NC Corporation (A036570) Earnings Call Transcript & Summary

[Foreign Language] Good morning, and good evening. Thank you all for joining this conference call. And now we will begin conference call of the fiscal year 2021 Third Quarter Earnings Results by NCSOFT. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions] Now we shall commence the presentation by NCSOFT.

[Foreign Language]

[Interpreted] So good morning. This is Willie Hong, CFO of NCSOFT. I am happy to use this third quarter earnings conference call to introduce myself to all of you on this call today. I feel the weight of my responsibilities as the CFO of NCSOFT at this critical juncture in time as the company is taking off as a truly global game company. In addition, I do hope and look forward to working with all of you with an open mind to have various open discussions. And I also look forward to your support. With the goal of further strengthening LTE's enterprise value, I would like to say that I am committed to becoming a CFO that grows together with our shareholders, investors, also sell-side and buy-side analysts. And I do hope that we can enjoy this time together.

[Foreign Language]

[Interpreted] So now let me do my presentation on the third quarter earnings highlights. The third quarter sales totaled KRW 5.6 billion, representing a decrease of 7% Q-o-Q and 14% Y-o-Y, driven by the decline in sales by Lineage 2M in Korea and abroad.

[Foreign Language]

[Interpreted] Operating profit posted KRW 96.3 billion, a decline of 15% versus the previous quarter, following the trends on the top line. On a Y-o-Y basis, operating profit decreased 56% because existing mobile games stabilized to a lower level, while key operating expenses such as labor cost and marketing increased.

[Foreign Language]

[Interpreted] Pretax income was KRW 126.6 billion, up by 3% Q-o-Q, but down 40% Y-o-Y, and net income was KRW 99.5 billion, up by 5% Q-o-Q, but down by 35% Y-o-Y.

[Foreign Language]

[Interpreted] Next, let me go over the sales of each game.

[Foreign Language]

[Interpreted] For Lineage M, sales was KRW 150.3 billion, an increase of 12% Q-o-Q, driven by the effects of the large-scale update for the fourth anniversary of the game. The focus of this update was to satisfy the needs of our users. And as a result, not only has user satisfaction improved, but sales and traffic numbers have also rebounded. Going forward, we will continue to extend the game's life cycle by concentrating on front services and enhancing the fundamental value of the IP.

[Foreign Language]

[Interpreted] For Lineage 2M, it recorded KRW 157.9 billion, lower by 28% versus the second quarter as overseas sales stabilized and we moderated the intensity of our business activities in Korea. This represents an increase of 9% Y-o-Y, which is mostly thanks to the launch in Japan and Taiwan. In the fourth quarter, we are planning a large-scale update to celebrate the second anniversary of the game, and on December 2, the title will be launched in 29 countries across North America and Europe. We hope to continue stable sales trends in the fourth quarter on the back of the update and regional expansions.

[Foreign Language]

[Interpreted] And for Blade & Soul 2, the sales -- from the launch that took place on October 26, to the end of September totaled approximately KRW 22.9 billion. We continue to replenish content that fully reflects the demand of our players and their characteristics. And based on the servicing experience in Korea, we are preparing to achieve even better results in the global markets next year.

[Foreign Language]

[Interpreted] And the sales of the 5 PC online games combined was KRW 101.6 billion, down by 4% Q-o-Q and 16% Y-o-Y.

[Foreign Language]

[Interpreted] For Lineage 1, sales was KRW 29.1 billion, a decline of 20% Q-on-Q and 42% Y-o-Y because of a void and business activities created as the classic server open was delayed. We look forward to a sales rebound in the fourth quarter as a wide variety of updates and promotions are put into action. For Lineage 2, sales was KRW 25 billion, representing an increase of 3% Q-o-Q, but a decrease of 5% Y-o-Y. The 18th anniversary update was conducted at the end of October, which we believe will drive healthy momentum in the fourth quarter and into 2022.

[Foreign Language]

[Interpreted] AION recorded KRW 17.9 billion, a decline of 8% Q-o-Q, but a jump of 112% Y-o-Y. Sales are showing a natural moderation after the boom from the classic server launch in the fourth quarter of 2020. To create another rebound in revenue, we are going to have a classic server update that we actually completed on November 10.

[Foreign Language]

[Interpreted] And for Guild Wars 2, sales was KRW 19.2 billion, which is higher by 20% Q-o-Q and 2% Y-o-Y. The presales trend of the third expansion pack that is planning to hit market in next February is solid. And we have a better test ongoing that we started in August. Interest in the new expansion pack drove the performance this quarter, and we expect more meaningful performance upon the actual launch of the expansion pack early next year.

[Foreign Language]

[Interpreted] and Blade & Soul ended at KRW 10.4 billion, up by 5% Q-o-Q, but down 40% Y-o-Y.

[Foreign Language]

[Interpreted] And lastly, royalty totaled KRW 40.8 billion, a decrease of 5% Q-o-Q and 31% Y-o-Y. The royalty revenue from PC-based games and licensed games has weakened, but royalty from Lineage M Taiwan continues to be strong, to show very solid trends even though it has been around 4 years since the launch.

[Foreign Language]

[Foreign Language] Next, let me talk about expenses.

[Foreign Language]

[Foreign Language] For the third quarter, operating expenses totaled KRW 404.4 billion, a decrease of 5% Q-o-Q, but up by 10% Y-o-Y.

[Foreign Language]

[Foreign Language] To walk through the line items, labor cost was KRW 147.8 billion -- excuse me, KRW 174.8 billion, a decline of 6% Q-o-Q, but higher by 10% Y-o-Y. Employee welfare benefit costs decreased, which led to the lower level versus the second quarter. However, the higher level versus last year reflects the increase in head count and universal raise in employee annual compensation.

[Foreign Language]

[Interpreted] And marketing was KRW 53.9 billion, a decrease of 3% Q-o-Q and up by 81% Y-o-Y because of less marketing spend for new launches, such as Trickster M and Lineage 2M overseas.

[Foreign Language]

[Interpreted] And variable costs and other expenses totaled KRW 152.2 billion, down by 5% Q-o-Q and 6% Y-o-Y.

[Foreign Language]

[Interpreted] So this would conclude my presentation on the third quarter performance.

[Foreign Language]

[Interpreted] So as you are aware, on November 4, the company launched Lineage M, which is a new challenge to take on the global mobile game market.

[Foreign Language]

[Interpreted] For Lineage M was developed as a Global One Build game that was simultaneously opened in 12 countries. We are 1 week into the launch and sales have been explosive, which has taken us to #1 in terms of sales in Korea, Taiwan and Hong Kong. The initial sales and user indicators are the highest levels recorded by any game launched by NCSOFT. Moreover, we find it encouraging that the high-quality and stable services have generated growing momentum in user indicators from the launch to date.

[Foreign Language]

[Interpreted] So to continue to talk about Lineage W, not Lineage M as mentioned before. For Lineage W, users from various countries can use AI translation services to communicate in real time with each other. As a result, even though the game has just opened, a natural competitive dynamic between countries has been created. And in addition, users are being creative and are creating competitive stories that cross borders. Though a huge number of users from all different countries are engaging in real-time large-scale warfare, service in smooth without issues, which, once again, proves the Global One Build technology and capabilities we have.

[Foreign Language]

[Interpreted] So in addition to the first release countries that we have already opened the game, the company is planning to launch next year in the second release areas, including the U.S. and Europe, and to confirm NC's growth potential in the global market.

[Foreign Language]

[Interpreted] And at the same time, the company is also ambitiously preparing a wide range of titles to be released after Lineage W. All games to be launched in the future, including TL, are in development with the target of achieving a simultaneous global launch.

[Foreign Language]

[Interpreted] So not only in our core MMORPG space, but we are developing genres and IPs that can appeal to a global customer base. And over the longer term, our goal is to become a global multi-platform game company that supports mobile, PC and consoles.

[Foreign Language]

[Interpreted] So we know that for efforts, words are not the end. So in the near future, the company is planning to host an event to introduce our new game lineup. It will be an opportunity to showcase our long-term blueprint for growth, which includes our global market expansion and platform diversification strategy and the way that we want to execute the strategy going forward.

[Foreign Language]

[Interpreted] So in addition to global market expansion and platform diversification, we also know that there are other topics that the market is very interested in, namely the combination of games with NFT and blockchain. So for the company, with a view that a combination of games, NFT and blockchain technology can lead to more and new opportunities, the company is planning to adopt NFT and blockchain technology in our games. We have created a task force for this purpose, and we are in the preparation stages. This has been an ongoing process for us, and the target would be to release new services next year.

[Foreign Language]

[Interpreted] And last but not least, this year, will be the start of our ESG engagement. The company has created an ESG steering committee and ESG framework. And for the first time in the Korea game industry, we have issued a sustainability report, which highlights our ESG vision and performance. In addition, the company was the only game developer in Korea to receive an ESG integrated rating of A by the Korea Corporate Governance Service. The company is planning to expand its ESG activities with a focus on AI ethics, diversity and creating opportunities for future generations.

[Foreign Language]

[Interpreted] So we will continue to openly communicate with the market about the various activities that we are going to be engaging upon and initiatives that we have. So we look forward to your support and interest in these efforts, and we will try to come back next quarter with more good news. Thank you very much.

[Foreign Language] Now Q&A session will now begin. [Operator Instructions] [Foreign Language] The first question will be provided by Eric Cha from Goldman Sachs.

[Foreign Language]

[Interpreted] So thank you for the opportunity to ask questions. Before asking my questions, I would just like to congratulate you on your new position and your new post as the CFO at this critical time for the company. The first question that I would like to ask you is that after a new game is launched, of course, there's always areas of controversy within the market. And if you look at Lineage W, I do believe that because there was not a lot of information about the details of the performance initially after launch, I think that there are some that are questioning that performance. And I do believe that there are also questions about the sustainability of Lineage W going forward. I also believe that there is some interest about how much cannibalization has been taking place at Lineage M and Lineage 2M because of the launch of Lineage W. So if you could provide us with some more detail the actual color or what you see in terms of the indicators for your revenue and traffic, I do believe that, that would be appreciated. The second question that I would like to ask you is about your road map. You did mention this during your presentation. But if you look at the initial performance of Lineage W, though it is very strong, I do think that there are some that are concerned that maybe it's just focused on the existing user base that you have for your legacy Lineage franchise. And I do believe that there are some in the market that may believe that it is challenging for the company to actually expand your user base overseas or expand it to attract new users. So I know that Lineage W is still in its early stages. But if we were to talk about the post Lineage W strategy for the company, what would that actually look like? And the third question is also related to something that you mentioned during your presentation, which would be blockchain and also NFT technology and Metaverse. I do believe that you have mentioned that these are areas that you want to apply to your games going forward. Could you be -- could you share a bit more details about your strategy, for example, what games are you looking to actually apply this technology to? And in addition to that, why do you think you can actually do this better than other peers within the market? What would your strength be within this area that would actually enable you to stand out?

[Foreign Language]

[Interpreted] So thank you, Eric, for your questions, and maybe I can take them one by one. First, I think to talk about the initial performance for Lineage W, if we look at the actual revenue traffic and also the overall numbers in user traffic and indicators, I think that actually we were surprised in seeing that it's so robust in terms of the performance across the board. So from the launch date, which was November 4 to November 10, which would represent 1 week of operations, if we look at the daily revenue on a global basis, it reached KRW 12 billion per day. And if the current trend continues, which we do expect, we do believe that on the ninth day of operations, on an accumulative basis, that we will be able to hit a revenue of KRW 100 billion. So if you look at that in terms of the performance versus other games that we have released, we do believe it represents one of the best performing, or the best of all of the games that we have.

[Foreign Language]

[Interpreted] And different from other existing games, what we find to be very encouraging is that in terms of traffic numbers and also in terms of the concurrent user trends, it continues to be on a very positive momentum, which is, again, very encouraging for us. So to give you a bit more detail, if we look at the concurrent numbers on November 10, that actually represents a peak number for us in terms of the PCU.

[Foreign Language]

[Interpreted] So if we look at the number of servers, we started out with 108. Right now, we have expanded and increased it to 132. And seeing that the traffic continues to have very positive momentum around the 12 [ November ], we are planning to add on 12 more servers.

[Foreign Language]

[Interpreted] And as mentioned before, there is a competitive dynamic that is taking place on the game country versus country. And we do believe that this is possible because this game was built to be a Global One Build game. So as a result of that, this overall dynamic is something for which we see very positive responses. And though it's only the initial stages of the game in itself and it's right after the launch, we do think that this tension that is created on the battlefield will actually be very good for us. And in terms of drivers that it will be a strong driver for revenue.

[Foreign Language]

[Interpreted] And in terms of your second question, which was the second part of your question, which was about cannibalization. From the company's standpoint, of course, we do fully understand the concerns that the market may have. But I think that I can address this question in 2 parts. First, to talk about traffic and then to talk about revenue. So in terms of traffic, if we look at the initial traffic indicators, for example, if we take Lineage M traffic as an example, we do believe that with the release of Lineage W, in the beginning, there was around 5% of users that moved over from Lineage M to Lineage W. However, if you look at the nature of those users, we do not believe that they represent the core user base for Lineage M.

[Foreign Language]

[Interpreted] And if we talk about it from a sales perspective, if we look at Lineage M and Lineage 2M, as we have announced, there are large-scale updates that we are planning for both titles in November. So this is something that we have forthcoming. And as you are aware, whenever we have a large-scale update on the horizon, there tends to be a natural softening of the revenue leading up to that update because of the pent-up dynamics that we usually see. So with the update taking place in November, we do believe that revenue numbers will rebound. And as a result of that, if we were to talk about revenue or sales as a whole, we think that it's too early into the launch of Lineage W yet to talk about what type of cannibalization is taking place. So we do think that there needs to be a bit more time. We would like to monitor the situation following the update of the 2 games. And once we have a clearer picture, I do think that we will be able to communicate what our view is to you. That is not to say that we are saying that there's not going to be cannibalization. That is not the situation. We do understand and acknowledge that there will be some. However, we do think that the degree of what we see will not be of a level that would actually raise concern. So that have been said, we also think that the strong performance that we see from Lineage W will be more than enough to offset any cannibalization effects that we see.

[Foreign Language]

[Interpreted] And maybe to move on to the next question, which would be about new user acquisition and global expansion. We also do recognize that these 2 go hand-in-hand. And maybe just to elaborate a bit about what our thoughts are on this topic. Just to go on and continue with the information that has already been provided. One of the things that we do think is different in terms of our strategy for game releases going forward versus those of the past is that for all games that we will be releasing on a forward-looking basis, the underlying strategy that we have is to do a simultaneous global launch. And we do believe that this triggers a very different type of strategy from what we have incorporated in the past.

[Foreign Language]

[Interpreted] And not only in our core MMO area, but also in other genres and for other IPs, this is an area that we continue to focus on for our development efforts. And for next year, maybe sometime during the first quarter, I do think that there will be an opportunity for us to actually showcase the new title lineup that we have and maybe also provide you with some in-game experiences. So if you see that, then I think that it will be a good opportunity for you to see for yourselves how we are going to go ahead with the diversification of our global markets and also our platforms. So for example, for TL, as we have mentioned before, this is a game that we will be supporting both on a PC and on console from the time of launch. And for -- there are other games. At the end of the day, our goal is to become a multi-platform plus global game provider. Whether it be mobile, whether it be PC, whether it be console, we want to support all these different devices. And I do think that the year 2022 will be an opportunity for us to actually show you how we are going to execute that vision.

[Foreign Language]

[Interpreted] And maybe to address your last question, which was about NFT and P2E and share our plans in this area. This is an area in which we have been interested long before this became a hot topic. So it's not that we have suddenly prepared just because there's more attention in this area. But this has been an ongoing process for us from before.

[Foreign Language]

[Interpreted] So for NFT, as mentioned before, we do want to apply this to our games. And internally, we do think that for this to be done right, that you actually need the experience, the expertise, the technology to be able to properly operate and also understand the ecosystem that is required within the game in terms of the economy that you're going to build to do it right. So in this area, we do believe that, that would be 1 of our fortes. So as a result of that, this is something, as mentioned before, that we have continuously been preparing for. Right now, we're in the final stages of our overall review process. We do want to be thorough. So we're looking at the business aspects, the technical aspects, and of course, very importantly, the legal aspects of our overall review. This is ongoing. And as mentioned before, we do think that we will be in a position next year to be able to launch a game that has NFT capabilities embedded in it. What game is a question that I do believe you asked? As of now, I don't think that I can rightly say, but I think that you probably have a good guess about what games we're looking to apply it to. And added to that, I just wanted to end by saying that we think that the MMORPG genre is one of the genres that best fit with NFT in many different ways. And as a result of that, that's why we are in preparations. That's why we do think that next year, we will be in a position to launch and share this service with you. However, for P2E also, for our various games and platforms in which we can apply this to, we are looking at this from various different angles. For P2E, I think that there's a lot of new interest in P2E in itself because it's becoming a very hot topic. However, as with any type of service, you need to be very comprehensive and thorough in terms of your review. So we believe that in addition to the interest that we see, it's important to look at the risks and also the criticisms that could follow. So for NFT, we do want to have a comprehensive exercise in which we would look at everything, the holistic approach. And as a result of that, be able to be in a position to manage any risks, if at all, from the beginning in a proper way with regards to the design.

[Foreign Language]

[Interpreted ] And just to elaborate a bit more about P2E, I think that I mentioned before that for the [ game ] platform, we do want to have two-way communication taking place. And I do think that you probably are familiar with the existing platform that we have, which is PURPLE. PURPLE enables gamers to enjoy -- not only enjoy cross-play across devices, but all our platforms, but also has various other functions. For example, there's PurpleOn, which enables streaming, there's PurpleTalk, which enables chatting. And right now, this is a platform that is opened and serviced in 40-plus countries around the globe. So what we want to do is use this platform as a foundation to build a global game and also global community of players. So for PURPLE and going forward, in addition to and maybe also utilizing the NFT technologies and the blockchain technologies that we talked about before, the long -- mid- to long-term vision that we have is to actually evolve this overall platform, which supports not only gaming, but also the community of our users to be able to create an overall wider and broader platform.

[Foreign Language]

[Interpreted] And maybe just to touch upon Metaverse. For Metaverse, of course, this is a very broad concept. And I do think that if we look at what our thoughts are on this topic, within the Metaverse, the elements that we believe are the most important is the creativity that a metaverse can represent and also the sustainability of the ecosystem that you are creating for your users. So if we look at what can actually be the linchpin that will connect that creativity and sustainability together, for us, we actually believe it's games. And this is not because we are a game company. But we think that it's the best fit in terms of the virtual location or virtual world that you're creating and to have interaction take place between the users. So as a result of that, because Metaverse in itself is such a broad concept and it does entitle very different elements, we think that this is something that requires a bit of a longer-term horizon. So different from the NFT or P2E, it's not something that we will be able to show you next year. But as you are probably aware, we do have a subsidiary called UNIVERSE, which is providing metaverse services. So it enables interaction to take place between fans and influencers. And if you look at the actual users of this universe, they are actually a very different profile from our core game users. For example, they represent a very different region. Most of them are overseas users. In addition, in terms of gender, there's a very high contribution from female users, which is a very different profile from the hardcore game users that we have. So we do think that this UNIVERSE can be a very good starting point for our Metaverse vision going forward. And we do think that if we can link our games to that universe, then that would be a good ending point or completion of our Metaverse. So for UNIVERSE in itself, as you may have seen, we do have a lot of partnerships and collaborations with companies in Korea and abroad. So for the overall direction of our Metaverse going forward, similar to what we have talked about for NFT or P2E for the technical aspects, we are reviewing that thoroughly. And then from also a business standpoint, I think that there are a couple of things that we would like to think through. And once we have a clearer picture, I do think that there will be a time that we can communicate that with you.

[Foreign Language]

[Interpreted] And just to ensure (sic) [ assure ] you that on the Metaverse front, this is something that we are fully committed to. And of course, I don't want to downplay Metaverse in itself. Just to share with you a few detailed statistics. In terms of the MAU of our UNIVERSE, it is at 4.4 million. Right now, 90% of them come from outside of Korea. And in terms of the overall profile and composition, again, there's no overlap with our core game users. In addition to that, initially at launch, we were servicing 130 countries. Now we're present in 216. So we do think that Metaverse is an opportunity that we will continue to explore, and we'll continue to build upon. I do think that there may be some slight differences in terms of priority versus other initiatives that we have. But of course, this is something that we are committed to continuously developing.

[Foreign Language] The following question will be presented by Jingu Kim from KTB Investment & Securities.

[Interpreted] So thank you for the opportunity to ask questions. And there are a few questions that I would like to ask you. First is working off of the comments that you just mentioned about NFT. I think that just from hearing what you're saying about your NFT services and the plans going forward that it's most likely that you are probably going to apply this to Lineage games that you will be launching in the future. If that is the situation for the Lineage institution as a whole, I think that a lot of the concentration of the users are in Korea. So and as you are aware, whether it be NFT or whether it be P2E, domestically, with regards to regulations, there's a lot of heavy regulations that are taking place. And I think that, that is why during your comments, you mentioned that legal would be one of the most important reviews that you would be conducting. So within the local regulatory framework, is there an approach that you think will actually satisfy us the stability that you would need with regards to your operations to actually make this work? So what is the approach that you're thinking of as of now? And how are you going to make that happen? And in addition to that, on the NFT side, I think that a lot of the you did mention and highlight this as an important area for you going forward. If that is the case, over the longer term, in terms of the number of NFT capable games that you want to release, could you share for us an example of a number of new games or a number of new titles that you're thinking about? The second question that I would like to ask you is about Lineage W. You did say that after the launch for the first week that on a daily global basis, you did have around KRW 12 billion in revenue. Would you be able to break down that revenue by region in terms of how much contribution there was from each of the different regions? And you also mentioned that November 10 was the peak in terms of your concurrent users. So what would that actual number be for the PCU? If you could actually share that number with us, that would be appreciated. And in addition to that, if you would be able to break down that PCU number in terms of contribution by region, that is also something that we would be able to appreciate. In addition, for Lineage W in itself, you also mentioned that there would be around second release countries that you would be looking at. So for the second round of countries, what type of countries are you currently actually looking at? If you could share some more detail, that is also something that we would appreciate.

[Interpreted] So maybe I can answer your questions one by one. In terms of the regulatory standpoint, I think that because of the regulatory dynamics that you talked about, that is why a lot of companies, when they are launching their service, actually start with overseas, and that is the general approach that is used. So I think that if we talk about what we are trying to do, it would be that for the new games that we are going to launch, I did say that there could be a showcase in the beginning of next year. And also Lineage W, there will be a second round of releases taking place in other regions. I think that you can understand our initial approach from that standpoint. So for the new game lineup that we will be showcasing in terms of new IPs and new games for next year, I think that, right now, we're at a stage in which we're exploring the possibility of applying NFT to these games. And secondly, I think there was a question about the breakdown by region. Of course, as you may be aware, we do not tend to disclose detailed numbers about revenue breakdown by region for specific games. However, what I can say is that if we look at Lineage W and look at the overseas user contribution and also the overseas user numbers in general, this is much higher than what we had expected. So right now, we have outperformed our expectations, particularly with regards to the total volume of overseas users as a whole. This is the highest level that we have seen for any game that we have launched. So as a result of that, going into next year, when we will be opening the second round of countries, we do think that, that will be a time in which we will actually see the results of our overall global strategy actually shine. So in terms of what we would like to emphasize and highlight is that, right now, I think that what we believe is most important is to see whether our global strategy is the right strategy to address the global market. So we need to have that right for us to be able to add on NFT or a wide variety of other elements. We also understand that there is concern whether a MMORPG which works very well in Korea can actually work overseas. So as a result of that, for the second round of launches that will take place, we are going to take into consideration the user characteristics of these markets, the contents that would be satisfy or fit in these markets, what the best platforms are and what the right business model would be. And that is all something that we are incorporating into the change necessary the changes necessary for our launches going forward. So this is all embedded into our plans. And in terms of the overall timing, though we are preparing a lot, we don't think that it will delay the process. So right now, the target would be to launch within the first half of next year.

[Foreign Language] The following question will be presented by Mike Hong from CIMB Principal Asset Management. [Foreign Language] The next question will be presented by Stanley Yang from JPMorgan.

[Interpreted] There are 2 questions that I would like to ask you. First is that when we talk about NFT and when we talk about play to earn, I think that for play to earn to actually work, you have to have the right mechanism in place in terms of the NFT. So as a result of that, for the NFT going forward in terms of where you're going to apply this, would it be to the existing games that you already have? Or would this be to a totally new set of games going forward? So in addition to that, for NFT to actually work, that means that there's tokens, there's coins that could be converted into real money for trade. So for this overall system, is this something that the company will be building proprietarily to have your own system in place? That's the question I have. And then secondly, as the CFO, I think that one of the things that you mentioned in the forefront is that you are going to work to try to maximize the overall firm value or enterprise value of the company. I think that if we look at it and see in terms of the success that you have had as a game developer, the company has been very successful. However, from a user standpoint, one of the areas in which people feel that the company could do a bit better is probably in terms of diversity and also in terms of innovation. So that had been said, in terms of your overall R&D strategy going forward, in line with your thoughts of maximizing the overall firm value or enterprise value of the company, do you think that there could be any changes that would be triggered within the strategy that you have on the R&D front? And if so, what would that be?

[Interpreted] So I think that the questions that you have just asked are topics that we, as a company, are also thinking about a lot, and they are top of mind for us also. So in terms of applying NFT and P2E as you are probably aware, for these 2 factors, we don't think that they are inseparable. It doesn't mean that you have to have both necessarily, but we do think that they are very closely interlinked in terms of their nature, and this is something that we do recognize. And in addition to that, to adjust the topic of whether we will be applying to new games or existing games, I don't think, for us, it's a question of whether it would be one or the other. I do think that this is an area in which we do are open to various possibilities. In addition, not only to share my view about this overall topic, but the view of the overall IR team as a whole, I think that what we can say is that for NFT and P2E to succeed, what we actually believe is the most important is to have the capabilities to operate and manage the overall economy that you are creating of these users that will be having various assets and be using those assets. So how you run the overall operations is what we believe is very important. So just introducing NFT in itself does not guarantee success for you, but how you are going to introduce the concept of virtual assets, the concept of actually earning these assets and exchanging them and sharing them, all of these need to be defined. And as you are well aware, this is an area in which we excel in terms of operations and making these definitions. This is an area in which we have a vast amount of experience and also operational know how. So as a result of that, this is not rocket science, meaning that what we believe is the most important is getting the operational aspects rate to enable users to stay and enjoy this overall world that you create and also to be creative within that world. We do think that, that is where the key to success lies. So for the technical aspects, that's already done and completed, but the reason why we're not actually moving to the forefront on this initiative is that we are still pondering upon in terms of our value proposition to the user, how are we going to present that? What would be the best way to do that and how we want to take it forward is what we are continuously thinking about. So that would be our position. And in terms of whether we will be issuing our own coins, the technical aspects again are something in which we're almost at the final stages of reviewing. However, again, this is a decision that we need to make in terms of what type of economy that we create would be the most stable and present the best value to our users. So that is where we continue to think. And in terms of your point about innovation and diversity, I think that this is an area that we will recognize. I recognize it even more than you do. So as a result, it is an area that we seriously are continue to think about and try to change. So in terms of our R&D strategy, we do believe that, for the service areas that we look at, there needs to be change. There needs to be more diversity in terms of the regions or diversity in terms of the genres. And we do need to adopt platforms 2 platforms, 2 overall business models and content that best fit the areas that we are going to service. So I think that these are all issues that we are well aware of. We're working on all of that. The efforts of the work that we are doing is something that you will see reflected in the new games to be coming forward. So as a result, I think that when you see the showcase that comes next year, you will actually be able to see a glimpse of what we are trying to do in terms of the approach that we're trying to take.

[Foreign Language] The next question will be presented by Dong Hwan Oh from Samsung Securities.

[Interpreted] So there are 2 questions that I would like to ask you. First is about Lineage W. It is known to the market that in the fourth quarter that the company has been engaging with a lot of large influencers on a big scale to engage these influencers for this game. So in terms of the marketing spend related to that, what would be the budget and what would be the cost? And what would be the outlook as a result of marketing for the fourth quarter? In addition to that, for NHW, you did talk about the peak concurrent users and the record that you have hit. So if we were to look at the global users before and after Lineage W, you know how would that look what would that look like? The second question I have is about the launch schedule for TL. If we were to pinpoint the launch schedule a bit more specifically in terms of the quarter next year, what quarter would that actually be sitting in?

[Interpreted] So to address your question in terms of the marketing, of course, marketing is necessary to drive performance. However, what I can say is that if you look at the third quarter and look at the marketing spend on a YTD basis and compare that on a Y o Y basis to that of last year, we have actually seen a 100% increase already. And as a percentage of revenue, it's at around 11% of revenue. So for the fourth quarter, we do think that we will be active on the marketing front. Because we will be going into the launch for Lineage W in the second stage region areas, as a result of that, we do think that there will be an increase. Unfortunately, I won't be able to share specific numbers with you. But I do think that if you look at the fund up to the third quarter, you would be able to get a good guess or idea about where we're headed. For the concurrent user numbers, again, unfortunately, this is not a piece of information that the company would be able to share with you. However, again, what I can say is that and this is something that I did say before, but for the overseas user traffic, this is something that has been unprecedented for the company. So we are at the highest level that we have seen historically for any game that we have launched. And not only is this a very solid trend, but what we see to be very encouraging is that it is on an upward trend. So that is something that is also very rare. So having that upward trend to enjoy is something that we would like to highlight. For TL and what quarter we will be launching next year, again, unfortunately, this is not something that I can address today. But I think that what I can say is that in terms of preparation, we are at the stage in where we are preparing for the launch. So we don't think that there will be any delays. But to be safe, I think that the second half of next year would be the timing that we can share with you.

[Foreign Language] The next question will be presented by Seyon Park from Morgan Stanley.

[Interpreted] And of course, before I start, I would like to congratulate the CFO about his new position. The first question that I would like to ask you is about the comment that you've made that overseas user base and the gamer base was significant. I'm not trying to take issue with that, but it is a known fact that for Lineage in itself, the franchise has a very strong base in Korea and this area also very popular in Taiwan. So I think that we do assume that the Taiwanese user base as a whole will probably be a significant portion of the overall global user base. But if we look at the users that are outside of Korea and outside of Taiwan, maybe could you elaborate about what the response is in the other markets? For example, the big markets for this game will probably be the U.S., Europe and Japan. And if we look at the initial feedback that we're hearing, it seems to be that a lot of the gamers still believe that it's still hardcore. So for your plans going forward, for customization, for the monetization scheme and also in terms of the content, do you have plans to customize and to what extent? The second question that I would like to ask you is related to you and your new position. I think it's well known that you are an expert that has an extensive amount of experience in the M&A area. If you look at and see, I do think that it's a well-known publisher in the MMORPG space and diversification is something that you said that the company would be interested in. So the question that I would like to ask you is, would M&A activities be one of the options that the company would be exploring? So for example, to date, if you look at the M&A track record in actuality, the company has not done a lot. But going forward, is can we look forward to more of a presence in the M&A arena? For example, in relation to maybe Metaverse or maybe in relation to blockchain technology, would there be areas that the company is interested in?

[Interpreted] So maybe I can address your second question first and then go on to the first question. So it is true that on the M&A front and in terms of inorganic growth, the company to now has not been very active. However, one of the focuses that we do have is on the global markets. So as a result, we are already engaging in a multiple number of very active discussions and opportunities. So this is something that is in review. In terms of area, of course, games are a given. But not only games, but we are also very generously looking at and seriously looking at IPs and content related areas and also at the end of the day to create a Metaverse platform is also very important and critical. So that's another area that we are also looking at. So there are various pillars to what we are currently looking at. And internally, we do have a dedicated investment team. So that investment team is taking the lead to actively review and explore these wide opportunities. And I do want to say that we're not limiting ourselves to overseas alone, but, of course, overseas is very important. We do have an entity that we have established a while back called NCWest. And through NCWest, we have acquired in the past a company called ArenaNet and we have the experience of operating an IP that the company has owned. So this overseas experience is in place. And added to that, we do think that NCWest can be a very solid and good stepping stone and an important stepping stone for us for M&A activities of the future. So I do think that there will be a point of time for me to share more solid and tangible results with you on this front. But if you look at our cash balance right now, it stands at around KRW 2.2 trillion as of the third quarter. Also in terms of our leverage, it's almost nonexistent at the company level. So I think that in terms of size of opportunities, we're not bounded by anything. We're interested in big. We're interested in small. We're interested in all different sizes. And I think that where we're coming from is from our strategy of pursuing more globalization and also acquiring new users, new business models and being able to achieve more. So as a result of that, I don't think that we're only looking at buyout opportunities. We're also looking at other types of opportunities. For example, if necessary, taking a minority equity stake in a company to build a very solid partnership is also something that we would actively look at and pursue. So I think that, that would be what I could say to that point. And maybe to address the first question that you have, it is true that the Korean market and Taiwan market do represent a significant portion. However, one thing that I would like to share with you in terms of information point is that in the list of companies or countries rather from where we are deriving revenues, there are totally new names that we have never seen before. So we are generating revenues from markets in which we have not been generating revenues in the past, and we find this to be very encouraging. So we do think that, that is representing something new for us. And in terms of the second round of releases that we will be having focusing on the Western markets, whether there will be more customization of content, we do recognize that for each market, when you release an MMORPG game that there are characteristics that the market is looking for. So of course, we will be trying to satisfy those differences and those changes. That does not mean that the fundamental of the game in itself will change, but it does mean that in terms of various elements that need to be reflected in terms of customization, that will be something that we will incorporate. So I think that I'm repeating myself. But again, I think that these are elements that you will be able to see for yourself once we have the showcase next year.

[Foreign Language] The last question will be provided by [indiscernible] Kim from [ Kim ] Securities.

[Interpreted] There are 2 questions that I would like to ask you. I think that for NC as a company, one of the strengths that you have is that in the domestic and local game market, you have one of the most loyal user bases of all companies. And as a result of that, I think that from that fact, if you do introduce NFT, one of the concerns that may arise is that there would be a highlight on the possibility of gambling taking place because or more additional gambling features being added to the game in itself. If you were to provide NFT to only your global users and not to your domestic or local users, I do think that the local users may believe that they are being left out. And as a result of that, there would be a relative sense of being somewhat discriminated in terms of the situation. So for that possibility, how are you thinking of addressing this issue? And the second question that I would like to ask you is that for NFT, I think that to be able to manage possible external externalities or external variabilities and also for the volatility that may arise too because of such situations, securing the right amount of or a sufficient amount of transaction volume is something that is very important. So to be able to do so, in most cases, to add on that stability feature, there is usually a game in place or a commerce platform or service in place to actually support the transaction volume. So from that standpoint, for your M&A interests and opportunities, would that direction also be included into the scope of M&As that you're looking at? And also, if we were to introduce an NFT game, I do think that the most well-known IP that you have on a global basis would probably be Guild War (sic) [ Guild Wars ]. So if that is the case in your scope of considerations for applying NFT, if Guild War (sic) [ Guild Wars ] included?

[Interpreted] So to address the questions that you have asked, I do think that the questions that you ask are very good questions and they go to the core of what is very important. In terms of the first part of your question about the sensitivity that the local users may have versus the global users, this is something that we are very well aware of. And as a result of that, internally, we are, of course, fully prepared to deal with such issue. Unfortunately, I don't believe that this earnings conference call is the right forum to address this issue because, of course, it's a much larger and big picture issue. But I do think that there will be opportunities in the future, for example, when we have our showcase or maybe somewhat before that, to address and talk about this issue then. So again, we do understand the importance. We recognize it. We are prepared for it. But unfortunately, we don't think it's the right time to discuss. And also for NFT, the stability of and the necessity of stability in the transaction volume, that goes back to the point that I made about the operational know how that is necessary and also needed. As you are aware, we have operated and managed the Dinos for a very long period of time. And we are probably not only the first in Korea, but the first in the gaming industry to the game industry to actually have this type of economy. So we have built it. We have operated it. We have experience in it. So going back to the point of your question about whether M&A is a consideration in whether NFT would be a consideration for our M&A activities, I did talk about the 3 main pillars, which would be games, IP and content and platform. I intentionally actually left out NFT but you pinpointing it, I cannot help but address it. The answer would be yes. It is a possibility that we are looking at. We are interested. But, of course, just because we're interested doesn't necessarily mean that something will actually happen and that's more true in terms of M&A. So I think that what we can say as of now is that it is part of the areas of interest that we're actively looking at. And also to address the last point about Guild War (sic) [ Guild Wars ] and whether this very popular IP overseas would be part of the NFT scope of applications, again, I don't think that this is the right forum to be addressing this issue. We do think it would be a possibility to explore. But I think that this is also another topic that we would like to save for a better opportunity to communicate with you. So I think that maybe the time would be better next year to answer this question. So maybe we can just end by saying, again, thank you for all of your time. I do understand and recognize it has been a lengthy session. So I don't I hope we haven't taken up too much of your time today. But I just wanted to end by saying 1 thing that I can promise you as the CFO of this company is that going forward, in terms of listening to what the market is saying and also trying to be more open in terms of our communication and spending more time in this area is something that I do believe that we are committed to. So up until now, I think that for due reason, the company has been a bit conservative in terms of sharing information with you and communicating with you. And of course, there were very good reasons why it was so and why it needed to be so. But I think that going forward, we have the hope of being a bit more interactive, a bit more open. So we do want to, to the extent possible, of course, actively communicate with the market. So the IR team to now has been doing a very good job in this area. If you have any additional comments or questions, please do not hesitate to communicate those to them. And I would like to just end by saying that we will be a company that will have an open position and also listen to what you say. With that, I would like to end today's call. Thank you very much for your time. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]