KRAFTON, Inc. ($A259960)

[Foreign Language].

We'll take the first question from Stanley Yang from JPMorgan. Waiting for the next question as Stanley Yang will be joining again. The next question will come from Jun Lee from Hanwha Securities.

So I have 2 questions for you. One is relating to the SOCAR investment announcement made today. So could you provide more color about this announcement? And my second question relates to the Hanwha Aerospace joint venture announcement made in March. Can you also elaborate more on this?

On the Hana Aerospace partnership, which was announced in last earnings call, we have nothing to update you because it is an ongoing matter. At the moment, and moving on to the SOCAR disclosure announcement made today, we will be establishing a JV company on the autonomous driving service together with SOCAR. So under this newly established entity on the autonomous driving service based on the AI R&D, KRAFTON will be utilizing the data accumulated across these processes in order to deploy them for our physical AI research and development.

Next question will be from Eric Cha of Goldman Sachs.

On Subnautica 2, as you're aware, there has been some noise around with the studio. And I'm wondering if there is no changes to the original plan of the early access, if things are proceeding on track in line with the original plan, please confirm on that. And my second question relates to your second quarter guidance and visibility in terms of revenue. I know that so far, you have quite substantial reliance on PUBG because the diversification is not substantial yet. So depending on the momentum of PUBG, the earnings results are dependent. So could you please add more color on that?

First, on Subnautica 2, aside from the noise that you mentioned, I could say that we are facilitating cooperation smoothly with the studio at the moment, and the early access will be planned as is and will be launched as soon as possible. On your question on PUBG Reliance, as you're pretty much aware, we do have some ups and downs across some seasonalities where there are some peaks and off-season depending on the quarters. And our Q1 performance does not mean that we'll have the same performance across the other quarters. However, we can say that the Q1 earnings have enabled us to provide a structural growth pattern going forward. So if I may elaborate more on the guidance to the second quarter, as I explained in my previous remark, we're still standing at the end of April. So we're kind of observing how the business is running for April. And as for PUBG, our traffic is running quite strong, and we -- based on the various collaboration that we initiated across April, for instance, a stellar blade on tender and as for mobile, the it, we are continuing to drive quite substantial sales, and this will continue. So if you're asking if you're seeing -- if you're asking if the momentum will be sustained in Q2, we are quite positive to that.

We'll take the next question from Stanley Yang from JPMorgan.

So I have 2 questions for you. First is on the PUBG IP. I've seen that the sales for the quarter is quite strong. And -- but I'd love to hear more on the -- more on the regional part. If we look at the third-party data for India and China, the data, there seems to be some gap. So please add more color on that. And my second question relates to your share buyback policy. So wondering what kind of criteria you have in mind to run and implement this policy? And do you have certain criteria for the undervalued share from the management side, which is linked to the earnings when you calculate that? Or are you considering the company-wide strategy like the new pipeline down the road or when the strategies are being materialized?

On your question to the sales of the PUBG IP, I think it's natural for you to refer to the third-party data. However, there has to be some inaccuracy around that data. And -- but relatively speaking, in terms of the size and the sales of the region, I don't think there is a huge gap. More specifically on PUBG Mobile, in line with the Ramadan season, which was a part of a premium product, which worked really well, especially and being received really well across the MENA users. This product was able to post a double-digit growth. And as you are aware, as a KRAFTON follower, in Q1 centered on the Lunar New Year, we have substantial growth from the China side for PUBG PC and also for the Peacekeeper Elite. On your question on the treasury share, we do have various list of criteria that we're considering, including if the current level of share is undervalued or not. And these are set internally based on the 3-year shareholder policy that we set before. However, when it comes to the precise criteria sharing for the share buyback, I don't think it's appropriate to share in detail because if we do share the mathematical formula behind taking these actions, there may be some misinterpretation from the market. However, what I can say you now is if you look at the Q1 operating profit amounting to KRW 560 billion. And considering the current level of our stock price, it is undervalued at the moment, which is kind of easy to say.

Next question will be from Junhyun Kim o f HSBC.

My first question relates to the PUBG M. I know I think that there has been a quite lift in your fandom based on the various collaboration and popular items that you initiated. And I guess there has been some increase for the paying users. And wondering how the ARPU works for that. And also, you've mentioned that the Xeno Point had no cannibalization effect. However, if we look at the steam figures, there has been some jump in the user trend, traffic. And so what was the contribution effect of the Xeno Point per se? And my other question relates to your partnership with JV initiatives from the gaming industries and wondering what you're expecting out of this? Can you talk a little more comprehensively about the consolidated operating profit or about the timing of gaining the margins, et cetera?

On PUBG M relating to the lift in our paying users, it's difficult to disclose our operating metrics. But as for the CCU figures, I think you can browse them from the same database. If we compare our actual user base against the revenue of IC, which went quite up -- it actually went quite up. And we do look across various metrics like the users' time spent, the retention, the paying users and the average revenue per user. And across all these metrics, we have achieved a double-digit growth. So your next question was about the XenoPointN effect, and you mentioned the word cannibalization. We cannot view it as a single factor attributable to Point because at the time of launch, we were also concurrently running other appealing products like the StellorBlade. However, on the backdrop of Xeno Point and with the start of the service, we've seen substantial growth in traffic across the PUBG IP. And specifically speaking, this year, we are embarking our initiative to introduce more well-made modes and Xeno Point is the first very well case in point. And before we used to run Arcade modes. However, Xeno Point marched the highest peak CCU ever. If we look at Xeno Point, which is offering a PVE mode with inside the PUBG universe, we could witness that over 1/3 of battle users were playing the Xeno Point mode. Therefore, we think this achievement is spectacular. On your question to the JV establishment with the nongame sector, with our very own AI capabilities, we'd like to expand into physical AI business. And centered on our software AI capabilities, we -- it is mandatory and required to work together with the businesses they have the offline edges. And so hence, we are engaging in JV. As for SOCAR as with Tada company before, they do have the expensive or perhaps the largest scale of car and driver-related data and management skills. And through initiating this autonomous driving business, we'd like to we'd like to create big synergy out of our own AI capabilities and their edge over their expertise where we can open up new business opportunities. Meanwhile, we can use these type of data accumulated from this new business entity into our physical AI domain. And we believe that this kind of partnership will continue in the future by combining our own strength in AI capabilities and their offline expertise. And we are just getting started at the moment. So when things materialize in the future, we'll give you more update on the timing of profitization.

Next question will be from Juno Lee of Hana Securities.

So I have 2 questions for you. The first is on Xeno Point mode. And I know that you used to have arcade modes before, but it appears that the Xeno Point mode will disappear and this continue towards the end of the year. And wondering if you have any plans for additional update? Or is this just like temporary mode? And my second question relates to PUBG M. As you're aware, we've had the Iranian War breakout in the beginning of March. And wondering if there has been any changes in terms of traffic across MENA and Southeast Asian users?

On your question on the Xeno Point mode, this was our very first attempt to adopt the PVE mode as part of our PUBG well-made content. And in these PVE modes, the play session tends to be quite short. So we would like to have the users enjoy and play the game the mode for a certain period of time and additionally offer new modes based on upgrades. And that is how we can maximize the effect and what users are expecting out of us. And in line with our Xeno Point mode, we are also preparing for some other always-on modes. On your question on the so-called war relating to geopolitical risk, it is difficult to comment in line and in connection with our business. As you might be aware, when things like war break down, then there is a great constraint in terms of mobility. And there tends to be a trend where the traffic is lifted. However, in Q1, it's not attributable to such geopolitical risks. It's rather attributable to the Ramadan themed item that we -- where we drove substantial traffic. So it's difficult to say this is attributable to the war. Rather, we can say the well-made content and the user satisfaction is a main driver to growth.

This concludes KRAFTON's 2026 Q1 earnings presentation. We sincerely thank all the investors and analysts for your continued support and interest for KRAFTON.