Pearl Abyss Corp. (A263750) 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 of the fiscal year 2022 second quarter earnings resulted by Pearl Abyss. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2022 second quarter earnings resulted by Pearl Abyss.

[Interpreted] Greetings. First of all, I express my deepest gratitude to the analysts and investors in and out of Korea for taking part in the 2022 Q2 Pearl Abyss earnings presentation despite your busy schedules. Before elaborating on today's business results, I would like to ask for your understanding regarding the following: The financial and business results contained in today's earnings release have been prepared for the convenience of investors and is subject to change depending on the final closing of our books. In addition, the accuracy and completeness of the financial and business results in the earnings results material are not guaranteed, and the company is not obliged to give updates of the accounts given after this date. So please take these factors into consideration. We have here with us in the earnings presentation today, Pearl Abyss CEO, Heo Jin Young; CBO, Kim Gyeong Man; and CFO, Cho Seok Woo. We will first hear the business performance presentation highlights from CFO, Cho Seok Woo and then engage in a Q&A session.

[Interpreted] Greetings, everyone. I am Pearl Abyss CFO Cho Seok Woo. Thank you once again for taking part in our company's earnings conference call despite your busy schedules. First, I would like to touch upon the Q2 major business highlights and performance. During Q2, Black Desert and EVE, riding on the back of user communication-based update, all continued stable performance. Black Desert during Q2, changed to self-publishing in South America and in 5 years since we started publishing, we accomplished global self-publishing. The South American market absolute size is not comparatively large, but we decided that in the future, we need global self-publishing for additional new title service. And actually, after changing to self-publishing, revenues in the same region increased 300% and more than 750% for new users, and we could confirm the good responses through self-publishing. In addition, in order to more closely communicate with our users, we started our offline meetings in around 2 years, starting with the Voice of Adventurers meeting in Boston, U.S. in April, we recently held user meetings in June and July and are sharing genuine conversations with our users. In addition, in Q2, Black Desert had large-scale content update. For online and console, there was the new patch, Drakania, which was introduced, and we also opened the season server where new users can quickly grow and enjoy the game. For mobile, with the launching of the Awakening class Yacha, we received positive acclaim from our users for our superior hit effect. For EVE Online, we held the off-line EVE fanfest for the first time in 3 years. We were able to share stories with our users in a long time and worked hard to create a tighter community. In addition, in Q2, with the EVE Evolved update with improved graphics, we created an environment where users could be more immersed in the game. We also adopted the AIR Career Program, which guides you when you select an appropriate occupation for yourself and heighten our user retention rate. Black Desert and EVE, with consistent communication with our users is solidifying its position as a representative MMORPG long-running game. Going forward, we will think more from the perspective of our users, operate the game and continue stable service. I will explain in more detail about our Q2 financial performance. This quarter's operating revenue posted KRW 94 billion, a 2.8% Q-o-Q increase. In the case of operating profit, we had minus KRW 4.2 billion of operating losses and net profit posted KRW 32 billion and grew 451% -- 451.7% Q-o-Q. I would like to cover operating revenue in more detail. First, I will explain about major IP operating revenue. The operating revenue from Black Desert IP in this quarter posted KRW 74.3 billion and increased 4.8% Q-o-Q. EVE IP operating revenue posted KRW 17.6 billion and slightly declined Q-on-Q. For regional operational revenue, the breakdown was 17% for Korea, 31% for Asia, 52% for North America and Europe. For the operating revenue for different platforms, 72% was from PC platform, 21% was from mobile platform and 7% from console. I would now like to cover our operating expenses. Q2 operating expenses posted at KRW 98.2 billion, a 13.9% increase Q-o-Q. In the case of labor expenses, it posted KRW 50.6 billion, a 15.9% increase Q-o-Q. This was an increase due to our incentive, which was paid out, including treasury shares. For your reference, the numbers of employees as of end quarter posted 1,515, a 30% increase Q-o-Q. The numbers of developers among the employees was 977, 65% of the total employees. In the case of commissions, it posted KRW 21.4 billion, a 4% increase Q-o-Q. In the case of advertising expenses, it posted KRW 10.8 billion, a 31.8% increase Q-o-Q. Lastly, I would like to cover our Q3 major highlights. We will provide consistent live service for Black Desert and EVE and do our best to prepare for new IP. Black Desert in Q3 will also provide diverse new content. First, we recently updated the reawakening version of the Drakania class, which was launched in Q2. With the fast attack speed, which was unseen in the previous classes, users' positive reviews are continuing. For mobile, with the launch of Drakania and Corsair Awakening, we will provide more fun. In the case of the recent Drakania update, daily users increased 32% and new and returning users increased 141% and 164%, respectively, and is receiving great response. In addition, continuing from the previous quarter, we plan to strengthen communication with our users. Recently, in July, we held the Voice of Adventurers and Black Desert Mobile Heidel Ball, and had time to share genuine talks with our users that met the user's perspective. We plan to hold the Heidel Ball for online and console users off-line to have closer relationship with our users. For EVE, we plan to open a new server for Chinese users in Q3, while maintaining the existing server based on Chinese users' feedback. We plan to provide new server, which can allow those to properly experience EVE's great experience. In addition, we will also add Spanish language support so that more users can enjoy the game in their comfortable language. Last but not least, I would like to cover the new IP progress situation. We are pondering upon the most appropriate place and method for us to communicate our news about Crimson Desert to many people. In addition, we are starting to discuss Crimson Desert service with our major partners. After the disclosure date and methods are decided, we will do our best to let you know as soon as possible. This year marks the ninth year since we started Black Desert service and we achieved global self-publishing this year. During this time, we increased service in different areas. And although there were many challenges, the marketing method that we had accumulated through our experiences and the communication taking into account regional user preferences is helping us greatly prepare for global new titles. Going forward, with our global service know-how that we had accumulated so far, we will do our best so that we can have unrivaled results, not only in existing service but also in the high-quality console game market. All of us at Pearl Abyss, from our CEO to all of our employees, are always doing our best to make our company greater. We will be looking forward to your interest and support. Thank you very much.

[Interpreted] With this, we will conclude the Pearl Abyss Q2 earnings release, presentation and start our Q&A session.

[Interpreted] [Operator Instructions] The first question will be given by Mr. Kim Jingu from Kiwoom Securities.

[Interpreted] I have 2 questions. First, I would like to ask you questions about your new title release schedule. Can you give us your information on a quarterly base for Crimson Desert and on a yearly base for DokeV. And I would also like to know your development progress for PLAN 8 as well. Second question is, although you mentioned this briefly in your earnings presentation, your future schedule for in-game video releases. I know for investors, you are planning to have these types of releases going forward. And you mentioned that you're going to have some pondering upon about the appropriate timing and method for in-game video releases. So can you tell us more about that? And can you also tell us more about in-game video related for DokeV as well?

[Interpreted] Thank you very much for your questions. And I would like to answer your question about the new title schedule going forward. I know that many people are waiting for our new titles. And for Crimson Desert, since our goal is to develop this as AAA console game, it is taking a little more time than expected, but we are seeing great progress. In a vast map, we have succeeded in having a very high degree of freedom. And with the best graphics and more realistic play experience, we now have the technology and skills to have all of this. And currently, for Crimson Desert, based on our enriched content, we have been increasing our game-playing experience and immersive experience and are heightening the playing fun experience of the game. Recently, we have had some experiences of actually showcasing Crimson Desert to many of our partners, including console companies. Along with demonstrations of our game, we have had venues where our partner company can actually directly play the game, but this was not disclosed to the public. Also on 24th of August this year, we're going to unofficially take part in gamescom event, so that we can show our game to more global game people and actually prove that our game is worth our playing experience. However, we ask for your kind understanding that for this disclosure, this is only limited to those in the game industry, so please take that into understanding. Going forward, before our official release of the game, we are going to show Crimson Desert to diverse partner companies and heighten the game's degree of completeness and also discuss different marketing methods. In order to show you and develop a higher quality game, it is true that the release of the video is a little bit later than expected, but we are still going to disclose a longer than 10-minute playthrough video within this year that we know many people are waiting for. For more detailed schedules, we will let you know after meeting with more partner companies. We also, once again, ask for your very kind understanding for the detailed release date of the game, taking into consideration the game's degree of completeness and our development schedule, please understand that it is not possible for us to disclose it at this time. However, through showing you the video of the game within this year, we will try to meet the expectations of many people who are waiting for Crimson Desert. For DokeV, we are focusing on developing games so that we can show you a better version of the game than the game video that we showed you before. However, since we are concentrating on showing Crimson Desert within this year, regarding how DokeV has been developing, we will disclose this to the public after our preparations are completed. Our company, because we are focusing on Crimson Desert and DokeV, which will be released earlier, is having a little bit [ delayedness ] in disclosing PLAN 8. However, we will also show you the development progress of PLAN 8 in the future as well.

It was our CEO, Heo Jin Young, who answered your questions.