. And third question is about any updates regarding --
Unidentified Speaker, : (Foreign Language). Thank you very much for your question regarding Crimson Desert marketing. For Crimson Desert, we have been strengthening our narrative and refining our game for perfection and have been smoothly engaging in the final processes. (Foreign Language). In addition, as we are nearing the completion of development, we are actually meeting many users by participating in many gameshows in and out of Korea, strengthening our relationships with the media and influencers and intensifying our marketing. (Foreign Language). (Foreign Language) Also, at this weeks G-STAR, which is planned, we will provide around a 30-minute demo build so that users will be able to directly play the game. (Foreign Language) As we are nearing the completion of the game development, we are seeing more visibility about the timeline. (Foreign Language) That is why, as we had shared with you in the previous quarters earnings conference call, we are going to participate in global game events at the end of the year and communicate more details to you. (Foreign Language) We are going to do our best until it is finally completed and perfected, and also work hard on our marketing so that we can have great performance. (Foreign Language) I would like to update you on our results and our current status for Black Desert China. (Foreign Language) For Black Desert China, we started official service on October 24th. (Foreign Language) We have had about 20 classes since the launch, and we have been offering diverse and various contents and are receiving great acclaim from our users. (Foreign Language) Regarding the performance, since it took us a very long time to service in China, our goal is to not have a very high performance like a completely new title game. (Foreign Language) However, we are working very hard with our publisher so that this game can safely take root in the Chinese market, so that we can service this game for a very long time with a certain amount of capacity. (Foreign Language) Based on our operation know-how in the global stage, we are going to work hard on our service on our service and do our best so that in China, it can also consistently contribute to our performance.
Heo Jin-young (Foreign Language). I will answer your third question regarding Dokkaebi (DokeV). (Foreign Language). For Dokkaebi(DokeV), we have been consistently accumulating our assets and have been developing this along with Crimson Desert. (Foreign Language). In particular, because we are nearing the completion of Crimson Desert, we believe that the development of Dokkaebi (DokeV) will become more accelerated. (Foreign Language).
Although we have been focusing our marketing on Crimson Desert until now, we will also share with you the development status of Dokkaebi (DokeV) at the appropriate moment. (Foreign Language). And as I had mentioned previously, with Dokkaebi (DokeV), we have been accumulating many assets and with our Black Space engine, we have had more efficiency in our development. So we are going to do our best to complete development quickly after Crimson Desert.
Unidentified Speaker, : (Foreign Language). The answers were from our CEO, Heo Jin-young; and CBO, Kim Gyeong Man. We will take the next question.
Operator: (Foreign Language). The next question will be presented by Jaemin Ahn from NH Investment & Securities. Please go ahead with your question.
Jaemin Ahn: (Foreign Language). ( ) Thank you for the opportunity. I have several questions to ask you. I know that you have been preparing for Crimson Desert for a long time. And I know that there have been many games using different graphics that are like early arrange five or 50, or other types of these Unreal game development engines that have great forte in graphics. So, can you tell us about what is the advantage or competitive edge of Crimson Desert? And my second question is related to your marketing budget for next year. Can you give us more color? And my third question is a little bit of a trivial question, but I've seen that your additional costs have been increasing for this quarter. Can you tell us about the reason why? Thank you.
Heo Jin-young (Foreign Language) Thank you for your questions. I would like to give you a little more color about what is a strong point of Crimson Desert and give you more information about our marketing budget.
We participated in Gamescom, TwitchCon, and Paris Game Week, and we had the hands-on demos for the users, media, and influencers. (Foreign Language) Many people exclaimed at the Crimson Desert games' details, the degree of immersiveness, and high quality, and did not hesitate to give out top-notch claims for its great performance. (Foreign Language) In particular, we saw acclaims for surprisingly high-quality visuals and that people were very impressed by our unique gameplay, which was actually based on our engine. And we could also find out that many were very positive about the game, saying that it is very fresh and it is a game unlike any other game they have seen before.
(Foreign Language) Crimson Desert has a very has a very high degree of freedom that goes beyond the open world games that have existed until now and is trying very hard to show a level of game experience that is one notch higher than before. (Foreign Language) We are going to do more of these hands-on demos so that we can heighten expectations for Crimson Desert and will work hard to perfect the game until its official launching. (Foreign Language) I would like to answer your second question related to Crimson Desert marketing expenses. (Foreign Language) For Crimson Desert, we have engaged in our focused marketing in Q3 as well.
So our advertising for Q3 went up 22% Q-o-Q (Foreign Language) For Crimson Desert, we plan to intensify our marketing efforts in Q4 as well as 2025, so we believe that expenses will go up. (Foreign Language) However, we are preparing for efficient marketing through our diverse partners and channels, so we are not actually expecting a great deal of marketing expense increase. (Foreign Language) I would like to explain about the third issue that you asked about, which was heightened additional costs. In Q-o-Q, we had about KRW3 billion of increase in our additional expenses, which were mostly one-off costs.
(Foreign Language) So we had, actually in Q3, we had the tax audit for our regional taxes and our corporate taxes. So we had those KRW2.5 billion expenses going toward these tax audits and other preparations. (Foreign Language) (Foreign Language). And we had about KRW500 million of increase because of the very hot summer we had this year.
So that is why we had a higher electricity bill because we had to pay more for electricity for air conditioning.
Unidentified Speaker, : (Foreign Language). We had answers from our CEO, Heo Jin-young; and our CFO, Cho Seok-Woo. We will take the next question.
Operator: (Foreign Language). The next question will be presented by Seung-ho Choi from Sangsang Insecurities. Please go ahead with your question.
Analyst: (Foreign Language). Thank you very much for your opportunity. I am Choi Sung-ho from Sangsang Insecurities, and I have two questions. I am sure that we will get to see it soon, but I am curious about the demo build for Crimson Desert. Will it be similar to what was shown in Gamescom? And are you going to also show or reveal new demos as well? And I also have some questions about EVE Frontier. Can you explain more about what the game is about, when it will be launched, and what we can expect? Thank you very much.
Heo Jin-young (Foreign Language). Thank you very much for your questions. I will answer your first question regarding the G-Star build and demos for Crimson Desert and other plans.
(Foreign Language). At G-Star, compared to Gamescom, when we had some limited time and many users, we are going to showcase one more new bot in our demo build. So we -- you will get to experience it at G-Star. (Foreign Language). However, for more details, you will actually have to get a look at it at the day at G-Star, because it will be only revealed on site. So we ask for your kind understanding. (Foreign Language) For Crimson Desert, we plan to continue to show you more footage and hands-on demos in 2025 as well. So in the phase of our marketing, we are going to do our best to show you diverse aspects of the game.
And regarding our demo versions, we believe that it will probably go along with our marketing plans, but we will communicate more details with you going forward. (Foreign Language) Next, I will explain more about EVE Frontier. CCP Games, during the past couple of years, in order to secure new growth engines, have been developing EVE IP-based new titles. (Foreign Language) EVE Frontier, among these titles, is a blockchain-based sandbox game that has an economic system.
So after its reveal previously, we have been actually implementing many playtests and have been refining the game's completeness. (Foreign Language) We will engage in many tests until its official launch, and we will share the details of our development process as we go along. (Foreign Language) Regarding the issuance of tokens for this blockchain project, we are currently reviewing the different regulations for different countries. So through CCP Games, we will give you more information.
(Foreign Language) Our CEO, Heo Jin-young, answered the question. We will receive the next question.
Operator: (Foreign Language) The next question will be presented will be presented by Donghwan Oh from Samsung Securities. Please go ahead with your question.
Analyst: (Foreign Language) Thank you very much for the opportunity. I have two questions. They are all related to Crimson Desert. I know that we have heightened expectations for Crimson Desert, and can you tell us about any revenue goals you have for the first year after it's launched? And can you also tell us about how many titles you plan to sell, or how many titles do you think will cover your development and marketing costs? My second question is about console games like Crimson Desert, which tend to have more concentration of sales and revenues in the first and second quarters after it has been launched. So from a financial perspective, can you tell us about how you plan to grow revenues the year after it has been launched? Thank you very much.
Heo Jin-young (Foreign Language) Thank you very much for your questions. I will answer your question related to Crimson Desert expectations and goals. (Foreign Language) Crimson Desert has a very high degree of freedom that goes beyond the existing open world games, and it's showing a very high game playing experience that is one level higher than the existing games.
Also, because we have very immersive stories and graphics, and a high degree of perfection, we believe that we can have the performance that befits this type of high quality open world game. (Foreign Language) Actually, I cannot give you more give you more detailed figures on our expectations for revenues, but I can just tell you that I know that probably the market has some expectations for this, but internally, we believe that we will do our best to perfect the game so that the results are higher than what is expected. (Foreign Language). Your next question was about the fact that since Crimson Desert is a single-play game, you were wondering about the sustainability or continuity of the revenues and performance of this game. (Foreign Language). Well, actually, this is our first attempt at this type of single-play game, but we have very high expectations for this special game. And although we are currently developing Crimson Desert as a single-play game, we are actively considering to have this in a multi-play mode or DLC so that many users can play together. (Foreign Language).
And since we are targeting other games that use our Black Space engine so that the other launching games have a very fast lifestyle, we believe that we will be able to get the great results that we expect.
Unidentified Speaker, : (Foreign Language). The answer was given by our CEO, Heo Jin-young. (Foreign Language). It seems that there are no other questions in the queue, so with this, we will conclude 2024 Q3 Pearl Abyss business results conference call. Thank you for your participation. The Event has Ended |
