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Sunday 28 May 2023

Plex for Omega discounts - which is the best deal

As is now always the case, the amount of Plex required to buy Omega is discounted by ever higher discounts as the period of Omega rises.

The discount to buy a 3 month Omega is 29%, the discount to buy a 24 month Omega is 45%.

Which is the best deal?

It can be quite straight forwards to work that out

Today it costs 31.0bn isk to buy a 24 month Omega.  It would normally cost 56.4bn.  A 45% saving.  That is the highest % saving for any Omega time (20% for 3 months, 30% 6 months, 40% 12 months).

Therefore, if you have 31bn isk lying around that you do not intend to use to generate isk in any way then the 24 month is the one to go for.  No doubt about it.

But if you would otherwise plan to use the 31bn isk to generate isk, either in PVE or on the Markets, then it is not so clear.

How so - this is not as clear as first seems?

Because, quite simply, if you could invest that 31bn isk, make over 6.1% return each month and buy a monthly Omega instead (no discount) then you are better off buying the monthly Omega.

The table below shows the monthly returns that are the difference between taking the deal vs not.

The table lists each of the Omega deals, the normal cost, the discount given and so the actual cost.  Then shows the saving made, and the saving on a monthly basis, and the effective number of months you get for free.

It is the final column that is the interesting one.

This does the calculation of taking the amount needed to buy the deal and shows the monthly return required to make the difference between just investing that isk in your efforts and buying the monthly Omega vs taking the deal.

The current price of Plex does not change the answer though clearly assuming Plex price does not change is one mighty assumption!

But, taking this table shows that the best deal is the 3 month Omega.  If your efforts generate over 27.5% monthly return on the 5.6bn isk needed to buy the 3 month deal then don't go for the deal.

For myself, i can get no where near generating 27.5% monthly returns and so i always for the 3 month Omega deal.

Saturday 27 May 2023

Pearl Abyss 2022 Accounts

OK, deep within the Pearl Abyss Korean language Report & Accounts is disclosed that Pearl Abyss Iceland has been loss making for two years and in 2022 took a big impairment to Goodwill.

The Summary of the below is that deep within the Korian version of the Pearl Abyss Accounts is that they do disclose the write down of the value of Pearl Abyss Iceland (that's mostly CCP) and that Pearl Abyss Iceland has been loss making for two years.

The source

I should have worked this out a long time ago.  Similar to other countries, the Pearl Abyss Accounts for 2022 and prior years are on their Korean website, not the English version.

The 2022 Accounts can be found which are in Korean so the google translate method is required.

What does it tell us about CCP?

Because the acquisition of CCP happened within the last five years we are given the details:

100% of CCP ehf acquired on 22 September 2018 for $225.9m and an earn out of up to $200m to be paid if various targets are met.  (These targets were never met).

Pearl Abyss Iceland is the vehicle that owns CCP.

The share capital of Pearl Abyss Iceland was increased by $3m on 20 June 2022

Do the Accounts show that the goodwill of Peal Abyss Iceland had been impaired?


Firstly, this had been a focus from the Auditors for a number of years.  But that is to be expected, the Auditor will always focus on recent acquisition and i suspect the trading of CCP was below the initial expectations at the time of the acquisition.

The table below is from the Report & Accounts, shows a 37bn 

Does the Accounts show that Pearl Abyss Iceland is loss making?

Yes, it does.  Deep and buried within the accounts but it is there.

The Accounts show that Pearl Abyss Iceland made a loss in 2021:

and The Accounts show that Pearl Abyss Iceland made a loss in 2022:

Is there anything else of interest?

Yes, there is.

When i looked through the Pearl Abyss Iceland Report & Accounts it was not obvious if the %10m long term liabilities i noticed in the Pearl Abyss Iceland accounts is there.  There is something that is big enough to include it but no details are given.

But i could see the additions and disposals of items in Intangible assets - so that at least indicates transactions with third parties.

. . . . . . . i need to keep reading these accounts when i get the time.

Sunday 14 May 2023

Month end update - April 2023

As at the end of April 2023 my wealth is 1 trillion ISK after paying 8.2bn to upgrade to Omega for another 30 days for four accounts.  My Wealth increased by 65bn in April.

Technically, my wealth is 1.209 trillion ISK but i always take a 20% provision against Sell Orders to be conservative.  Hence i quote 1 trillion.

Another pleasing month into what is normally a slower month after winter.  I suspect i am benefitting from nothing more complicated that i have more items on the market to sell.

In April 2022 i had 412 bn of items for sale, today i have 1.2 trillion.  In April 2022 my wealth increased by around 30bn, this April it rose by 65bn . . . . so makes sense.  Wealth gets more wealth.

Target 1 trillion wealth achieved

There we go, i trillion of wealth in the bag.

what to do now?  the obvious answer of 2 trillion could become quite tedious.  My wealth increased by 632bn in the last 12 months.  So making my next trillion i suspect would take 12-18 months.

But, when i set out this time back in August 2020 i wanted to experience more of the Eve ISK making avenues.

I do a bit of manufacturing on the side - i want to do a lot more of that.

Tried Planetary Interaction - it worked but was tedious and took too long.

Tried Invention - will give it another go.

So, lets see what i come up with.

Quick Summary

I definitely feel that the market is slowing down as we amble into the slow summer months.

The 65bn increase in wealth may say otherwise.

Currently, i can go some days during the week with very few sales.  It all kicks off Friday to Sunday.

In fact, in the last few weeks it has not been uncommon for me to not log in some days because so few sales have been made.

That said, my Dodixie operation has attracted some additional competition that will need to be crushed.  It is really important that competition is taken head on - if a new entrant feels that i am a sleepy operator they will gain in confidence.  I need to extinguish their confidence before it gathers momentum.

Overall sales were down 14% to 315bn though this was 140% higher vs April 2022.

Sales fell in all my Omega Trading Hubs except Dodixie and Alentene.  Dodixie was strong - recording sales of over 100bn isk.

My new Omega account that covers Arnon and Alentene this month failed to generate sufficient profits to cover the cost of the Plex to Omega the Account.  This will be a focus for May.  I need to get more items into those Hubs to make it work.

In the last 12 months i have made sales of 3.8 trillion isk and profits (after everything including Plex) of 632bn isk having spent 76bn on Plex.

The overall aim of what i do is to increase my wealth by at least 10bn per month.  So far i have beaten that in 25 / 32 months i have been running this venture and indeed in all of the last 21 months.

A year or so ago the dream was to be making more than 1 billion profits a day including Plex costs to Omega the accounts.  That has been achieved for each of the last 10 months.  Lets see if i can go 2 more months.

For the last 6 months, my daily profits have been around 2.2 billion isk.


I continue to come on once a day to update Sell orders and replace items sold.  About 30-45 minutes.  Getting closer to 45 minutes these days.

I am experimenting with Manufacturing (ramping up slowly).

I stopped the Planetary Interaction - it was actually doing well enough to Omega an account but needed plenty of support and took too much time.

Over 99% of my sales and profits still come from Regional Trading.

Target 1bn profits per day after all taxes and plex costs

I have now achieved this aim for the last ten months.  Was not expecting to but now i do expect to achieve this going forwards.  The real test will be in the coming slower months.

In fact, over the last five months i have made over 2bn isk per day - that will be tricky to maintain over summer.

The big dream has to be making 100bn in a month.

Target daily sales required to achieve 1bn profits per day

In summary, i generally need to make 7.5bn sales per day assuming my item margin is 25%

As the cost of plex rises then my daily sales requirement also rises.

On the current taxation levels to make 30bn ISK per month i would need to cover:
 - Plex costs of 3 x 500 x 4.7m = 7.1bn
 - Courier costs 2% of sales (i.e. = purchase cost + collateral)
 - Broker Listing fees 1.5% of sales
 - Broker re-listing fees 0.3% of sales (lets assume all sales changed at least five times per month)
 - Transaction Taxes 3.6% of sales

That all works out at 225bn monthly sales will generate profits after all costs including Plex of 30bn isk. = 7.5bn daily sales.

Bottom line is that assuming i make my 25% profit margins then each 1bn of sales creates profits of 164m and these go towards buying Plex for the Omega accounts and whatever is left is reinvested in the business.

Looking at some sensitivity analysis

- if my item margins were 28% instead of 25% then i need only make 192bn isk of sales (or 6.4bn per day)

- if Plex rose from 4.7m to 5.0m then then i need to make 228bn isk of sales (or 7.6bn per day)

Review of the April aims

1) Plex the four omega accounts - aim number one all the time - achieved

2) Hold sales in Dodixie to down 20% - achieved, was up 49%

3) Hold sales in Amarr to down 20% - missed, was down 34%

4) Hold sales in Rens to down 20% - missed, was down 33%

5) Hold sales in Hek to down 20% - achieved, was down 17%

6) Hold sales in Sobaseki to down 42% - achieved, was down 37%

7) Hold sales in Tush-Murkon Prime to down 20% - achieved, was down 7%

8) Ramp up Arnon and Alentene - achieved

9) Hold the investment and profits in Manufacturing - missed

So, on paper mixed but the positives were much stronger than the negatives.

Started a fourth Omega Account in January

I bit the bullet and started a fourth Omega account in January with trading Alts in Arnon and Alentene.  Very early days and i was not really sure about it.  So far, so good.

I am stocking up each alt by effectively reinvesting the profits from my business into these locations.

As expected, there is next to no competition much like Tash-Murkon and Sobaseki.  So the sales may be low but the time requirement is very low.  On some days, if i don't make any sales at one of these locations then i don't bother checking the prices - i know that there will be no competition.  This is as close to "passive income" i think i will get.

Reminder of my Current Business.

For now 99% of what i do is inter-regional trading - buying from Sell Orders in Jita to sell elsewhere.  The rest is made up from Manufacturing.

For Trading i focus on slow moving but high margin items.  That keeps me away from fierce competition and i only need to sell an item once every 10 days to make good income.  In other words, i don't really care if an item sells once every 10 or 20 days, if have many hundreds of items for sales across Eve and so each days a few items will sell and that generates all my income.

To put this in perspective.  I had Sell Orders of 997bn up at the start of April which generate sales of 314bn.  In other words, i sold between 1% to 2% of everything i had for sale every day.  The is slow and i like it.  Not for me the cut and thrust of high volume low margin world.  Slow and easy for me.  Tortoise and hare stuff.

For this side of my business, lets call it Merchanting or inter-regional trading, i want to generate profits of 10bn ISK per month after paying to Plex my account.  Given i now have eight Omega alts in Amarr, Dodixie, Rens, Hek, Sobaseki, Tash-Murkon Arnon and Alentene i am hoping that this 10bn aim will be easily achieved.

My business model evolves over time.  As my wealth increases i focus on higher value items.  Therefore, i try also to stick to the rule of making a minimum of 100m profit per item sold.  i.e. if i buy an item for 70m then i aim to sell it for at least 170m isk.  This makes sure i don't waste my time on making low absolute profits and so preserves the 45 minute rule.

My main business is operated with four omega accounts (paid for with plex) with twelve alts.

The main Trading alts sit in Dodixie, Amarr, Rens and Hek.  I have also omega alts in the new Trading locations of Sobaseki (in Lonetrek), Tash-Murkon Prime (in Tash-Murkon), Arnon (in Essence) and Alentene (in Verge Vendor).

The other four alts sit in Jita and buys from Sell Orders, has these items couriered to the alts in Dodixie / Amarr and Rens / Hek and Sobaseki / Tash-Murkon Pime and Arnon / Alentene who then put them onto these markets for sale.

The Jita alts also serve to sell items that i can no longer sell in my trading locations  Sort of clearance sales.

I also started in December 2021 to place alpha alts in other regions to see how it goes.  I just need two of them to demonstrate that they can combine to justify an Omega account.  Also, they need to take up very little of my time.  So far the Sobesaki / Tash-Murkon alts and Arnon / Alentene made the grade and were upgraded in two accounts.

The other regions so far are: Placid; Citadel and Khanid.  And i am in an NPC station in Delve and Outer Ring.  I have started in Venal.

I am struggling to make the Low Sec locations work.


Traditionally i never sold anything in Jita unless it was being transported back from one of my trading hubs because i could not sell it and so to be sold at Jita prices to get some isk back.

Then in September 2022 whoever was selling ship Blueprints in Jita fell asleep at the wheel and i moved in.  In November Jita was my top selling location.

But all good things must come to an end and competition returned by February.

So from sales peaking at 103bn in November 2022, in April sales in Jita were a mere 22bn which is more than double the pre-September 2022 era but remains in a declining trend.

I also do station trading in Jita (that is - put Buy Orders up in Jita and then when those Buy Orders are executed i then put the item up for Sale in Jita at a higher price).  I stick to the slow moving items again.  That said, i don't actually know how much this earns me.


I am now nine months into my Manufacturing project.  It remains slow and i need to up my game (i know, i said that before).

In Aprili made 7bn of sales generating an item profit of 0.9bn and so after taxes a profit of 0.8bn.

Not good at all.  Again.

When i get time, i really need to look deeper into this and get things ramped up.

Other High Sec Trading Locations

I don't want to spend all my time on Eve doing Regional Trading (buying from one region, mainly Jita, to sell to another) but i do want to see if i can find really low competition but stable revenue streams of trading.

The current alpha account regions so far are: Placid; Citadel and Khanid.  And i am in an NPC station in Delve, Outer Ring and now Venal.

My alts in Arnon and Alentene were upgraded to Omega during January.

The alpha trading locations made combined sales of 1.6bn in April vs 1.2bn in March.  I have been scaling back.  I don't replace the sales made anymore.

The trial has been done, i feel i know what Locations are best and which don't work.


I want to experiment with selling in null/low Sec.  Hence, i have found an NPC station in Delve and started experimenting with items to sell.

It is not going well - sometimes threatens to improve but then fall back again.

As with my other alpha accounts i am letting it wither away on the vine.

I am rethinking how to make low/null sec work.


I am aim to store up to 6 months of Omega for each of the Omega accounts which would mean buying 12000 Plex (= 6 x 4 x 500).

I now have 4500 in stock - so no change during March.  I don't plan on buying any Plex in the near term given my surplus isk is going into stocking up on the Arnon and Alentene trading locations.

That said, CCP are changing their attitude to Omega prices and there is a permanent sale on that gives a discount to the Plex required for longer periods of Omega purchases.

A minor accounting point (again)

Similar to back in September 2022, i have to think how i account for buying three months of Omega for each Omega account (4 accounts).  I repeated this in December and again in February.

Hence, in the December deal and in February i spent 26bn and 18bn respectively buying 3 month Omega deals for Plex.

The way i account for this is to hold the entire amount as wealth and reduce this "asset" by a month at a  time.

The alternative accounting treatment would be to count the 26bn and 18bn as costs in the month they were expensed which means December and February would look week but January, March and April stronger.

It all adds up to the same number just the timing of recognising the cost is different.

Analysis of Trading Profits

In total i made 315bn ISK of sales in April which made me item profits of 105bn ISK.

(item profit is the simply difference between sales done vs costs spent buying products, so before fees and taxes.  Because i don't yet invest in items other than Plex i don't make any allowance for items still in stock - in part because i don't track the cost per item spent).

Overall, sales fell by 14% in April which was all Trade Hubs down except Dodixie and Alentene.

Dodixie was the best selling Trade Hub at over 100bn followed by Amarr at 70bn.  Rens was 38bn and Hek 32bn.  Sobaseki + Tash murkon did 26bn whilst Arnon + Alentene did 11bn.

The item profits of 108bn was an item margin of 33.2% (105/315) vs my target of 25%.  This is another good month for margins.

From this I then need to take a whole series of costs off before i get to my Business profits (and notice how they are more related to Sales rather than costs):

Courier Fees: i aim to pay 2% of sales value to the Courier = 8.1bn

Sales tax cost me 11.6bn ISk (=3.69% of sales) - the Dodixie, Amarr, Rens, Hek Sobaseki, Tash-Murkon and Jita characters are level 5 in Accounting (=sales tax of 3.6%); Alentene and Arnon are training up, and of course all the alpha alt accounts are only Level 1 (=sales tax of 8%).

Broker Fees costs me 11.5bn (=3.7% of sales, Dodixie is more competitive so i was changing prices more).  Now, i can break this down into the initial listing fee of 1.5% (because i am Level 5 Broker Relations on all Omega characters and lets to make the sums easier and include all the alpha alts) and therefore the rest is the cost of changing the price which is 0.30% a shot (i may have that 0.30% completely wrong!).

So, Listing Fee = 1.5% x 315= 4.7bn and so the Relisting Fee = 11.5-4.7 = 6.8bn which is 2.2% of sales.  That shows that i do change prices quite often, bias to Amarr, Jita and now Dodixie.  Someone is taking me on in Dodixie.  Will need to be crushed.

This takes my 'Business Profits' to 73bn ISK for April vs 76bn in March.  This is what 30-40 minutes a day in April gave me.

So, the post-tax margin is 23.1% (73/315) and so i achieved the 15% target.

The omega charge was then 8.2bn (see above in Plex section)

That, therefore, is the road map from 315bn sales to 65bn increase in wealth.

Items i am selling in Dodixie, Amarr, Rens, Hek, Sobaseki, Tash-Murkon, Arnon and Alentene

No Change all year really.

I sell blueprints, skill books, implants and ship equipment.

I am trialling selling structures like jump gates.

Blueprints i think have stabilised.  I have all but been kicked out of selling blueprints in Jita.  Too competitive.

Implants are doing well and tend to be the most competitive - i am slowly expanding into more types and moving up the ISK value curve.  And rolling them out to all my Trade Hubs.  I now keep to implants costing over 100m ISK and up to 2bn ISK.  They don't sell well but when they do i tend to get a whole family sold at a time.  Again, that's how i like it.  A billion or so of investment can take 30 days to sell.  I am seeing more instances of whole family's of implants being sold at once.

Mining equipment also feels like it has stabilissed at a low level - feels like there are players coming back who need mining equipment.

Skill books are now my lowest income generator - very few sales now.  Barely happening at all.

Ship Equipment is doing well.  I think has been gathering momentum all year.

Rigidly sticking to the 25% margin target.  Courier fees and taxes now take 9% of that to bring me to a theoretical 16%.

Courier Contracts

Each night, i get home from work and determine what i need to sell in all the locations.

The time is taken changing prices were necessary (especially Amarr given it is competitive and increasingly Dodixie) and then figuring out what to sell with the ISK made from the prior 24 hours sales.

I have a list of items that feature regularly and i add to this list as time goes by.  So is a case of checking Jita prices vs current location prices.

It takes a minute to check all the alt accounts.

To look up prices in Eve I am using Eve Tycoon which seems to have more of the latest items in its market browser.  I used to use evemarketer but i just got used to Eve Tycoon.

Each night i courier about 5 to 15bn ISK of items from Jita.  Used to be 2-10bn but things are better these days and i have more items up for sale.  The total cargo volume is 10-250m3 per shipment.  So small but valuable items.  But this allows the couriers to use small, fast ships with much less chance of being ganked.  So there is always someone willing to pick up the contract quickly.

I pay a generous 1.5 to 2.0% of collateral as fees.  I am more interested in getting my items onto the market quickly than penny pinching on distribution costs.


May will have ten very conservative aims - I expect May will be slow, i can feel it already.  Hence, the aims will be:

1) Plex the four omega accounts - aim number one all the time

2) Hold sales in Dodixie to down 20%

3) Hold sales in Amarr to down 20%

4) Hold sales in Rens to down 20%

5) Hold sales in Hek to down 20%

6) Hold sales in Sobaseki to down 20%

7) Hold sales in Tush-Murkon Prime to down 20%

8) Ramp up Arnon and Alentene

9) Hold the investment and profits in Manufacturing

The daily sales in April averaged 10.5bn.

Current wealth is 1 trillion ISK made up from:
  • Plex held as an investment 22bn ISK
  • Items in hanger for sale 5bn ISK
  • Items in hanger for use in business 11bn ISK
  • Omega brought forward 18bn ISK
  • Buy orders on the market 42bn ISK
  • items for sale 1043bn ISK
  • less a 20% provision 209bn ISK*
  • ISK in wallet 70bn ISK

When i add up my wealth, I don't count assets I use in the course of my business such as ships, fittings etc nor do I add back any expenses such as skills purchased etc.  The wealth I disclose is made up of items that are ISK or are in the process of being converted to ISK or are used to generate isk that can be readily resold back onto the market.  Any ships or skills or fittings etc i buy are counted as expenses in that month.  The only exception to this rule is Blueprint Originals i use for manufacturing.  They are held at cost.

* I take a 20% provision against the items I am selling.  Eve calculates wealth by adding up the value of the sell orders hence it is possible to increase your wealth by buying an item for 100m ISK and putting a sell order for 120m ISK (in this case your wealth would increase by 20m ISK).  For me, I want my wealth to be calculated at cost.  I know that the value of my sell orders will likely fall over time as I update my orders downwards as competition reduces their prices before my items are sold.  Hence the 20% provision is my best guess as to what the maximum reduction I would need to make to my sell orders as a whole before they are sold.  In an ideal world I would value my sell orders at the value which I bought the items for.

Thursday 11 May 2023

Pearl Abyss Q1 is out - for Eve Online declining trend though recent improvement

Today, 11 May, Pearl Abyss in Korea had is First Quarter earnings update.

Overall, Pearl Abyss saw revenues fall 6% vs First Quarter 2021 (better to look back at the prior year for a fairer comparison - less distorted by holidays).  Operating Profits were down 79% whilst Net Profit was up 62%.  The reason Net Profits are higher than Operating Profits is due to Pearl Abyss Capital generating some gains.

But we are here to look at the Eve Online data

The narrative was very light on Eve numbers - actually, nothing about the financial performance of Eve was said at all.  The full text of the earnings call is below in this post.

The only numbers we have for Eve in Q1 23 is revenues.

The below chart is from their presentation and is in Korean Won (KRW).

The Eve part will include Eve Echoes and China, as well as of course the Eve Online we all love and play.

Stripping out the Eve part and converting it to USD using an average quarterly currency rate gives:

Always best to compare Q1 23 to Q1 22 - and in that case revenues for Eve are down 13% (which is what they were down overall in 2022 vs 2021).

Now, recall that Q1 22 was before the 30% subscription price rise where as Q1 23 has it all in.

At a simple level therefore, if prices are up 30% and revenues down 13% then that suggest player numbers are down 40-45% since Q1 2022.  But that is too simple and ignores Omega accounts and players staying in the game but reducing their number of accounts.

Actually, we may be seeing some improvement

But, in USD Q1 2023 is up on Q4 2022 by 3%.  Both these periods will have the May 2022 price rise in them so we can perhaps deduce from this that player numbers rose a bit vs Q4 2022.

Write downs?

In the Balance Sheet, i don't see any further write downs - but i would not expect to see any either.  Such decisions would likely be made at the end of the year.

The text from the earnings call is below:

(Foreign Language) Good morning and good evening. First of all, thank you all for joining this conference call, and now we will begin the conference call of the Fiscal Year 2023 First-Quarter Earnings Results by PearlAbyss. (Operator Instructions) (Foreign Language)

Unidentified Speaker
Greetings. First of all, I express my deepest gratitude to the analysts and investors in and out of Korea for taking part in the 2023 Q1 PearlAbyss 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) we have here with us at the earnings presentation today CEO; Heo, Jin-young, CBO; Kim Jong Man[ph] and CFO 2 togo. We will first hear the business performance presentation highlights from CFO (inaudible) and then engage in a Q&A session.

(Foreign Language) greetings. I am (inaudible) of CFO to thank you once again for taking part in our company's earnings conference call. Despite your busy schedules.(Foreign Language)

(Foreign Language) First, I'll cover Q1 major management activities and achievements. Black Desert in Q1 released (inaudible) the twin of the Husab class, which was introduced last December and showed solid results with a significant increase for both new and returning users. In addition, a new zone land of morning light which showcase the beauty of Korea was introduced in March and while receiving unprecedented acclaim is continuing to be popular.

However, the update was made in Korea at the end of March and it takes time to adjust the (inaudible) manner of the lines, the global releases scheduled for Q2. So the effect of the update is expected to appear and earn it from Q2. For a console in celebration of the third anniversary of cross-play, we held various events and user invitation events.

At the event, we disclosed the next content schedule including the release schedule of (inaudible) and along with raising the expectations of users, we were able to confirm the transition to a positive trend. For mobile, new Classics (inaudible) igneous were introduced and along with user indicators performance improved across all regions.

As a result, relevant revenues increased by more than 21% Q-o-Q contributing to the long lifecycle. In addition, Black Desert was selected as the most popular game in Middle Eastern countries including Saudi Arabia, United Arab Emirates, and in Egypt. And one the Games Star Award 2022 at the Type A Game Show and achieved a record of 5 consecutive awards solidifying its global presence.

For EVE Online, the last update of the rising content introduced in the previous quarter improved the factional warfare function and continued user-friendly service, simplified Chinese character was also added in an environment where more users can enjoy the game was implemented. In addition, we announced the development of a new Triple-A Web 3 Game project, not only the game but also third parties are being considered for the new project and it is attracting the attention of domestic and foreign companies including global BCs such as A16 D and makers fund and have also raised about $40 million investment through seed investments.

Black Desert and EVE in Q1 with fresh content and user-friendly services was also able to continued steady performance going forward. We will strive to manage our IP life cycle and work hard to provide fun and fresh Games. (Foreign Language) I will now cover Q1 operating performance. Operating revenue for this quarter was KRW85.8 billion and operating profit was KRW1.1 billion, the revenue, which was generated from the previous quarter's Pearl Abyss capital valuation gains decrease, since there was not a separate evaluation conducted in this quarter and accordingly. Operating revenue and operating profit decreased by 16.9% and 69.4% respectively Q-o-Q net profit posted KRW9.4 billion a positive turnaround into the black compared to the previous quarter.

(Foreign Language) I will explain the operating revenue in more detail. First, I will break down the operating revenue by core IP. The operating revenue generated from Black Desert IP for this quarter, (inaudible) KRW67.5 billion a 5% decline Q-o-Q, Eve IP operating revenue posted KRW16.9 billion down 2.3% Q-o-Q, in the case of operating revenue by region, the biggest was 55% in North America, Europe, then 23% in Korea and 22% in Asia. In the case of operating revenue by platform 74% was for PC, 20% for mobile, and 6% for console. (Foreign Language)

(Foreign Language) Next I will cover operating expenses, Q1 operating expenses posted KRW84.7 billion down 14.9% Q-o Q. For labor expenses, it recorded KRW44.3 billion of 3.2% Q-o Q. For your reference, as of the end of Q1, the numbers of employees stands at 1,355 and among them the number of people in the development is 793, which is about 60% of the total employee. In the case of commissions, it recorded KRW19.1 billion, down 3.3% Q-o Q. For advertising expenses, through effective marketing it recorded KRW5.6 billion down 55.6% Q-o-Q.

(Foreign Language) Lastly, I would like to cover Q2 major highlights. (Foreign Language)

Unidentified Participant
(Foreign Language) we will continue to show steady live service of Black Desert and EVE and do our best to prepare for our new IP Black Desert in Q2 will also introduce a variety of new contents Black Desert is planning for not only new class (inaudible) and awakening versions but also planning a global update of land of the morning light, which was first introduced in Korea last March. The story of land of the morning light, which is composed of Careers unique emotions is a sad but touching story, and we expect it to make a strong impression for Western users who like a well structured story.

For console, we are planning to update the New crest (inaudible) which was hugely popular online and on mobile and on mobile, we are planning to have a class balanced patch and characteristic strengthening. In addition, also in Q2 in order to further increase contact points with global users along with the recently held at venture (inaudible) and Japan fan meeting, we will further deepen our relationship with our users with such events.

Eve following the uprising expansion pack released last quarter plan to release that Viridian new expansion pack in Q2 by providing enhanced content on the social side with more personalized options. We plan to further strengthen the relationship between users

Unidentified Speaker
And implement an environment where they can cooperate with each other. In addition, we are preparing a large-scale update to celebrate the 20th anniversary of the release, the fan fest to be held in September is going to be very commemorative and this event is already receiving great attention from our users. We will prepare thoroughly to achieve successful results. I will now cover the progress of new IP, Crimson Desert with the goal of completing development within the second half of this year is focused on development.

In addition, we are preparing for the various types of marketing, according to the development progress. As the release date approaches, we are preparing to have diverse marketing methods with different strengths. The development of (inaudible) is also in full swing. As I aforementioned, when developing Crimson Desert since a lot of our development was carried out considering (inaudible) in mind, we believe that after the release of Crimson Desert, it will not take a long time until the release of (inaudible)

We are also proceeding with the development of the east-based web 3 project as it is a AAA project that has received great attention since the seed round by solving problems that occurred in existing Web 3 blockchain-based games. We are working hard to create a net-level ecosystem. We will further strengthen Black Desert and EVE live services and we are thoroughly preparing for new titles increased including Crimson Desert and 2 JV. In particular, in line with the development of Crimson Desert, which will be completed in the second half of the year, we are doing our best. So that we can showcase the game on the global stage where we can best publicize our Game.

As many people happened to be waiting for a long time, we will do our best to repay you with the best quality. To be a better company all employees from our CEO, are doing their best, we ask for your continued interest and support. Thank you very much.

(Foreign Language) With this we will conclude the PearlAbyss 2023 Q1 earnings release presentation and start the Q&A session.

Questions And Answers
(Foreign Language) (Operator Instructions) (Foreign Language). The first question will be presented by Jin Young Kim from HSBC. Please go ahead with your question.

Q - Jin Young Kim{BIO 20909169 <GO>}
(Foreign Language) Thank you for the opportunity. I believe you talked about your new title development and I see that in Q1, you have seen I think decrease in the numbers of development people in your company, and it is on the downward trend. So regarding the numbers of developers in your company. Do you think this will affect your preparations for a new title development, do you have any plans to add to your developers going forward. And can you tell us more about its effect on the lineup of the development.

A - Unidentified Speaker
(Foreign Language) Thank you for your question. I would like to answer your question about development number increase. (Foreign Language) actually regarding the numbers of our development staff as of end of Q1, it is 1,355. And regarding the two main reasons behind this, first we had the ending of our internship program as of end March, and we have been going through the business closing of our subsidiary factorial Games. So we also had a decrease in our development due to this.

(Foreign Language) we have actually acquired factorial Games in 2021 which is famous company for being developer of loss kingdom but afterwards, taking into consideration the business environment and because of our strategic selection. We decided to close the business.(Foreign Language)

(Foreign Language) Regarding the amount of our losses stemming from this, the closing of the business, we already have recognized the full amount of the impairment late last year and currently we are smoothly going through the procedures of the finalization. (Foreign Language) So that is why regarding the numbers of developers needed for our new title development. We have no deficiency in the numbers that are needed. We have sufficient numbers of developers. (Foreign Language) However, taking into consideration the internal and external environment, we are planning to have a conservative number of developers going forward.(Foreign Language) It was our CFO (inaudible) who answered your question.

(Foreign Language) For those who have questions, please press star and one and ask your question. (Foreign Language) The next question will be presented by Stanley Yang from JP Morgan. Please go ahead with your question.

Q - Stanley Yang{BIO 6631617 <GO>}
(Foreign Language) Thank you for the opportunity. I would like to ask for some of your comments regarding your new titles and I'm curious about the updates for Crimson Desert. And can you tell us about any plans you have with your console partners? Can you tell us about how much progress the development has been making? And can you maybe update us or give us more details on

Q - Unidentified Participant
Your estimate release schedule and apart from Crimson Desert. Is there any catalysts or any major event. Do you think that can help your situation stock prices and give us a direction going forward.

A - Unidentified Speaker
(Foreign Language) I would like to thank you very much for your attention, because after our last disclosure, you have been showing much interest.(Foreign Language) as was mentioned for Crimson Desert we are smoothly going on with the development with the goal of completing development within the second half of this year.(Foreign Language) also, in order for pre-marketing, we have been participating in the recent GTC, and we have been consulting with many partners.(Foreign Language) in addition, in order to disclose our Crimson Desert to the public on the global stage.

Now we are in the preparation stages for us to actually disclose Crimson Desert going forward.(Foreign Language) after the previous disclosure Crimson Desert has been making great development progress, not only the well-known graphic technology but as Open world games. We have been successful in implementing the high degree of freedom. And we have very long play time and very immersive story. So it has all the characteristics needed for a triple AAA title. (Foreign Language) since we have been making very thorough preparations for a long time in all details regarding the Game quality and story. We are going to do our best. So that we can meet the expectations by our users and by the market.

(Foreign Language)

(Foreign Language) Actually, internally at our company, we are actually really feeling that our development has been making great progress going forward. However, until the last moment when we have finished the development of the game, we are going to do our best. (Foreign Language) As I mentioned previously, now we are in the preparation phase for the disclosure of Crimson Desert going forward. So with of disclosure that will happen, we are going to be stepping up the strength of our marketing.

(Foreign Language) Regarding our pre-sign-ups and these releases well, this will need to be decided with the consultation of our partners and with the degree of marketing development. So it is quite difficult for us to give you a very definite release date at this time. (Foreign Language) However, after we have finished development, we are going to make preparations, so that we can release the game without a very large gap.

(Foreign Language) It was our CEO, Heo Jin-young, who answered your question.

(Foreign Language) Currently, there are no participants with questions please press star and one to give your question. (Foreign Language) It seems that there are no other questions in the queue. With this, we will conclude 2023 Q1 PearlAbyss Earnings Presentation and Q&A session. Thank you for your participation.

Wednesday 3 May 2023

Review of the 2022 CCP Report & Accounts

The CCP Report & Accounts for the year to December 2022 came out today on 2 May 2023.

I suspect I will have a lot more to say in later posts but quickly going through it yields the below review.

A little bit of background as to what we are looking at and why

Now, we have to be careful here.  There are several parts to CCP mainly in Iceland but also in the UK, China and US.

Therefore, to get a combined view of all this, and a bit more, we need to look at the Pearl Abyss Iceland 2022 Report & Accounts which came out at the same time.

Pearl Abyss Iceland was the company set up by Pearl Abyss in Iceland to buy CCP back in 2019.

Therefore, this post focuses on the Pearl Abyss Iceland 2022 Report & Accounts.

You can access the Pearl Abyss Iceland 2022 Report & Accounts here and also I have a page on this blog that hosts all the Pearl Abyss Iceland from 2019 / CCP from 2013 to 2018 here.   They can also all be found and downloaded for free from the Iceland Company Register.

  • Game revenues (EVE Online, Echoes and anything else from CCP) fell 12% from $63.8m to $56.1m
  • The underlying loss rose from $8.0m to $19.0m
  • The overall loss rose from $8.0m to $70.1m (there was a $51m impairment I discuss)
  • $12.5m cash likely came in through the sale of a “token warrant”, i.e. crypto currency
  • Therefore, after a few new shares being issued the business did not lose any cash during the year!
  • The impact of the Ukraine war and the ending of sales to Russia is around $800k.
  • There is a good chance we can see the salary of the CEO (but that needs a disclaimer so see below)

Profit & Loss Account

Revenues fell 12% from $63.9m to $56.1m whilst costs fell 2% from $74.0m to $72.5m.  Government grants added around $5m income in both 2022 and 2021

Therefore, the Operating Loss rose from $9.5m in 2021 to $16.3m in 2022.  In other words, CCP has more to do to reverse this trend and then turn a loss into a profit.

Finance Costs and Currency movements took off an additional $4m in 2022 and $3m in 2021.  Add back some tax rebates and the bottom line for the underling business was $19.2m vs $8.1m in 2021.

And then, the impairment charge of $51m kicks in which is basically Pearl Abyss admitting it paid too much for CCP and can no longer justify the value of the investment in part due to rising interest rates (rising rates reduces todays value of future earnings) and in part due to CCP being unable to meet the expectations set at the time of its sale to Pearl Abyss.


Overall revenues fell 12% from $63.9m to $56.1m.

It is important to realise that if revenues in Eve Online go up or down then it does not mean the costs of the business go up or down as it would in other businesses.  The costs of this business are more about creating new content, marketing the game, running the offices.  So the costs have nothing to do with how many players are paying and what they are paying.

So, in this case of a fall in revenues it goes straight to the bottom line and increases the loss.

Now, this $56.1m is not the player base of Eve Online paying subs and utilising Plex.  It is a combination of that and Royalties & Licences and a few other minor bits and bobs, as the notes in the Accounts show below.

The largest line in revenues are players that pay money to play the game including Plex that is used in the period and that fell 12% from $53.8m to $47.3m.  For reference, in 2020 this came to $55.8m.  Recall that in January 2021 the subs price was raised 30% and again in May 2022 the subs price rose 30% whilst the effect over the two years has been for the player base revenues to fall 15%.

Revenues fell in all regions: North America fell 8%; Europe fell 18% (there will be a Russia effect in there); Asia fell 14% (actually, all the Royalties & Licences are Asia with NetEase which means the player base revenues in Asia fell 21%); and the rest of the world (which includes Australia) fell 13%.

How to think about the subs price rises vs player base numbers?  I am not sure but it is clear to me that the paying player base has clearly fallen quite a bit over the last 1 and 2 years.

The Royalties & Licences line also fell 12% from $10.0m to $8.8m.  This is paid by NetEase who distribute the game in China (which is on a separate server).  I am not looking too closely at this but the fact it declined presumably indicates there is a decline in China or the terms have been renegotiated.

Gross Profit

The cost of actually running the game (as opposed to creating new code, marketing et al) is very low at around $5m for both 2022 and 2021.  Nothing really to add here.

Operating Expenses

CCP now expense all their development costs (historical costs are still being held on the Balance Sheet and reduced over time).  This is a much cleaner way to account for these costs.

Ignore the Impairment Loss for now which means Operating Expenses in 2022 were $72.5m vs $74.0m in 2021 – i.e. a decline of 2%.  Which is impressive given the inflationary background.

Research & Development is the core of the business, this is the development of new content, expansions, the works and any new games.  This was basically flat at $37.9m and salaries will be a noticeable part of it.  Hard to know how to read this.  Presumably wages went up a decent chunk and so therefore did the number of employees in this area decline?  Not sure.

Publishing stayed flat at $4m.

Marketing fell 12% from $14.2m to $12.5m.

General & Administrative (so everything that is not coders, marketing and publishing – i.e. finance people, office services, utilities etc) fell 2% from $18.1m to $17.8m in what must have been a high inflationary environment, so that was good work by CCP though the quantum of the General & Administrative cost has always looked high to me.  It is currently 32% of revenues which is off the dials compared to other businesses i look at.

Of the $72.5m Operating Costs the largest item is Salaries (this is a people business after all):

Overall, those rose 1% to $42m whilst the average number of employees rose 8%.  Clearly a mix effect going on here – did the number of coders decline vs a rise elsewhere?  Not sure.

Worth noting that Salaries as a % of EVE Online Revenues rose to 89% vs 77% in 2021 and if we include the NetEase income then this % was 75% vs 65% in 2021.  This is getting tight.  We are closing in on the day when revenues will struggle to cover employee costs let alone everything else.

Overall, given the inflationary background it seems to me that costs were very well controlled.

The problem is not costs, it is revenues.

Other Income

There was $5m-$6m of Other Income in each year which is Government Grants

Finance Costs

The Group has a $50m bank loan from The Korea Development Bank which is due for repayment in 2024.  Clearly, inline with global trends, the interest rate charged has gone up.  Therefore, interest paid rose to $2.4m from $1.9m.  The business pays 5.53% interest rate on that loan (that is reasonable and does not suggest the bank has any concerns - but there will be a guarantee from the parent company Pearl Abyss in Korea here).

Currency movements cost $1.6m in 2022 vs only $0.2m in 2021.


Given the business makes a loss, in Accounting the loss is reduced by a tax rebate (in actual cash flows tax is still paid given this is a global business making sales across the world – somewhere there will be profits to tax).  This accounting rebate was $1.4m in 2022 vs $3.7m in 2021.

Underlying operating loss

Add all that up and the underlying operating loss of the business rose from $8.1m to $19.2m.  And it is because of the fall in revenues.

To put this in perspective, to move back to profits and assuming costs are flat in 2023, revenues need to rise by 34% to around $75m.

Impairment charge

I have been expecting this for a while and it is interesting to note that where was no indication in the Pearl Abyss results in February that this had happened.

In fact, in the Pearl Abyss results there is no indication that CCP is loss making let alone the losses have risen.

Anyway, to put this simply, when Pearl Abyss bought CCP they have to allocate the payment between the assets of CCP they bought, a number of intangible assets (the Intellectual Property, Customer relationships) and anything left is called Goodwill.  Every year, the business must ask itself if they can still justify the value of this goodwill by looking at the expected earnings of CCP and adding it all up and comparing to the original purchase price.

There two things that can reduce the summation:  firstly, rising rates makes the value of future earnings lower in todays money (i.e. $100 next year is worth $91 today if interest rates are 10% but that $100 is worth $95 today if interest rates are 5%); secondly, CCP may decide that the earnings they expected to make in future years at the time of the sale to Pearl Abyss are now unrealistic and need to be rebased.

Both appear to have happened.

Therefore, the Goodwill of $141m has been reduced by $51m.  It is non cash but does indicate that the expected growth of the earnings of Eve Online is less than previously thought.

The Korean senior management will not be happy.

Balance Sheet

This is a bit more exciting in 2022 vs 2021.

CCP is loss making in aggregate since sale to Pearl Abyss

The standout feature is that the sum of all earnings made by Pearl Abyss Iceland (i.e. all the earnings produced by CCP since acquisition) is now negative.  And that is before we consider the $51m impairment.


Plex, as we know, is sold to the player base for real money and can be converted into ingame currency in the ingame market.  To recognise this sale as revenues then CCP needs to wait for the Plex to be used.

So, the way that Plex in inventory is accounted for is that Cash comes in and the other side of the accounting entry sits in Deferred Income.  Once it is used, the Deferred Income becomes Revenues.

It is called “In-game purchases not yet consumed”

In 2022 the amount of “In-game purchases not yet consumed” (Plex) actually fell from $4.1m to $3.6m despite all the sales in September and later.

That says a number of things to me: firstly, Plex in inventory was used during this time to convert to Omega at cheap rates; secondly, any plex bought for real money was used up quickly; thirdly, perhaps Plex sales are falling.  Personally, I think the destocking was a bigger driver.

Also, note in the table above the Subscription Deferred revenue (so people that pay for 3, 6, 12, 24 months where part of that is still to run after December 2022) is only slightly up despite the 30% increase in subs.  So, either the mix of longer term subs is down or less players are buying them overall.

Crypto Currencies

There is a non-current Deferred Revenue amount of $10m (see the above table).  This is not Plex.

In the Cashflow Statement there is an inflow of $12.5m which is stated as “Proceeds from sale of intangible assets”.

I don’t know if these amounts are related but I suspect they are (can make an argument in the other direction though).  $12.5m cash comes in and $10m of it sits on the Balance Sheet for now waiting to be moved into Revenues in the future.

In the table below, it sort of looks like the $12.5m disposal was an asset created out of thin air - which makes it more likely to be linked to the $10m above.  But i really don't know.

There is loads more to say about this from the Accounts but it seems the Group is developing a blockchain based network and planning to issue crypto tokens once the development is complete.  Ahead of this point in time the group has already sold warrants which will allow holders to convert these into the tokens when they are issued.  I.e., the group is getting some cash in now for future sales.

And to make this more intriguing / exciting, the group goes on to say that it holds other crypto assets such as Ethereum for “various business purposes” but not for resale.  I have no idea as to what their value is.

Cashflow statement

This is the sharp end of it all and the business did well to avoid losing any cash!

At the end of the day, the underlying loss of $19m caused cash to reduce by $9.4m – there are always non cash items in the Profit & Loss account such as depreciation.  In any given year cash and profits are rarely the same for any business.

And then a further $4.3m was spent on capex (office equipment, IT, intangible assets) and this was offset by the $12.5 discussed above coming in.

And then, just when you think it is all lost a further $3m of new shares were issued and taking into account lease payments of $1.4m the business did not lose any cash in the year!

That $12.5m inflow saved the day.  No idea who was the other side of that transaction.

Unless they can keep on pulling these rabbits out of the hat eventually cash will start flowing out of the business.  Hence the focus on getting those revenues back up.

CEO Salary?
Thee are two items here which give a clue.  I am not here to speculate on someone’s remuneration so I will just put the items below with a few lines of text

So, the table above merely gives the total payments made to the Directors and CEO.  I am guessing the Korean directors are not paid so this will be all the non-Korean directors which is the CEO and perhaps one other.

I have no idea what the $500k “Sales of goods / Services” is here.  Also, i don't really know if that is the business selling $500k of items to the CEO or the other way round!