Netmarble Corporation (A251270) Earnings Call Transcript & Summary

[Interpreted] 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 Netmarble. This conference call will start with a presentation, followed by a divisional Q & A session. [Operator Instructions]. Now we shall begin the conference of the fiscal year 2023 First Quarter Earnings results by Netmarble.

Good morning. This is [indiscernible] from Netmarble's IR. I thank the shareholders and analysts for taking time out of their busy schedules to attend today's earnings session. Today with us are CEOs Young-Sig Kwon and Gi-Wook Do; and Head of Global Business, Seungwon Lee. They will address your questions after the results presentation. The content presented today has yet to undergo an independent auditor's review and could be subject to changes upon such review. With that, CEO Gi-Wook Do will give the results presentation.

[Foreign Language] [Interpreted] Good morning. This is Gi-Wook Do. I will give you the general results for Q1 2023. Please refer to Page 3. With new title absence and seasonal influence of overseas business, Q1 revenue decreased 12.3% Q-o-Q and 4.6% Y-o-Y at KRW 602.6 billion. With quarterly revenue decrease, EBITDA decreased 43.7% Q-o-Q and 56% Y-o-Y at KRW 20.1 billion. EBITDA margin rate recorded 3.3%. Next page is on operating and net profit. Q1 saw an operating loss of KRW 23.2 billion and net loss of KRW 45.8 billion and controlling shareholder loss of KRW 37.7 billion. With the non-occurrence of intangible asset impairment that was reflected in the previous quarter, nonoperating loss increased KRW 377.9 billion over the previous quarter. Next page is on regional revenue breakdown. Overseas revenue in Q1 was at KRW 504.3 billion. Overseas revenue contribution decreased 1 percentage point over the previous quarter at 84%. The regional breakdown is as follows: North America 48%; Korea 16%; Europe 13%; Southeast Asia 10%, Japan 7%, and others 6%. Next page is on genre mix. In Q1, casual games accounted for 47%; RPG 27%; MMORPG 16%; and others 10%. The genres remains diversified. RPG revenue has decreased 7 percentage points over the previous quarter due to overseas seasonal influence of Marvel Contest of Champions. Next page is on game portfolio. As in Q1, Jackpot World accounted for 10%; Marvel Contest of Champions 9%; Cash Frenzy 9%; Lotsa Slots 9%; The Seven Deadly Sins: Grand Cross 7%; Ni no Kuni: Cross Worlds 5%; Lineage 2 Revolution 5%. The portfolio remains diversified. Next page is on major cost structure. Operating expense in Q1 recorded KRW 630.8 billion, which is 11.3% decrease Q-o-Q and 1.9% decrease Y-o-Y. Commissions paid was at KRW 247.1 million, with revenue decrease, demand decreased 9.0% Q-o-Q and increased 0.7% Y-o-Y. Labor cost was at KRW 187.5 billion. With headcount decrease, it shrunk 7.4% Q-o-Q and increased 0.3% Y-o-Y. Lastly, marketing cost was at KRW 100.3 billion. With absence of new titles in Q1, it decreased 17.9% Q-o-Q and 11.1% Y-o-Y. Now on our new titles lineup. In 2023, the company is going to have a lineup of 14 new titles in total. They will be 9 multiplatform-based games [indiscernible] new titles, using competitive IPs such as Solo Leveling: ARISE, Arthdal Chronicles and 5 China-licensed titles. The company in Q1 focused on adding sophistication and polishing to the [ II-B ] launch [ platform ]. Development is well underway. We are doing our best for successful launches of well-made titles, as that will set us apart and prove our game development competencies that will place us once again as the global culture game company. So I look forward to your support and interest. This concludes the results presentation. Should you have any questions, we will be glad to address them.

[Interpreted] Now Q & A session will begin. [Operator Instructions] The first question will be presented by Sang-Hyun from IBK Investment Securities. Please go ahead with your question.

[Foreign Language] [Interpreted] Yes, I have 2 questions. Well, first, it's related to your introduced Everybody's Marble: Meta World that was duly launched in April. So what is the expected revenue for Q2 with this title? What's your expectations going forward? And secondly is on your marketing and labor related to cost guidance. Could you give us some numbers as to the marketing cost and labor guidance? Foreign Language] [Interpreted]. Yes. This is CEO Kwon, addressing the first question. Now on Meta World, the global launch. Well, with the given situation, the launch is impossible in Korea and Japan. So this time around, the launch centered around Thailand. And in Thailand, we are getting the results desired. And we do have plans to engage in further marketing activities for the U.S. And in '23, within the year, we are going to launch the title in Korea and Japan. But it's a global launch, but it was first initiated in Asia. So with that, we have limited influence from this title on our revenue. But with the full launch in U.S. and Korea, we do expect the title to be giving favorable influence to our revenue numbers. Yes. This is the second question addressed by CEO Kwon, on cost effectiveness. As is communicated in our fourth quarter year 2022 earnings release session, we are going to be paying keen attention to adding more efficiency when it comes to our expenditure. And as is illustrated in our Q1 data, we've seen tangible results on a Q-o-Q basis. And up until the fourth quarter of this year, we will continue our efforts going forward. So on a Y-o-Y basis, you will be and witnessing the influence of our cost-cutting measures. And compared to the first quarter, with the new title lined up for -- with the launches in the second half, there could be slight changes in our second quarter numbers. But percentage wise, we will be maintaining our status. And we will, of course, be monitoring and managing the numbers on a very thorough basis. Next question please?

[Interpreted]. The following question will be presented by [ Kim Dong Woo ] from Kyobo Securities.

[Foreign Language] [Interpreted] Yes, I have questions from the titles to be introduced in the Chinese market. Please brief us of your schedule. And could we know the publisher of your titles to be released in China? And for what title do you have the greatest expectation?