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

[Interpreted] Hello. This is [ Min Lu ] of the Wemade IR division. Thank you for joining the 2025 Q3 earnings call of Wemade. We have with us Mr. [indiscernible], Head of the IR Division; and Mr. Young Jun Go, Head of the Corporate Finance Division. We'll start with the presentation of the third quarter results by Mr. [indiscernible], which will be followed by a Q&A session. The preliminary results of Q3 of 2025 is provided for the convenience of the investors without completing the external auditor's review. It is subject to change in the course of the final review by the external auditor. Please refer to the disclaimer from the Q3 results presentation materials posted on our website. Now Mr. [indiscernible] will provide a review of the third quarter business results.

[Interpreted] Hello. This is [indiscernible] from the IR division of Wemade. I'd like to share with you our key business results of the third quarter of FY '25. Wemade recorded revenue of KRW 163.6 billion in the third quarter. During the quarter, revenue increased 40% quarter-on-quarter, driven by the global launch of major subsidiaries, new titles and the recognition of IP licensing revenue from China. Operating expenses decreased by 6% Q-o-Q and 16% Y-o-Y, mainly due to reverse base effect caused by the one-off expenses in the previous quarter, lower revenue-linked costs and the continued reduction of blockchain-related outsourcing expenses. Thanks to concurrent improvement in revenue growth and cost efficiency, operating profit for the third quarter reached KRW 26.3 billion. In nonoperating income, the company recorded a profit of KRW 38.7 billion, driven by the removal of derivatives liability following the early redemption of convertible bonds in the previous quarter and a decline in foreign exchange translation losses. Net profit for the quarter amounted to KRW 57.4 billion. Next, I will explain Wemade's business performance by segment for the third quarter. First, in the Game segment, as was mentioned before, new titles such as Lost Sword Global by our subsidiary, Wemade Connect, contributed to the revenue. However, because of the stabilization of revenue from existing titles, the revenue was down by 6% Q-o-Q. On October 28, the global version of Legends of Emir was launched in around 170 countries. And since its release, the game has maintained a concurrent user count of around 160,000. Similar to other blockchain games onboarded on WEMIX PLAY, Legends of Emir Global is expected to achieve long-term success. In particular, the major content updates scheduled for the fourth quarter are expected to positively contribute to revenue growth and full year profitability. The domestic version of Legend of Emir has shown a natural stabilization over time since its launch in February. However, Mir 4 Global and Night Crows Global continue to generate additional revenues from regular content updates, demonstrating sustained long-term performance. Notably, Legend of Emir Global introduced a partner server model for the first time, which meaningfully delayed the pace of revenue stabilization compared to other previous titles. The introduction of this new game model is expected to contribute to extending the overall life cycle of the IP in the long run. In the licensing segment, revenue of KRW 50 billion from the Mir IP licensing in the Chinese market was recognized in the third quarter and the remaining KRW 50 billion from the third year contract is scheduled to be reflected in the fourth quarter. The blockchain segment's revenue increased slightly Q-o-Q due to the new recognition of WEMIX Pay revenue. The company plans to sustain growth by further expanding in WEMIX Pay use tapping into the success of blockchain-based games. Next, I will explain the operating expenses for the third quarter. Total operating expenses amounted to KRW 137.3 billion, down 6% Q-o-Q, mainly due to a reduction in revenue-linked costs following the stabilization of live service games and the removal of one-off expenses reported in the previous quarter. In terms of detailed line items, the labor cost decreased 7% Q-o-Q, reflecting the absence of bonus payments at MADNGINE in the first half, while commission expenses declined 8% Q-o-Q due to lower revenue-linked costs from existing titles. Following the financial results, I would like to briefly share our business outlook. From the second half of this year through next year, we will continue our efforts for a well-defined new game road map, management efficiency improvements and enhanced platform competitiveness which is expected to fuel our growth trajectory that continued on from last year to this year and to the next year. The company plans to launch more than 6 new titles globally by next year, including Mir M China, which is scheduled for release within this year and major titles such as Midnight Walkers, Mir 5 and Night Crows 2 to follow in sequence next year. Along with these new releases, Wemade has also secured financial stability and visibility through cost optimization and business normalization efforts that have been in progress since last year. As a result, the company achieved a return to profitability in 2024 and expect further profit expansion in 2025. Looking ahead to 2026, Wemade is gearing up for unprecedented growth based on a strong road map and executional excellence. In addition, the company will leverage the WEMIX PLAY platform, where the number of highly engaged blockchain gamers continue to grow to maximize marketing efficiency and develop and introduce new business models to further improve profitability. Given the titles such as Mir 4 Global and Night Crows Global have already proven successful in the global markets, Wemade will continue to increase its global revenues by utilizing its tokenomics-based blockchain platform. In the mid- to long term, we made plans to expand our global market presence through diversification of both IPs and game genres, led by our key IP titles such as Mir 5, Night Crows 2 and Mir 4 China, the company currently has a pipeline of more than 20 new titles, including FPS and casual games. We are actively strengthening its development and publishing capabilities through strategic investment and partnerships, both home and abroad. Above all, we are committed to rebuilding trust with the market by establishing a sustainable management system and maintaining transparent communication based on concrete business plans and facts. This concludes my presentation on Wemade's third quarter FY '25 results and business outlook. Thank you for your attention.

[Interpreted] With this, we will finish the third quarter results presentation and move on to the Q&A session.

[Interpreted] [Operator Instructions] The first question will be provided by Hee-Seok Lim from Mirae Asset Securities.

[Interpreted] First question is about the progress you are making to launch Mir M China in the Chinese market. And can you also share if there is any possibility of delay? Second question, can you share and elaborate more on the global performance of Legend of Emir Global?

[Interpreted] Thank you for the questions. The first question has to do with our plan to launch Mir M China within this year. And the second question was about the further details about the Legend of Emir Global's performance since its launch on October 28. So to answer your first question, Mir M China is on track to be launched within this year as was planned by us following the Legend of Emir Global's launch on the 28th of October. To share more about its performance, as was mentioned during the presentation, Legend of Emir Global is showing a concurrent user number of 160,000 on WEMIX PLAY and its ARPU and the concurrent user number is quite performing. And for the first time, we are introducing new model of partner service system, where servers are operated directly by streamers, establishing a virtuous cycle of motivating users and gamers to continue to play and engage further. We believe the stabilization of revenue can be delayed and be moderate going forward, and we are expecting to continue this type of structure with the introduction of partner server.

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

[Interpreted] You mentioned there will be 6 new titles launched next year. Can you share more details about the pipeline and the time frame of these launches?

[Interpreted] Thank you for the question. I will explain the details of new title launches in the half year and annual basis. So in the second half of this year, on 28th of October, we already launched Legend of Emir Global. And as was mentioned previously, Mir M China is expected to be launched within the year. And Midnight Walkers was originally scheduled for launch within this year. However, to increase the level of perfection of the production and development, we postponed that slightly to the early 2026 time frame, and it will be launched on stream, which will be followed by Mir 4 Global and Mir 5 and Night Crows 2. And to cover the pipeline for the year 2027, as was released in one of the teaser videos we already shared, Joseon Dynasty based fantasy console game TAL is expected to be launched in 2027. So in total, in mid- and long-term basis, we have about 20 titles lined up in our new launches.

[Interpreted] The following question will be presented by Sungman Yoo from Leading Investment & Securities.

[Interpreted] Congratulations and thank you for the great performance announced today. I'm Sungman analyst from Leading Investment & Securities. Two questions. First question is, can you share -- you recently done a demonstration on Korean won-backed stablecoin and mainnet technology. Can you share more about the news flows and the timetable for the businesses? And second question is you are venturing into new areas of business with Korean won denominated or Korean won-backed stablecoin. Can you share more about your plan to expand and strengthen this business in linkage to your core business area of game development?

[Interpreted] Thank you for the question. First question was about stablecoin related news flow and time line. And the second question had to do with our plan and strategy for the Korean won backed stablecoin. So instead of answering these 2 questions in a separate way, I would rather want to elaborate on the progress so far and our strategy going forward regarding Korean won-backed stablecoin. As you have mentioned, we have hosted a demonstration session at one of the hotels located in Korea, inviting almost 100 analysts and reporters on the 18th of September. And we showcased during the demos successfully a full cycle transaction system, encompassing direct connection to a real bank account, minting, transferring and swapping and burning of Korean won-backed stablecoin as well as final remittance to a bank account. So in doing so, we successfully demonstrated the implementation of feasibility of our Korean won-backed stablecoin technology. And in terms of our strategy, as was mentioned during one of the earnings reports, instead of seeking stand-alone initiatives, we are looking to be part of a domestic consortium where we will be playing a role of main contributor of core technology. And the project named under Stable One project, we are looking to build and launch a StableNet, which will be a main net for Korean won-backed stablecoin product. And in order to improve the reliability of the technology, we are actively seeking strategic partnership with globally renowned blockchain players. And already, we are having meaningful progress and very tangible dialogues. So if there is any newsworthy information, we'll be happy to share them with you within this year. And through this 2-track strategy, we are preparing for the official launch of StableNet, our Korean won-backed stablecoin mainnet targeting the first quarter of next year.

[Interpreted] If there is no further question, we will conclude our earnings call presentation and Q&A session here. Thank you for being part of 2025 Q3 earnings report conference call. And should you have any questions regarding the results, please contact IR division. [Statements in English on this transcript were spoken by an interpreter present on the live call.]