NEXON Co., Ltd. (3659) Earnings Call Transcript & Summary

Hello, everyone, and welcome to NEXON's online earnings presentation. Thank you for joining us today. With me are Junghun Lee, President and CEO of NEXON; Shiro Uemura, CFO; and Patrick Söderlund, CEO of Embark Studios and NEXON's Board of Directors. Today's presentation will contain forward-looking statements, including statements about our results of operations and financial condition, such as revenues attributable to our key titles, growth prospects including with respect to the online games industry, our ability to compete effectively, adapt to new technologies and address new technical challenges, our use of intellectual property and other statements that are not historical facts. These statements represent our predictions, projections and expectations about future events, which we believe are reasonable or based on reasonable assumptions. However, numerous risks and uncertainties could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Information on some of these risks and uncertainties can be found in our earnings-related IR documents. We assume no obligation to update or alter any forward-looking statements. Please note net income refers to net income attributable to owners of the parent as stated in NEXON's consolidated financial results. Furthermore, this presentation is intended to provide investors and analysts with financial and operational information about NEXON, not to solicit or recommend any sale or purchase of stock or other securities of NEXON. A recording of this presentation will be available on our Investor Relations website following this presentation. Unauthorized recording of this presentation is not permitted. Now I'll pass to Junghun.

Thank you, Kawai-san, and good afternoon, everyone. Thank you for joining our call. Earlier today, NEXON posted a letter, slide deck and press release detailing our Q3 performance and Q4 outlook. On today's call, I will begin with some context, including some insights in the highly successful launch of ARC Raiders on October 30. Then Uemura-san will follow with detailed financial highlights. In Q3, we delivered revenue of JPY 118.7 billion and operating income of JPY 37.5 billion, both within our expected range. Our Q3 results and Q4 outlook demonstrates how the IP growth initiative we introduced a year ago is driving sustainable long-term growth. Our MapleStory franchise exemplifies how its elements of the strategy delivers growth. A strong recovery in Korea driven by new content, hyperoptimization in global MapleStory and regional expansion on our UGC platform, MapleStory Worlds. Also last week -- MapleStory Idle RPG is expected to further expand our player base with a relaxing casual experience. In total, MapleStory is starting to grow annual revenue by 40% in 2025, resulting in the highest annual revenue in the 22-year history of the franchise. And there is a clear sign of global progress. Approximately 40% of total franchise revenue is coming from outside of MapleStory's primary market, Korea. The rapid progress we've made in diversifying the content and globalizing the appeal of our MapleStory franchise can be applied to much of NEXON's IP portfolio. This includes the Mabinogi franchise, which is now in development for mobile release in Japan next year. And for Dungeon&Fighter, which this year released the first of 3 new games designed to introduce the franchise to large new audience in the West. Another strategic front in our global expansion plan is partnership. In 2024, our publishing agreement with Tencent delivered strong returns with the list of Tencent [ trying to move ] over in China. And on November 18, Tencent will host an open beta on our version of THE FINALS, especially adapted for Chinese players. Looking further ahead, we are also working with Tencent on Chinese adaptations of ARC Raiders and The First Berserker: Khazan. Among our plans for expanding NEXON's global footprint, a big driver is ARC Raiders, which launched globally on October 30 and established itself as #1 on Steam's list of top-selling games. With ARC Raiders concluding its second week in the market, we feel confident in saying it's off to a particularly strong start. With us today is the founder and leader of Embark Studios and a member of our Board of Directors, Patrick Söderlund. We've asked Patrick to provide some color on the launch and the strategy to sustain purchase and engagement in ARC Raiders.

Thank you, Junghun. The response to ARC Raiders has received from players worldwide is particularly gratifying for the small team at Embark that created the game. As gamers ourselves, we believed we had created something meaningful, but the immediate and overwhelmingly positive response from players is truly humbling. We have watched engagement numbers climb higher and higher towards 700,000 peak concurrent players this weekend, exceeding our initial targets. The game received widespread acclaim from both players and critics earning a very positive rating on Steam, and ranking among the highest rated titles of the year on various sites. ARC Raiders is a labor of love that came with a few twists and turns. More than once we decided the game was good, but not good enough to match our vision. So we stopped and started over, decisions that took guts by the creative leadership and patience by NEXON. The result is a game that is highly differentiated from anything else in the market. The tech tests we ran in May and the Server Slam we hosted in October sent a message to players that ARC Raiders is not the same shooter we've been playing a year after year. Today, more than 4 million players agreed and bought the game and a special start for a newcomer in the market packed with established players. Looking ahead, we are committed to sustaining the excitement with promotions and content updates that expand the player experience and grow the game through 2025 and into the new year. Later this month, we will introduce a fifth map, followed by updates that include new ARC machines that require adaptation and tactical planning, new weapons and gadgets and new quests. All of it supported by world-class live operations for matching, balancing, cheat detection and what we call quality of life features that constantly strive to improve the experience. In summary, we are deeply humbled and inspired by the passion global players have shown for our game and deeply committed to sustaining that passion.

Thank you, Patrick, and congratulations to you and your team on delivering an outstanding game. ARC Raiders has sold over 4 million units to date across all platforms and promises to engage the core and attract new players with a content plan that extends through 2026. We believe that with Embark's commitment to live operations, ARC Raiders can grow to become an enduring contributor to the NEXON's portfolio of blockbuster global franchises. With that, I will turn the call over to Uemura-san for a detailed review of our Q3 results and Q4 outlook.

Thank you, Junghun. Q3 revenue and operating income both came within the expected range at JPY 118.7 billion and JPY 37.5 billion, respectively, driven by solid performances from our 3 largest franchises. Year-over-year revenue and operating income declined by 12% and 27%, respectively, due to last year's launches of Dungeon&Fighter Mobile in China and the First Descendant. Net income exceeded our outlook at JPY 38.2 billion. Year-over-year, it was up 41% primarily due to a JPY 9.2 billion FX gain in Q3 compared to a JPY 19.6 billion FX loss in the year ago quarter. Turning to the franchise review. The collective revenue from our 3 major franchises declined 11% year-over-year due to a revenue decrease in Dungeon&Fighter Mobile. The PC Dungeon&Fighter achieved 72% year-over-year revenue growth driven by positive player reception to a series of content updates. On the other hand, total franchise revenue declined by 45% year-over-year due to the mobile launch in 2024. In Korea, Dungeon&Fighter delivered 145% year-over-year revenue growth. In China, Q2 revenue exceeded our expectations and marked double-digit growth year-over-year, driven by the successful Summer and National Day update. As for KPIs, MAUs be used in ARPU were all up year-over-year. For Dungeon&Fighter Mobile revenue came at the high end of our outlook, multiple updates, including Level Cap release plus new Dungeons and rave content drove quarter-over-quarter revenue growth. The first codeveloped content with Tencent was released in late September, which have maintained key matrix including retention rate. The MapleStory franchise sustained its momentum from the previous quarter with 61% year-over-year revenue growth in Q3. In Korea, MAUs, PUs and ARPU were all up year-over-year, reflecting strong momentum from the summer updates. As a result, Korea MapleStory increased its revenue approximately 3x year-over-year. Conversely, global MapleStory declined year-over-year. MapleStory Worlds delivered a year-over-year growth of over 8x. FC Online revenue increased year-over-year in Q3, exceeding our expectations, driven by the successful team of the season update. Mabinogi Mobile, again made a strong contribution this quarter, while Q3 revenue was somewhat below expectations. Moving on to our fourth quarter outlook. We anticipate double-digit growth year-over-year in MapleStory and FC franchises as well as PC Dungeon&Fighter. Also, we expect to benefit from contributions from Mabinogi Mobile and new titles launching in Q4, including ARC Raiders, MapleStory Idle RPG and the China service of THE FINALS. Consequently, Q4 revenue is expected to be in the range of JPY 115.8 billion to JPY 129.3 billion representing a 45% to 62% increase on an as-reported basis or 43% to 39% increase on a constant currency basis year-over-year. We expect the Dungeon&Fighter franchise revenue to decline roughly 10% year-over-year. For PC Dungeon&Fighter, we anticipate continued year-over-year growth in both Korea and China. For Dungeon&Fighter Mobile, we expect revenue to be roughly flat sequentially driven by multiple updates despite a typical weak seasonality. The next release of co-developed content with Tencent is scheduled for next year. Moving to MapleStory, we expect the franchise to grow approximately 40% year-over-year, driven by a strong performance in Korea. Our revenue increased from MapleStory Worlds and a contribution from a new title MapleStory Idle RPG. We expect the PC version of MapleStory in Korea to support its strong player engagement with the release of the winter update. For global MapleStory, we expect a slight year-over-year revenue decline. We also expect revenue per MapleStory Worlds to grow year-over-year in Q4. In addition, we will benefit from the contribution from MapleStory Idle RPG, which launched on November 6. For FC franchise, we anticipate year-over-year growth to continue in Q4 despite the absence of major professional soccer events in 2025, we expect the franchise to finish the year with revenue roughly flat compared to the strong performance in 2024. Overall, we expect Q4 revenues from the 3 largest franchises to increase by approximately 15% year-over-year. For Mabinogi Mobile in Q4, in which we anticipate a sequential moderation in revenue, we also expect to sustain players with exciting collaborations and new content updates. Since its launch on October 30, our creators has already sold 4 million copies. We plan to sustain player engagement and drive additional purchases through a high cadence of events and new content drops. THE FINALS is set to start the open beta in China on November 18 and will modestly contribute to our Q4 performance. Moving on to the operating income outlook. We expect Q4 operating income to be in the range of JPY 21.7 billion to JPY 31.9 billion. Year-over-year, we anticipate increased variable costs associated with contributions from new titles launching in Q4, including ARC Raiders and Mabinogi Mobile. Also, we expect increased marketing expenses primarily associated with promotions for new titles launching in Q4, such as ARC Raiders and MapleStory Idle RPG. In addition, we expect increased cloud service costs and fees to creators in MapleStory Worlds. On the other hand, we expect another gain of approximately JPY 5 billion associated with the liquidation of our subsidiary funds. Despite the year-over-year operating income increase, we anticipate net income to be in the range of JPY 22.2 billion to JPY 30.6 billion, representing a 31% to 4% decrease on an as-reported basis or a 38% to 14% decrease on a constant currency basis year-over-year. This is due to the comparison against the JPY 31.7 billion FX gain on cash deposits in Q4 2024. Finally, I will provide an update on our shareholder return initiative. NEXON has been steadily executing our IP growth initiatives to enhance shareholder value over the medium to long-term. With significant and stable cash flows and a robust balance sheet already in place, we are well positioned to continue driving substantial growth while enhancing shareholder returns. To that end, NEXON's Board of Directors today approved a doubling of the year-end dividend up from the initially planned JPY 15 to JPY 30 per share, reflecting our firm confidence in continued stable growth and cash flow generation from our core franchises and new titles in development. Accordingly, our FY '25 annual dividend forecast will be JPY 45 per share. And the FY '26 annual dividend forecast will be JPY 60. Additionally, under the year JPY 100 billion share buyback policy outlined in February, we completed a JPY 25 billion buyback on October 24. And in total, we have completed a JPY 75 billion buyback to date. Also today, our Board approved the execution of the repurchase for the remaining JPY 25 billion worth of shares scheduled from November 12 to January 26, 2026. We will continue our fundamental policy of returning more than 33% of the previous year's operating income to shareholders while promoting proactive shareholder returns through both stable dividend payments and flexible share repurchases. At the same time, we will maintain a robust balance sheet that supports growth investments and strategic capital allocation while remaining committed to enhancing capital efficiency. With that, I will turn the call back to Junghun.

Thank you, Uemura-san. As we near the close of another exciting year, NEXON's management team measures our progress in 2025 with a humble sense of accomplishment. NEXON is delivering on the goals outlined in our 2024 IP growth strategy. We validated our game plan for generating [indiscernible] in our large established franchises with new content and globalization. And we are creating sustainable horizontal growth with the launch of new games like ARC Raiders, which has set a record as the largest and most successful global launch in NEXON history. At the same time, we are actively pursuing strategic partnerships and investments that will accelerate our growth in high potential markets for long-term value creation. Backed by the strength of our business, a robust balance sheet and strong cash generation, we have doubled our dividend in conjunction with execution of JPY 25 billion share buyback to provide greater value for our shareholders. This concludes our summary. Operator, we are ready to take questions.

[Operator Instructions] The first question is from Mr. Seyon Park from Morgan Stanley.

So I have 2 questions. The first is relating to ARC Raiders. Congratulations to Embark and the team for a very strong start. I know having gone through the cycles. It's been a long process, but it's great to see that the game has come out in such a great quality. Can I ask, just given the current trends, whether you have an estimate of roughly how many units you expect to sell by maybe the end of the year? And also, what that revenue mix is between the actual sale of the game. And then if there are any micro transactions within the title? And is it fair to assume that as time passes, that revenue mix would be more towards in-game item sales going forward? That's my first question. My second question is relating to Dungeon&Fighter Mobile and the hyper localization that Tencent and NEXON is doing together. Can you maybe provide a little bit more detail about what that's been able to accomplish. And as we have more title or more updates that come out in the future, can we maybe expect a recovery for the D&F Mobile revenues in China going into 2026? [Interpreted]

Thank you very much, Seyon, for your question. I believe you had 2 pieces of questions, second of which will be answered from my end on Dungeon&Fighter Mobile in China. For the first one on ARC Raiders, Patrick will be able to provide his view directly. And so right now, Junghun mentioned that regarding the response to ARC Raiders related question, Patrick will be responding to that. But since the questions pertain to quantitative point, our CFO, Uemura, would like to respond to those questions.

[Interpreted] First of all, thank you very much for your warm comments regarding ARC Raiders, and we are very happy to see a very robust start of this game. As to your question about what is our forecast for the sales for Q4, we believe that it will be somewhere around 5 million units, and the best maybe it might be 5.5 million units altogether. So far, we have sold 4 million units even given the very short period of time since its launch. And we are encountering Christmas season and the competitive environment will be severe. So we started very strong, and we believe that we might moderate at one point in time, but we plan to sell the number of units that I have told you already. About your question regarding the revenue mix, it is basically a package game. And so most of the revenue is from the sales of the package and not DLC. But going forward, there will be more DLC drops and there will be some changes in the revenue mix. But all in all, I think it will follow the trajectory of conventional package games.

I can add to that. This is Patrick. There are, obviously, today like Uemura said, predominantly packaged goods sales. We have an in-game store where we allow for micro transactions, cosmetics and other aspects that players are enjoying. We will, of course, increase the availability of content in the store as we go along. And like we've said publicly, we aim to support this game for a long time and to have frequent content drops, both free and paid going forward. [Interpreted]

[Interpreted] All right. So I'll be able to provide my answers to the question on Dungeon&Fighter Mobile. As mentioned in our previous earnings calls as well as I have done recently, we are right now making a long-term effort to bring in recovery to Dungeon&Fighter Mobile and improve the game. So this is just like how in PC Dungeon&Fighter in China, we are addressing and resolving the problems that we had in '24 and '25. So in regards to our co-development efforts with Tencent, of course, we are expecting and hopefully, we are expecting increase in traffic and revenue. So adding on to the content that will be produced in Korea with this development effort with Tencent, we will be able to provide more locally tailored content as well as more timely events in a more ample manner. So with that, I believe we will be able to expect some traffic and revenue increase. So our first co-developed content with Tencent was released in-game on September 24. And from the player retention perspective, it was received very well. So as I believe many of you will be already expecting for both PC and Mobile Dungeon&Fighter, we are now finalizing our New Year's plan for next year as well as the development road map for the year of 2026. So for Dungeon&Fighter Mobile's 2026 plan, we do have plans to add not only the Korea developed content, but the co-developed content with Tencent in quite an ample manner. So for 2026, we are confident that we will be able to see some stronger performance there. That concludes my answer. Thank you.

Next, we will take a question from Yijia Zhai of UBS Securities.

[Interpreted] I have 3 questions. My first question is related to ARC Raiders. You commented that there will be in-game charges. And I would like to confirm about that. You also commented that the trend of the sale of this game will be quite similar to regular or ordinary console based game. So I would like to confirm that you mean that the in-game charge will not contribute to the next fiscal year's performance as that is my first point that I would like to confirm. And also, any deferral related to the in-game charge and also any performance-based bonus in the fourth quarter?

[Interpreted] The comment I just made is on the sales revenue mix currently, current revenue is mostly made up of the packaged sale. And also Patrick added his comment saying that we will be focusing on adding in-game content in the future. So that will be the focus going forward. So towards next fiscal year, we will be focusing on DLCs. And your question on deferral, whether we defer the booking of the sale of such item will vary depending on the item, so there will be a variety of items sold in-game. And partly, there would be deferrals, but that amount will not be large, relatively small.

[Interpreted] Can you also comment on the bonus related to the performance?

[Interpreted] My apology for missing that question. With regards to the performance-linked bonus, that will be calculated within the compensation structure that the company has. And so our policy -- company's policy is to provide bonus for the performance generated. So basically, that is how we handle our human capital, and that is something that we are supposed to do. So it's possible that in the future, we will be paying a performance-based bonus.

[Interpreted] My second question is related to Dungeon&Fighter Mobile. In China, by the end of September, already a jointly developed content have been released and partially, that is reflected in the KPIs such as MAU. So do you expect this momentum to continue in the future? And what is the level you are targeting at what point did you achieve a certain level and then you plan to bring it back to that level? Or shall we assume that the status quo will be maintained and then it will bottom out?

[Interpreted] Obviously, our goal is to increase the numbers. So as mentioned earlier briefly, our top priority right now is how we can bring efficiency and how we can execute this entire development process in a more smooth manner with this content supply procedure with Tencent's co-development initiative in place. That is something that I've been looking into thoroughly for the past half of the year -- earlier half of the year. And after the update in September, we believe it has been kind of settled down in enough pace and efficiency. So speaking from our decades of experience in providing live service for our players, I don't think it is truly a healthy thing to basically see a temporary large boost in terms of traffic and revenue with a single large-scale update that wouldn't be healthy in terms of the long-term health of the game. So as mentioned, briefly earlier for our development road map for 2026, we are taking this long-term approach so that the game can be sustained in the longer-term, and we plan to improve and address problems in a gradual and step-by-step manner. So I think our franchises of Dungeon&Fighter and MapleStory have already proven such results for the past 20 years. And I would like to ask for your continued interest and support for Dungeon&Fighter Mobile going forward in 2026 as well. So that -- and with that, we will be able to provide and do our best to deliver results.

[Interpreted] The third question is on the MapleStory Idle RPG. We understand that the initial strength or momentum has been very strong. And I think this is a good example for your horizontal deployment of IPs. So if possible, can you share the regional breakdown of the global release? What -- how did it fare in each region? And also the breakdown between new players and existing players and also whether we need to be concerned about cannibalization with the existing titles. So this has been ranked #1 and I also would like to know how sustainable this position is?

[Interpreted] So MapleStory Idle RPG was launched on November 6 on selected countries globally, I mean, excluding some countries around the world. It's still less than a week since lunch, so it is pretty early. So I would like to ask for your understanding for my answer to this question. So this game has a clear distinction in terms of its genre when compared to other games within the franchise or the existing games within the franchise. So we haven't seen any cannibalization happening and we do not foresee to see any going forward either. To share some details here for Korea, Taiwan and North American regions, the performances are very strong. So the revenue numbers as well as the early retentions are quite strong. So basically, we chose this genre, and this was quite a strategic decision for us. But we thought that genre would help us generate a new group of MapleStory fan base within the franchise. So Idle games, typically, they do not boast too much of a long-term sustainability when compared to other genres. However, we will put long-term efforts so that the game can be -- game remains sustainable and our users can circulate within the franchise of MapleStory at large. That concludes my answer. Thank you.

The next question is from Robin Zhu from Sanford C. Bernstein Limited.

Congrats on ARC Raiders success. I guess first question, just curious on -- you said there will be a cadence of updates from here. Curious how much developer resources that you're putting towards the operations of the game versus, say, the original development team? And should we expect gameplay updates to add more game modes in addition to just going have more weapons and more missions and more of the same effectively. And second question, Embark has been pretty transparent about the use of generative AI in the development of the game. I'm curious if you could give some highlights on where you think AI has been most impactful in development to date or in the live ops that you anticipate? And further how management or the company plans to address some of the online controversy that's appeared as a result of the AI use? [Interpreted]

[Interpreted] I'll start, Patrick here from Embark. In regards to what -- how we make sure that the engagement stays strong. I think there's a couple of things that we look at. The first one is how the game is retaining players. And we have been quite surprised at how well the game is retaining players. Our retention numbers are, I would say, very strong in the first couple of weeks. I think that's evident by an increasing CCU population. The fact that we had our peak so far CCU on Sunday, yes, 10 days after launch tells us that players are obviously have purchased the game, but they're also playing the game a lot, and they're staying inside the game. So those are all good signs. What I would then say is in order for us to ensure that people stay engaged, you pointed out that not only do we plan on updating with content, meaning weapons, new ARC enemies, maps for that matter, but also quests, like you said, larger changes to the game are obviously conceptualized, but not yet communicated. And I think it's going to be a discussion with the community, what people are doing, what do we see them doing, but we won't be afraid to add to the game in a way that make people stay and play the game. And when it comes to our development team sites, the -- we will continue with the same team that built the game to support the game. We won't shrink the team. We may probably add to the team rather than shrinking it in order to ensure more frequent updates. I think you've seen us do 2 or 3 patches already. And in the coming weeks, there will be more meaningful updates. So we're started -- we're starting that journey now. The final thing you asked was in relation to Embark's utilization of artificial intelligence and reinforcement learning and machine learning in our development. And you also pointed out that there's some controversy around that subject, which I think is fair. What I would like to say is, I think there's a misconception that Embark is automated development. That's not how we do it. We don't automate development. We use AI and other means of efficiencies to unleash the creativity in the company. We don't use AI to lower costs. We don't use AI to replace a certain work field, we use it so that we can focus on the things that matter and the things that we would like to spend less time on that can be automated, we automate. I know that there's some controversy around audio. Our credits for the most part, is utilizing recorded voice because we believe that, that has a higher quality. Yes, there are instances of automated voices, but that is because we want players to get frequent updates quickly. So it's an efficiency and something that we do to be able to get players a better experience very quickly. It has nothing to do with our goal or we have -- we have a ton of voice actors, we love them, and we will continue using them. So I just want to make sure that, that's clear in regards to how Embark treats automation and AI.

Next, we will take questions from Yamamura-san of JPMorgan Securities.

[Interpreted] I'm Yamamura from JPMorgan Securities. I have 2 questions. My first question is related to the company's strategy. My second question is more of a confirmation of technical matter. So my first question on the ARC Raiders. To what extent do you expect that this momentum of sales will continue for the home game type of product. There are 2 types -- 2 ways to sustain the revenue in general. First is to reduce the price continuously so that there will be repeat customers in the long-term. The second way is to build up revenue through in-game charging. And listening to your response to the questions, I believe your company's strategy is the latter, which is to add revenues through in-game charging. And I wanted to confirm whether my understanding is correct. And speaking of the repeat purchase, repeat sale. In case of ARC Raiders, the initial price point is set at relatively low level. Therefore, I think there is a smaller room for further price reduction. So I understand that your focus will be more on DLC, paid DLC and I understand that this is in a way the first title that you achieved a major hit for the packaged games. So that's why I wanted to ask you on the strategy.

Patrick here, I'll answer that as well. The -- when it comes to price reductions and what business model we use in the game, I think that they're pretty standard as with any packaged goods game, which my previous career at Electronic Arts and other places, I spent 15 years in the packaged goods space. You will price promote when the time is right. That's any business, any company that does deals with packaged goods, whether it's digital or in the past in store will use that methodology. And we will do the same when the time is right. For the time being, we are doing well. We're selling well, and we don't have any price promotions planned in the immediate future. But we'll obviously assess the sales situation and make those decisions along the way. When it comes to -- this is the packaged goods game, which means that the development team and Embark and NEXON need to make sure that the people who have purchased the game are well treated and that get previous free content drops and things that they can -- so that they continue playing the game, but we will obviously like already in the game today, there will be a store, but we will have offers to players where they can purchase things if they choose to. We will not have -- we will -- it will be of cosmetic nature and there will be things that -- so that players can express themselves, business models that are very successful in many other games today in the West and in Asia. So there's no real difference there. But we will obviously evolve and make that component of the game larger as the time goes by. And that's the only way for us to sustain this game over a very long period of time, which is our absolute ambition.

[Interpreted] My second question is just to reconfirm when I look at the Chinese business revenue, the revenue is -- forecast is a decline on a Q-on-Q basis. And given that the mobile business forecast is flat, it hints that the PC will go down by roughly JPY 10 billion Q-on-Q. Is it within the regular seasonality range or is there any impact on the strike of Neople or any general environment in the South Korean market?

[Interpreted] Firstly on strike, currently, all the employees are coming to office and working. So there is no impact. As analyzed by Uemura-san in China in the Dungeon&Fighter franchise for PC, we have seen a major recovery in Q2 and Q3. And we believe that Q1 of the next year would be extremely important. So in Q4, we will focus on the maintenance, meaning that we will implement measures to enhance user engagement. It's not that there is some major slowdown of the game, but rather strategically in, Q4 we will focus on the strengthening of user engagement. That is the reason for the Q-on-Q revenue decline.

Next question is from BMA Securities Masuda-san.

[Interpreted] Okay. I also have a question related to the sustainability of ARC Raiders momentum. As you know, Escape from Tarkov which is another extraction shooter game is scheduled to be released on November 15. So I want to know what kind of impact do you assume?

Patrick here. Escape from Tarkov is a game that yes, it's finally releasing, but it's been in an alpha and beta mode for several years. So although it's an official launch and it's a game that many people have played for many years. So that, I think, is important. It's actually a game that served to some extent, as the inspiration to ARC Raiders. The goal with ARC Raiders was always to or the hypothesis with ARC Raiders rather, and the concept of ARC Raiders was that we believe that the extraction genre, which is seen as a very difficult than what gamers would describe as a hard core genre could be done more accessible, more easier to play so that we could get it to become a more mainstream product, and that was the goal. So Tarkov and other extraction -- successful extraction shooters was something that we looked at quite a lot. So while I do believe that they will do well. It's not a -- it's a new game, but it's not necessarily a new game.

Next, we would like to take questions from Atul Goyal of Jefferies Singapore Limited.

This is for Patrick. Looking at Embark's 2 recent launches, THE FINALS, which had a strong start, but faced challenges to sustain momentum. And then ARC Raiders, which has launched to significant fanfare and apparent success. What are the key learnings from these contrasting outcomes. And how have these experiences shaped your thinking around game development, live ops or community engagement going forward? [Interpreted]

I think it's a fair question that I'll try and respond to fairly. THE FINALS, like you said, came out and we, I think, managed to build an IP that had a lot of attraction. Players wanted to try the game and we had shown the world that we can build a game that on the surface or it was actually had a lot of innovation, and it brought something new to the genre of the FPS. What we -- and as I said, we had over 20 million downloads just in the first month. So the game did and we did also monetized quite well for being a free-to-play game. What we did not account for was the fact that there wasn't enough for players to do for -- to stay engaged over time. So the retention, both day 1, day 7, day 14, and we measure retention on certain cohorts and depending on how many days people have played. And also, even after a month, the retention numbers weren't where they needed to be. These are KPIs that are standardized today in our industry and numbers that NEXON are well aware of and Embark at the time of the release of THE FINALS knew of the numbers, but we didn't know how to get the right numbers in full transparency. What the team then did with THE FINALS, if we can stay on that for a second, was something that is difficult to do. They managed through listening to the community, working with NEXON and working with the development team, of course. They managed to increase the retention metrics, both the short- and long-term -- medium- and long-term retention, which then made players stay in the game. So that's why you've seen THE FINALS make a comeback. We have seen an increase in players. We're seeing an increase in both players and revenue every season now that we're launching. And even though the numbers aren't as big as something like ARC Raiders, they are meaningful to us and a game that's absolutely worth continuing supporting for us. So the learnings that we had from THE FINALS, I think, paved the way for the success of ARC Raiders. Like I said, as far as I know, ARC Raiders retention numbers are among the highest that NEXON have ever seen for any game that's been developed in the history of NEXON. And that's a testament to the hard work on making sure that we have features that are aligned to support retention. And retention and obviously, your daily active users and your CCU curves are very important -- to very important blueprints to look at as you determine how well a game is doing long-term. So far, so good, I would say. We're very happy with where we are now. But, and I say but we will keep obviously monitoring the situation and what's going on. And in a case where we see a decline, we will do our utmost to cure that decline by being methodical and swift like we have been on THE FINALS. [Interpreted]

This concludes the question-and-answer session. Mr. Kawai, I'd like to hand over to you for any additional or closing remarks.

Thank you. If there are no further questions, I would like to take this opportunity to thank you for your participation in this call. Please feel free to contact the NEXON Investor Relations at [email protected] should you have any further questions. We appreciate your interest in NEXON and look forward to meeting with you whether it is here in Tokyo or in your corner of the world. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]