Date: February 14, 2023 (Thu) 08:00
True Seek: Her Jin-young, CEO, Kim Krugman, CBO, CHO Seok-woo, CFO
Contents of presentation: Pearl Abyss 2022 performance and game launch schedule/strategy
■ Pearl Abyss 2022 4Q and annual earnings summary and new schedule
▣ Summary of sales
-Annual sales of KRW 386 billion (-4.4%), operating profit of KRW 16.6 billion (-61.4%), net loss of KRW 41.1 billion (deficit turnover)
-4Q sales of KRW 103.2 billion (electricity-6.1%), operating profit of KRW 3.6 billion (electricity-70%), net loss of KRW 100.3 billion
The net loss in the fourth quarter is shifted to the deficit compared to the previous quarter due to foreign currency-related losses and intangible asset damage loss
▣ Cost configuration
-4Q operating expenses of KRW 99.6 billion (electricity +16.7%)
-Labor cost of 45.9 billion won (electricity +4.9%,-2.5%last year)
ㄴ a total of 1452 people in the end of the fourth quarter and 905 people in the development group, which is 62% of the total number of employees.
-Payment fee KRW 19.9 billion (electric + 19.8%, + 4.1%last year)
-Advertisement cost of KRW 12.7 billion (electricity +35.2%,-11.3%last year)
B due to new updates and large-scale user events in December
-The other cost 17.6 billion won (electricity +53.6%, +106.2%last year)
Increased costs due to loss of investment asset evaluation of Pearl Abyss Capital
▣ Profit configuration
-4Q Black Desert IP sales of KRW 71.2 billion, Eve IP sales of KRW 17.6 billion
-Secure sales by region are 19%in Korea, 25%in Asia, and 56%in North America/Europe
-The platform sales accounted for 77%PC, console 7%, mobile 16%
▣ Business status
-22 years, while strengthening the existing IP life cycle, the year focused on securing future growth engines.
-‘Black Desert’ and ‘Eve’ IP will continue to show live services and are preparing new IP
-‘Black Desert’ Last January, the new class Male was launched, and the ‘Morning Country’ update with the motif of the Jose on Dynasty in the future
-‘Black Desert Mobile’ New Class USA is scheduled to expand with global users in the first quarter.
-‘Eve Online’ for more than 30 years of service target, establishing long-term roadmaps, providing training programs and packages to secure new users.
▣ New release schedule
-Development with the goal of completing the development of ‘Red Desert’ in the second half of the year.
Marketing gradually preparing for development progress
■ Q & A’m curious about the release of new in-game video, such as ‘Red Desert’ and ‘Devils’, and the development of ‘ghost’ development.
Huh, Jin-young = ‘Red Desert’ is dedicated to development in the second half of the year, and is working and testing to enhance the completeness of the game.
In addition, we are in consultation with various partners to prepare for pre-marketing, and we are considering the direction of benefiting us for various proposals.
After making an internal decision, the marketing intensity will gradually increase, starting with the release of the video.
‘Devils’ is being developed with resources and environments developed for the red desert through the Black Space Engine, and thus the development efficiency is increasing.
In addition, the Devil Development Team is doing its best to showcase its development.
However, we plan to focus on red desert marketing this year, so please understand that it is difficult to answer the video of the goblin video this year.
I’m curious about the progress of the AI business.
I would like to explain about room for its own engines, synergy effects, and shortening development efficiency.
Huh, Jin-young = I know that there are many questions about AI.
With the development of technology, game development and service areas using artificial intelligence are expanding, and we are also interested in the field.
In the case of our company, we are not focusing on training and developing large-scale models such as ‘Chat GPT’, but we have been researching and developing with interest in the general model.
We are using AI for conversations with characters in the game or communication between users who use other languages.
In addition, it was increasing the development efficiency with the goal of combining AI technology into its own engine and providing high-quality games to more users quickly.
For example, the engine’s atmospheric processing technology is possible to express and express at once, without handling the air effects such as the sky, the sun, the fog, and the light.
In addition, if you automate geometry and physical technology, you can set up a large amount of objects, not to generate an object, but to specify the area.
It has automated development in various areas and is helping to quickly develop high-quality graphic games.
What is the difference between comparing gameplay with the trailer of ‘Red Desert’, which was released two years ago?
I wonder if there is no change in the business model prepared.
Huh, Jin-young = If you briefly explain the difference between the video and the recent version we are developing two years ago, we are doing our best to realize everything you introduced in the video to actually play and increase quality.
Since graphic technology has evolved dramatically between two years, we are doing our best to implement higher quality graphics technology.
Since it is developed as a single player, the natural NPCs are focused on various productions.
Despite the delay in development for a long time, the expectation of management seems to be high.
Please explain more about the reason for making the global market performance expectation (red desert).
Huh, Jin-young = The Red Desert is being developed as a single play game as I mentioned earlier, and is considering introducing multiplayer later.
Therefore, in the early stages of launch, profits from package sales are generated, but additional sales are expected to be introduced in the future.
It is being developed with the goal of the AAA-class game market with narrative and wonderful visual effects.
As we challenge the competitive traditional console market, we are making a lot of efforts to provide the best quality and unique quality that can be repeated for a long time.
In the process, it takes more time than expected, but in the first challenge of the major console market, we are preparing to achieve comparable results with leading masterpieces.
As we think that it is a necessary process to meet the expectations and eye levels of users, we will increase the completeness for the rest of the period to bring good results.
Even though there was no launch of the new work, marketing costs increased in the fourth quarter.
I wonder how the 23-year marketing cost is expected.
CHO Seok-woo CFO = 4Q marketing costs are due to the increase in advertising costs due to user events in Korea and the United States and the massive updates.
Above all, the events were held at the end of the year, and as the sales growth continued until February, there was a higher marketing cost.
In the future, live service games will maintain the proper size of the expected sales and conduct efficient marketing.
It is known that we are considering the release of the new work through an external partner publisher. In this case, how do we expect marketing costs?
CHO Seok-woo CFO = It’s not necessarily a publisher to consider several partners.
However, in 2023, marketing for new IP is expected to increase marketing costs.
Please ask for the 23-year labor cost.
CHO Seok-woo CFO = As of the end of the fourth quarter, the number of employees was 1,452.
Like other companies, the company plans to take over the overall manpower operation considering the economic situation.
In the case of console games, you need to pay more than 30% fees to the platform.
In addition, please tell us more about the partnership.
Huh, Jin-young = In the case of red deserts, he is considering launching a PC and console at the same time.
In the case of consoles, we are considering global partnerships. In addition to publishing, there are many marketing monopolies and various measures, and we are considering which partnership is advantageous in consideration of profitable aspects.
Considering the concerns of investors, we are thinking about the best way to benefit from the company and succeed in the market.
As the game has been delayed over the past three years, many masterpieces are scheduled to be released in 2023.
What do you think this competition will affect Pearl Abyss, such as the Red Desert?
Huh, Jin-young = For the competition with the masterpieces, Pearl Abyss does not aim for a short-term market when starting the development of new works, but to secure the development period and make a game that can be maintained for 10 or 20 years after launching.
It is a goal.
We are developing in consideration of the situation that we should compete with the masterpieces based on the high quality graphics and technology, so we will fight well in such competition.
The quality of the Pearl Abyss game is high, but there are many commercial delays.
The new works are being prepared, and ‘Plan 8’ is also in a situation where the visibility is inadequate.
Huh, Jin-young = New works are taking a lot of time to develop and have been concerned about the delayed release, but Pearl Abyss is not a company that develops prolific works, but aims to provide and maintain a product for a long time.
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Therefore, I think that the commercial success of the games that are released for a long time is to replace our commercial success.
It takes a lot of time to create and release games, but we will be able to improve commercial results for a long time since its launch.