Wemade Co.,Ltd. (A112040) Earnings Call Transcript & Summary

[Interpreted] Good morning and good evening. Thank you all for joining this conference call. And now we will begin the conference of the fiscal year 2022 second quarter earnings results by Wemade, Wemade Max and Wemade Play. This conference will start with a presentation, followed by a divisional Q&A session. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2022 second quarter earnings results by WeMade, Wemade Max and Wemade Play.

[Interpreted] Greetings, I am [ Ying Chi Min ] from the Wemade Strategic Communications division. Thank you very much for participating in Wemade, Wemade Max and Wemade Play Q2 earnings conference call. We have here with us at today's earnings presentation, our CEO, Henry Chang; Wemade Play CEO Lee Ho-Dae; and Senior Managing Director Kim Sang-Won from our Strategic Communications division. We will first hear opening remarks from CEO, Henry Chang; and then Senior Managing Director Kim Sang-Won will cover the 2022 Q2 earnings results, and then we will have a Q&A session. Our 2022 Q2 results have not yet completed review by the external auditor and are provided for our investors' convenience. Therefore, some of it may change during the auditing process, as well as the instructions by the Financial Services Commission. We also remind you to refer to the disclaimer included in the Q2 earnings presentation posted on our website. And now I will invite our CEO, Henry Chang, to deliver opening remarks.

[Interpreted] Greetings, everyone. I am Wemade CEO, Henry Chang. Thank you very much for participating in Wemade Q2 Earnings Release Conference Call for 2022. Blockchain Games is in its early phase and has just started off. And Blockchain Game platform, with the launch of our wemixplay.com, has shown its first appearance. Moreover, blockchain service and platform that uses universal blockchain technology is passing its first stage at this point as an industry. The processes that the past technology innovations of the past, like the Internet and smartphone, have gone through similar processes to become an industry, and this is taking place in the same way in the block [ C ]. Among the diverse fast ideas, only the few that the most will recognize as the most competitive will survive and lead the industry. Within the blockchain, the utility test of where to use this cryptocurrency will determine the success and survival, and Wemix has already passed this test. However, in order to become the open blockchain game platform that the company aims for and to become the #1 main net, we still need investment and commitment. For the past 4.5 years, our company has been investing at the level that is appropriate, a level that it can bear. We started with two people. And for a while, we prepare for WEMIX with only about 10 employees. However, at this juncture, where the vision has been solidifying and when the strategy to expand the ecosystem is all the more effective, aggressive investment is needed. For an investment to lead to results and for the results to lead to accounting numbers, there is a basic time lag. Moreover, it is all the more so in a situation where there isn't yet an established accounting system for cryptocurrency. Accordingly, it will be impossible to determine the results of the investment with the current short-term P&L statement. Instead, the results will need to be determined through whether how faithfully the strategy has been implemented and how much the vision has been realized. On the other hand, investment needs to be done at a level that the company can bear. Technically speaking, it needs to be done within a limit that can withstand the time lag between the investment and accounting. If not, the company cannot go on existing. Wemade has been sustaining the most aggressive investment possible for the company to bear in terms of talent investment and external investment for ecosystem expansion. This investment allowed WEMIX to be at its current position. We have been achieving our 100 game onboarding quest one by one and have launched WEMIX 3.0 test net on July 1, including our core elements such as stable coin, WEMIX dollars, [ fe kin dao ] and DeFi, we plan to open main net within Q3. Even with these aggressive investments, Q2 net cash flow is maintaining a plus. Moreover, in 2022 as a whole, including the second half, cash will increase. This is a result that the past years of investment have led to these results. The past crypto winter and global financial situation were opportunities for Wemade to secure our current competitiveness and leadership. We believe that the current economic situation will rather be a good opportunity for us to secure talent and expand our ecosystem. We will maintain our level of investment and commitment. At this juncture, I would like to ask you please do not be overly focused on certain quarter's status. And rather, please keep observing us to see whether Wemade have been keeping our word and about what we have been spoken about and how aggressively and stably we have been investing. We will do our best to meet your expectations. Thank you very much.

[Interpreted] Greetings. I am Kim Sang-Won from the Wemade Strategic Communications Division. I would like to highlight our 2022 Q2 key business results and share Q3 status and plans. First, I want to touch upon the new game title that we have developed, Mir M, launching results and global expansion plans. Mir M was launched on June 23 in Korea and posted KRW 5.3 billion of revenues as of Q2 end. Right after launching, it ranked Google Play Store at #3 top revenue game and has received positive responses and is being serviced smoothly. Based on our past Mir-4 service experience, by providing diverse growth systems and rich economic systems within the game, it is providing a new type of enjoyment to users, and we expect there to be strong support from global users following Mir 4, when the strength in in-game economies combined with WEMIX based blockchain economy going forward and when it is launched at Mir M Global. As of current, we expect to launch Mir M Global in the second half of this year. WEMIX platform new title game onboarding is smoothly taking place. Yulgang, Dark Eden M, Cryptoball Z, Four Gods, Every Farm, ASU, Icarus Online, a total of 7 games, have been launched through WEMIX platform in Q2, and we have plans to onboard diverse new titles, including Kingdom Hunter, Project [ Wemix Sport ], [ Abyssirium ], [ an econ match ] and [ any fine blast ]. In particular, we plan to diversify game genres in the Linux platform through onboarding of social casino games such as Grand Pris Slots and sport match prediction game Project WEMIX Sports. With the increase in the numbers of WEMIX mix platform onboarded games, WEMIX Wallet indicators have also posted, on the whole, a positive level. Cumulative numbers of WEMIX Wallet accounts have been growing each quarter during the past year, and in particular, the cumulative numbers of Wallet accounts as of Q2 end recorded 8.15 million and showed a higher than twofold growth compared to early this year. With the overall weakening of the cryptocurrency market, the Q2 WEMIX DEX transaction value decreased Q-o-Q, but WEMIX Wallet and DEX MAU maintained a solid level Q-o-Q. In particular, DEX MAU recorded KRW 800,000 and increased 29% Q-o-Q. In addition, in the case of NFT transactions, the numbers of transactions compared to the previous quarter increased greatly, and recorded a similar level of transaction value compared to the previous quarter, when Mir 4 global NFT transactions were reflected fully. In addition, through the WEMIX 3.0 Global Showcase held on June 15, we announced plans for our launch of main net, which we developed on our own, as well as plans to launch three platforms that we have been newly preparing for: WEMIX Play, Nile, and WEMIX DeFi. Among the three platforms, Wemix Play, the global blockchain platform, was first to be launched on July 1. Through WEMIX Play, which has maximized user convenience, users have been using diverse [ port ] information and functions including Reflect and Staking (sic) [ Stake ] 360 program. In addition, I would like to briefly cover 2022 Q2 consolidated tentative financial results. First, Q2 revenue posted KRW 109 billion and with the downward revenue stabilization of Mir 4 Korean and Global versions as well as existing gains in service, it decreased Q-o-Q. In the case of new game title Mir M, which was launched on June 23, the revenue of 7 business days was reflected in Q2, this quarter's financial results, and will be reflected fully from Q3. Regarding operating expenses, it posted KRW 142.2 billion and increased Q-o-Q and Y-o-Y. Labor costs went up with more headcount, and marketing costs increased Q-o-Q with the launching of new games. Accordingly, around KRW 313 billion of operating losses was posted and operating income and net income, respectively, turned to deficit compared to the previous quarter. Regarding details about the business segment and regional revenues, please refer to the earnings presentation materials that are uploaded on our website. With this, I will conclude my presentation on Wemade Q2 tentative financial results, and now cover Wemade Max 2022 Q2 tentative financial results. Wemade Max Q2 consolidated revenues with the launching of new title Dark Eden M on Wemix, an increase of existing game revenues posted KRW 24.2 billion and grew 4% Q-o-Q. Operating expenses, with the increase of marketing costs and service fees, increased 9% Q-o-Q. Operating income recorded KRW 8.9 billion and slightly decreased Q-o-Q and turned to profit compared to the previous year, and net income posted KRW 9.3 billion, a slight increase Q-o-Q and turned to profit compared to previous year. With this, I will conclude 2022 Q2 financial tentative results presentation for Wemade Max, and then cover 2022 Q2 tentative financial results for Wemade Play. Wemade Play Q2 consolidated sales posted KRW 33.9 billion, and with the natural decrease of existing game revenues, slightly decreased Q-o-Q, but with effects, including incorporation of Fleischer as subsidiary increased 38% Y-o-Y. Operating expenses due to overall expense increase, including rising labor costs due to increase in consolidated subsidiaries, as well as depreciation and marketing expenses, rose 4% Q-o-Q and 59 -- 57% Y-o-Y. Operating losses posted KRW 700 million and turned to deficit due to increase in expenses and net losses posted KRW 9.3 billion and turned to deficit due to nonrecurring expense recognition including valuation losses of pre-invested financial products following the global stock market decline. With this, we will conclude our presentation on 2022 Q2 tentative financial results for Wemade, Wemade Max and Wemade Play on a consolidated level, and then have a Q&A session.

[Operator Instructions] [Interpreted] The first question will be presented by SeokO Kang from Shinhan Financial Investment.

[Interpreted] I am Kang SeokO from Shinhan Financial Investment. I have two questions. First is the level of your open SDK development, because you will need that to have more games on the WEMIX platform. So can you tell us about the degree of development? Second question is about having your own developed games by Wemade on the WEMIX platform, although, of course, having games out of Korea on the platform is as important as well. So can you tell us about any of your developing games that you have been working on, apart from your Mir series, maybe as IPs? Or can you also tell us about the direction and strategy of any casual games going forward?

[Interpreted] So as I aforementioned previously, SDK is actually a fruit of your experience and your operations. So that is to say the more onboarded game experience that you have, then the more sophisticated and sharp and better your SDK will become. So we do currently have an SDK, but as more games are being onboarded, we are seeing improvements in our SDK as well. And as we had all mentioned, by the end of this year or by early next year, we plan to have open SDK developed, and we will actually showcase that to you later on. So regarding our different games for the future, well, for not only we made, but also Wemade Max, Wemade Play and all the subsidiaries under those companies, we have probably more than 10 studios, and they all have the same strategy. It is that all the future games that we will launch will be blockchain games. So this means that we will have a huge number of our own developed games in our lineup. And for our internal blockchain game lineup, we will try to actually lift it up and communicate it to everyone later on. And regarding our two large titles that we are working on, well, I think that you already have seen some of the footage for Legend of Ymir, our MMORPG games, and we shared some of the moving images. And there is another MMORPG game that we are developing, which is being done by a team that previously worked for before, and we have plans to actually release both of these games within next year. And for that game, the graphics are Western fantasy type. So we believe that it will reap greater results in the global market as well. And for the 2 games, we believe that through GSTAR, we will have a more detailed opportunity to explain, display and share more information with you.

[Interpreted] The next question will be presented by Jae-min Ahn from NH Investment & Securities.

[Interpreted] Ahn Jae-min from NH Investment Securities, and I have two questions. Well, the CEO, you already have explained a bit about the cash flow, but as investors, we have to also review the short-term P&L. And it seems that in Q2, the labor costs have actually been high -- have increased more than we had expected. So can you give us more details? For example, how much headcount increase has happened? And what are your plans for talent acquisition in the second half of this year and others? My second question is about the marketing cost. And it seems that for the marketing cost, it was actually a little bit higher than we had expected. And we understand that you needed to have the prelaunching marketing costs. But since it was limited to domestic market, well, we -- some may see that the marketing costs were a bit excessive. So if you can, I don't know if it's possible, break down the marketing costs for Mir M, WEMIX and others.

[Interpreted] So thank you very much for your question. And I do understand where you're coming from. But when you see the results of our game, well, you can see that our company's operating profit ratio actually befits that of a great game company. But since we have been aggressively investing in blockchain and blockchain platform, it seems that our company's financial results might not be as high as expected. To answer your question, well, to explain a bit about the overall P&L situation, it seems to us that we can reach BEP with revenues of about KRW 120 billion. So for this quarter, you can see that we have KRW 33 billion of losses, and it was comprised of several factors. So you can see that we lacked about KRW 13 billion -- KRW 10 billion or so of revenues, and we also had KRW 10 billion of labor cost that increased, as well as KRW 10 billion of marketing costs as well. And regarding the labor cost, well, apart from the temporary or nonrecurring labor cost increasing factors this quarter, it seems that for each quarter, we had about 80 headcount increase. So on recurring terms for labor cost, it's about a KRW 3 billion increase. So we believe that since we have been continuing to acquire talent, we will have similar numbers for next quarter and the quarter after that as well. And for the Mir M-related marketing costs, it was about KRW 10 billion or so. But out of that, I believe that about KRW 8 billion was recognized in this quarter and the rest was actually deferred from the cost related to [Technical Difficulty] [ GD ] [Audio Gap] [ sipark ] in late March.

[Interpreted] The following question will be presented by Hee-Seok Lim from Mirae Asset Securities.

[Interpreted] I'm Lim Hee-Seok from Mirae Asset Securities, and I have two questions. Well, first of all, I would like to ask you about the results and traffic related to Mir M that was launched in June of this year. And can you tell us more about what will be different for Mir M Global that you mentioned it will be launched in the second half of this year? And what are the expectations by the company for Mir M Global as well? Regarding Q2, I know that you might not have determined this already, but looking at the utility token transaction value within DEX, while we see that for Mir 4 or for Yulgang, which have large numbers of users of blockchain ecosystem may be well established. But for the other games, well, I believe that for now, we are not seeing a very well-running blockchain economy yet. So for these middle sized or smaller games that have less numbers of users, do you have any special [ way ] that you have in mind to have a well-established blockchain economy within the game?

[Interpreted] Thank you very much for your questions. And regarding the early results for Mir M, maybe I can compare with Mir 4 for a better picture. In numbers of traffic, well, compared to Mir 4, for Mir M it seems to be much more stable. So it seems that we are seeing a great opportunity and a great life cycle. And for revenue that has been 1 month and for daily average numbers, it's about KRW 500 million. Regarding the second question, well, you probably know that regarding Mir 4 and Mir 4 Global, there weren't fundamental differences. We just added a game coin and NFT to Mir 4 for Global. And likewise for Mir M, for Global and Mir M the Korean version, for the game itself, it will not have a big difference. However, we did learn some things from Mir 4 Global. So we believe that the tokenonomics for Mir 4 Global will be quite different from Mir M, the game. So I think this is also related to your second question, so maybe this can answer both. And for Mir 4 Global, we had one current good -- [Foreign Language] good. That was actually a game token and that was established as an economy. And for Mir M, actually we plan to have countless numbers of goods so that it can be incorporated into the tokenonomics. How this will be possible is because we do have the know-how and we have now the main net, we mix dollar and the stable coin. So we have the technical capability to have the tokenonomics going into the game economics. So we will have the tokenonomics that will be running in the game. And I have been actually voicing this, and I truly believe in this, that if we see the blockchain [ health ] tokenonomics as 100 that we need to have, we only have achieved one. So it means that we're in a situation we have much more to do. However, does that mean that the current results are almost nothing? Well, I don't think that is the case at all. I believe that regarding the current results, well, the games have been showing much better results than they have potential for so far. I believe that the results and achievements were possible because of the tokenonomics that led to more users going into the game and leading to higher revenues. And I cannot mention everything at today's earnings call, but I believe that when we do have introduction of the WEMIX dollars, then it will lead to more stabilization of Token transactions, lead to more game and to have more intergame economics established through diverse methods. Of course, this will not mean that all games will do well. It means that the game developers and games that have worked very hard that can accept and utilize the technologies and economics will get a great opportunity so they can have their game life cycle that will be improved and even have games that become more -- become popular, that the games that existed from the past can gain more popularity in the future. So I believe that this can all be possible, and we are working very hard to make this happen.

[Interpreted] The following question will be presented by Ha Jeong Kim from DAOL Investment & Securities.

[Interpreted] I'm Kim Ha Jeong from DAOL Investment Securities. I have two questions. First question is related to labor cost. So we have been hearing from you in terms of your labor costs, but I would like to know your take on the future outlook for blockchain-related labor costs. Because in this industry, we are seeing some of the blockchain projects that are getting canceled, and we are seeing some head count going down in blockchain. So can you tell us if you see any changes in the blockchain-related labor costs? It seems that for now, we are seeing the per head count labor costs that are similar, but do you think this will change in the future? And you also mentioned some nonrecurring labor costs in this quarter. So was that performance-linked compensation? And if so, can you tell us what it was for? And my second question is about the Chinese market outlook, since we may have been a pioneer in relations with China in terms of games, well -- and although the Communist National Congress has not taken place yet, do you see any changes in the Chinese market related to games?

[Interpreted] And let me answer both of them at once. For individuals or for companies, in many cases, when things are going very well, whether it's for your individual situation or corporate situation, well, you tend to invest more and be more aggressive. However, seen from a longer perspective, the more effective strategy would seem to be, well, in a situation where the economy or times are not good, well, rather than just not buying and not actually acquiring talent, it would be better for you to take on another type of strategy. So in that perspective, we are more aggressively acquiring talent. And for the Chinese market, we are doing what we need to do, I believe, to respond to the Chinese market. And last year, in the game industry, we had an overall increase in the early salary. So that was a bit of a widespread phenomenon. But I believe that Wemade was one of the few that did not follow that trend. However, you are seeing in the industry where a lot of the companies are now actually stopping to -- they are not hiring more people and they are actually having some headcount reduction. On the other hand, we have been trying to acquire more talent. And when you actually have experience at a company, you will see that very talented people sometimes will leave the company first. So of course, we are going to use our own hiring criteria, but we have plans to actively hire going forward. So as was mentioned previously, it will be probably between 80 to 100 -- less than 100 headcount hiring per quarter that we believe need to be done. And we believe that the rise in labor cost will be about KRW 3 billion or so. And we don't believe that there will be an increase in the labor cost per headcount. And for the nonrecurring cost, well, it was for our investment results. So it was related to that. And there was LIONHEART, that ODIN developer that we had sold off partially the shares. So there was some realization of investment results. So that was provided as an incentive form. And as was mentioned previously by myself in the earnings call, I believe -- I expect that we will share some of the investment results. And according to our shareholder dividend policy, we plan to incorporate this and give it out in form as well. Regarding my thoughts on the Chinese game situation, I believe there are two points that can be made. And looking at the Chinese domestic situation, I believe there could be some opposing outlooks, but people are looking forward the October -- the Communist Party Congress and what the political landscape will be after that and looking at the degree of freedom for the economy and society after that happens, but I think most of the people have the opinion that the domestic market freedom for economy and society will probably go back and recover to the previous level. So I believe that although this year is not the year to actually have business in China, it will be a good idea to start off from next year. And looking at the Chinese game market, well, it was not good from the previous year. So it has been almost 2 years since the situation has been continuing. And looking at the situation for Chinese game developers and Chinese game development companies, well, the situation is not very good. However, you probably can tell that the level of technical prowess of these game developers is quite high, even looking at the ranking of popular games within Korea. So we have been very active in actually investing in Chinese game developers and game companies. And we have been also acquiring some talent to internalize them within our company. And in some cases, when they leave and start up their own companies, we also have been active in investing in those companies as well. So well, to put it simply, out of the 100 games that I mentioned that will be on board this year, 80 will be external games and out of them, 20 will be Chinese games. So we are not just looking toward Chinese developers or Chinese game companies, but we have many partners that we've worked with in China. And since their domestic market is blocked, well, they need to find routes out of the country overseas. So we are discussing many ways of cooperating with them. And we believe maybe early, if it's early, then maybe next month, we can have onboarded on Wemix a game that has been developed in China.

[Interpreted] The following question will be presented by SeokO Kang from Shinhan Financial & (sic) [ Shinhan Investment ].

[Interpreted] I am Kang SeokO from Shinhan Financial Investment. I have one question. And yesterday, it was that Wemix actually was included into the unit swap liquidity pool. So can you tell us about future plans for WEMIX 3.0 to be expanded into the Ethereum ecosystem, and why this was in the unit swap liquidity pool?

[Interpreted] So thank you very much for your question. I believe that when seen largely from a blockchain ecosystem for main net in the future to be connected and to be interoperable, I think that is something that everybody could predict. And I believe that app -- whether it's app or platform, expanding into the main net must be done. And I believe that in an open situation where everything is open, having platform and service competitiveness is something that we must have. So in the beginning, in order for efficiency started with a domestic main net because it did not have many technology and business limitations. So that is why we're here now today. But in order to expand this, on the one hand, we have the WEMIX 3.0 main net. But on the other hand, we have a service that could incorporate Ethereum that goes beyond the main net. So I mentioned that basically all the main nets will become interoperable going forward. So I believe that for our other main net, well, this will have a relationship with Ethereum, and I believe that this has two meanings in the short term. First is, for the services that we are operating and developing such as WEMIX game chain, Kleva. It will have -- now we have the technical basis for it to be implemented through Ethereum. And secondly, in the past, some were based on Clayton. So they couldn't be lifted on the exchanges. But now since the technical issues have been overcome, then this can be resolved. So this can be listed, which are based on Ethereum.

[Interpreted] [Operator Instructions] The following question will be presented by Ye-ji Yoon from Hana Securities.

[Interpreted] I am asking your question about Mir M game content updates going forward. So I know it has been only 1 month, so you probably do not have enough for core content. So I'm [ then ] asking you for some core content update, for example, within the server and some of the battle related content?

[Interpreted] So actually, before we launched Mir M, when people asked us about our expectations or goals, well, I said that we don't have any specific goals, but we just wanted to do very well in the market. And actually the company, I believe, believes that the revenues could have been higher. So we also have been hoping even now that we want higher revenues going forward. But looking at the traffic or the fun or the activities that the users are actually enjoying within the game, we believe that it is very positive. So actually, thank you very much also for your content-related questions, and we know that [Foreign Language] were other factors that actually inherit the Mir heritage will also be continued. But apart from that, we are very happy and satisfied because we have the non-monetized users that are just enjoying the game. And what they're doing is that they are actually coming into the economic system. So they are earning their own money, and they are using that to enjoy the game. So they are being incorporated into the economic system. So we believe that this actually proves that for Mir M Global blockchain ecosystem, we can actually expect very positive, big results through this.

[Interpreted] Currently, there are no participants with questions. [Operator Instructions] The following question will be presented by [ Toon Jun Kim ] from CLSA.

[Interpreted] I have several questions. And I believe that only 5 months remain for 2022, and you gave us guidance that 100 games will be onboarded to WEMIX platform. So do you have any changes to that guidance? Do you think that is still achievable? And I believe that in Mir 4 -- I believe that in Q2, there was a Hydra-enabled in-game settlement that was made possible. So can you tell us about the size of it? And can you tell us more about the -- some of the details related to it? And for the game company it will mean giving up some of its game-related revenues, so can you tell us about that situation and any progress in the establishment of accounting standards or accounting system? And I believe that it will be a structure where the tokens will accumulate. So how can this be turned into cash? So it might be a little bit sensitive to mention the WEMIX liquidization type of method. So maybe you can tell us about how, if it's not going to be converted into cash, where this could be used and how it could be utilized? And will this have an effect of reducing the cost or expenses?

[Interpreted] Thank you for your questions. And because we are seeing an acceleration in the launching of games in our platform, we don't have any changes in the plan or goal of onboarding 100 games within this year. And I would like to answer question two and question three jointly. And regarding Hydra payments, we believe that it takes about 15% of our overall revenue. So we believe that there is almost no trade-off. It's because the Hydra payment users are different from the existing payment users. So they're different also in terms of region as well. So we believe that there is almost no trade-off. And regarding the revenue recognition of game tokens and whether this can be converted into cash, I believe that it will be possible. And there will be two issues to overcome to make this possible, but I believe that we will have progress in both of them. First is for accounting standard -- or accounting system. And because of what happened to WEMIX and others, the government agencies and others are actually working very hard on how to have the accounting standards for cryptocurrency. And we have been asked to submit some material for their benefit. And we have been faithfully complying with their requests. So I believe that going forward, we will have an established accounting standard for cryptocurrency. And there is also the technical issue. It's because for the game coin, game companies and users all need to sell it. So will it be possible for an economy to run with both parties doing that? Well, there are actually ways to reduce those issues. And if we say that the orders -- until now, the competition was directly exposed because it was order book basis, so based on the orders. Well, we could think of the type of unit swap method that we have actually took on. So it means that you don't have to make direct transactions or sales and this can also be converted into cash. So this is an indirect way for game tokens to be converted to cash. So we have adopted a swap method for WEMIX 3.0, and we believe that it will be a way for game companies to participate in the game coin transactions. And we will be working very hard and looking towards Korean and U.S. and other governments for them to come up with a reasonable accounting standards and policies for cryptocurrency. And this is only the beginning, and there will be many different DeFi'd services and games that utilize DeFi'd services going forward. So I believe that we will find a way for game points to have value not only within the game, but also in reality as well.

[Interpreted] The following question will be presented by Ha Jeong Kim from DAOL Investment & Securities.

[Interpreted] I am Kim Ha Jeong from DAOL Investment Securities, and I asked you a question before, but this is a related question. So you -- the stock options that were exercised in Q3, will they be included in the cost, or were they?

[Interpreted] No, we do not have them recognized as expenses or cost by the company. In the case of stock options, well, there is only the vesting period that goes between the issuance and before it is exercised that is recognized as noncash costs or expenses, and it is not recognized as cost by the company.

[Interpreted] The following question will be presented by Ye-ji Yoon from Hana Securities.

[Interpreted] Once again, Yoon Ye-ji from Hana Securities, and I have a question related to what you said in one of your interviews, and you mentioned that for the games developed in China, you will not only put it on your blockchain platform, but you also have plans to directly publish them. So unlike like a coin system, well, when Wemade directly publishes this type of blockchain game, well, how will you recognize this on your revenues or on your books?

[Interpreted] Yes. You are exactly right what you just mentioned. And when we just have the game on our platform, well, we don't get any share of the in-app purchases or game-related revenues. But when we become a publisher, then we will get a share of that. So this will be included in our revenues.

[Interpreted] Currently, there are no participants with questions. [Operator Instructions]

[Interpreted] If there are no other questions, we will conclude the Q&A session. If you have any other questions related to the earnings results, please do not hesitate to contact our Strategic Communications Division. I will now invite our CEO, Henry Chang, to deliver closing remarks.

[Interpreted] I will continuously report on our company's qualitative -- quantitive and qualitative results. Thank you for your interest in our company and I will be looking forward to it. Thank you.

[Interpreted] With this, we will conclude the 2022 Q2 Earnings Results Conference Call for Wemade, Wemade Max and Wemade Play. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]