Greetings. I am Kim Yoon from Pearl Abyss IR team. First of all, I express my deepest gratitude to the analysts and investors in and out of Korea for taking part in the 2024 Q3 Pearl Abyss earnings presentation, despite your busy schedules.
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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 the state. So please take these factors into consideration.
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We have here with us at 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.
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Greetings. 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.
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I would like to elaborate on Q3 major business activities and performance. Black Desert and EVE consistently showcase live service, and we carried out marketing for Crimson Desert and implemented tests for new service of Black Desert China, EVE Frontier and EVE Galaxy Conquest. Black Desert showcased the Land of the Morning Light: Seoul, which showed the charm and beauty of Korean tradition and completed a vast fantasy world encompassing both Eastern and Western elements. In particular, in Black Desert, which has the background of Western medieval fantasy, we implemented terrain and locations which have the charm unique only to Korea, and provided new experiences to global users. In addition, in line with the Land of the Morning Light update, we launched the new class Dosa, which captured the colors of Korea and enhanced immersion in the game.
In case of mobile, we launched the Dosa class and Azunak Arena, a combination of PVP and PVE, and worked hard to provide more fun to the game. In addition, we hosted the Heidel Ball and along with colorful events, we communicated major second half updates. For EVE Online, we held the Alliance Tournament, which is held each year, and implemented additional update of the Equinox expansion pack and provided more things to enjoy to our users. In addition, EVE Vanguard, through the Solstice update, held the largest record ever live event, communicated major improvements, and enabled diverse gameplay experiences. Apart from this, we were thorough in preparing for new services to expand revenues.
First of all, Crimson Desert participated in gamescom in August, and along with four boss character hands-on demos, showcased our footage. In addition, in September, we provided a 15-minute gameplay video and revealed the story, action, and fun elements that you get to experience through the Crimson Desert vast open world. After the Chinese license for Black Desert China was issued in June, after a technical test in August, official service started on October 24th. There were various play tests for EVE Frontier, which is blockchain-based, following the previous quarter, and we perfected EVE Galaxy Conquest, the mobile strategy game based on our soft launching feedback, and it was officially launched on October 29th.
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Next, I would like to walk you through our Q3 performance. Q3 operating revenue posted KRW 79.5 billion, a 2.8% decline QoQ. Operating losses posted KRW 9.2 billion, and net loss recorded KRW 7.8 billion, recording a loss.
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I will cover in more detail regarding operating revenue. First, I will cover major IP operating revenue. Operating revenue from Black Desert IP this quarter posted KRW 54 billion and decreased 10% QoQ. EVE IP operating revenue posted KRW 20.5 billion, a 5.2% decrease QoQ. For regional operating revenue contribution, 20% was from Korea, 24% was from Asia, 56% was from North America and Europe. For platform operating revenue contribution, 76% was for PC, 21% for mobile, and 3% for console.
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Next, I will cover operating expenses. Q3 operating expenses went up 1.2% QoQ and posted KRW 88.7 billion. In the case of labor cost, it posted KRW 43.5 billion, a 4.9% decrease QoQ. For your reference, Q3 end total number of employees stand at 1,347. The number of employees in development are 771 and take up 57% of the total headcount. Commissions posted KRW 17 billion, a 7.5% decrease QoQ. In case of advertising, it posted KRW 8.9 billion, a 22.1% increase QoQ due to Crimson Desert marketing, including our participation in gamescom.
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Lastly, I will cover Q4 major highlights.
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Q4 Black Desert will showcase content and events which are full of more interesting adventures. In particular, in celebration of our 10 year anniversary of Black Desert, we plan to hold a Black Desert FESTA. At the event, we will introduce new content, which we will showcase in 2025, and also hold diverse events including art events and concerts to strengthen communication with users. Black Desert Console launched the Dosa class, which was first introduced via PC and mobile. In addition to foster better quality and game environment for users, we are accelerating development of versions for next generation devices. In the case of mobile, we launched the Kurenai class in October, and we will host the Calpheon Banquet in December to communicate our future roadmap. Black Desert China, after two rounds of tests, started official service on the 24th of last month.
We will launch popular contents like Great Ocean and Land of the Morning Light quickly within this year. We plan to launch diverse content for EVE as well, and following the Equinox expansion pack, which was launched in Q2, we will launch the new expansion pack Revenant today. For EVE Vanguard, we plan to continuously refine the gameplay until the release while showcasing new content. We are smoothly implementing preparations for our new titles to secure new growth engines. First, in the case of EVE IP based player led sandbox game EVE Frontier, we revealed that we are developing it as a blockchain-based survival game in September, along with the official game name and game playing experience. We will continue testing in Q4 as well as for EVE Frontier, and will refine the game until we perfect it.
In the case of EVE Galaxy Conquest, we officially launched it on October 29th, and since strategy games are showing strength nowadays, we will focus on service so that we can achieve great results. For Crimson Desert, we plan to participate in diverse game events in Q4 as well and actively promote the game. First of all, at this week's G-STAR, we plan to show an approximately 30-minute demo build so that users can directly play the game. We are preparing a demo event that will sufficiently satisfy the heightened expectations of many people, and we kindly ask for your continued interest. Starting from last week's gamescom, we are engaging in active marketing, including at TwitchCon and at Paris Games Week. We met countless media influencers and users, and after getting feedback for Crimson Desert and sharing opinions, we are working very hard to promote the game to more people.
Our offices around the globe are very busy working to do this. We will participate in diverse game events, including G-STAR, for the remainder of 2024, and along with hands on demos, we will communicate more information. Everyone at Pearl Abyss, from our CEO to all our employees, are doing our utmost to always show an improved company. We will kindly look forward to your continued interest and support. Thank you for listening.
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With this, we will conclude the 2024 Q3 Pearl Abyss business results presentation and start the Q&A session.
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Now Q&A session will begin. Please press star one, star and one, if you have any questions. Questions will be taken according to the order you have pressed star and number one. For cancellation please press star two, that is star and two on your phone.
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The first question will be presented by Jingu Kim from Kiwoom Securities. Please go ahead with your question.
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Thank you very much for giving me the opportunity. I have three questions. My first question is regarding more details related to Crimson Desert marketing. Are you going to participate in TGA this year? And can you also tell us about what is your timeline for the launching of the game? Will it be within this year? If you can give more details, it will be greatly appreciated. My second question is about Black Desert China. Can you give us some updates on user traffic or your revenue trends? It would be also greatly appreciated. My third question is about any updates regarding DokeV.
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Thank you very much for your question regarding Crimson Desert marketing. For Crimson Desert, we have been strengthening our narrative and refining our game for perfection, and have been smoothly engaging in the final processes.
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In addition, as we are nearing the completion of development, we are actually meeting many users by participating in many game shows in and out of Korea, strengthening our relationships with the media and influencers, and intensifying our marketing.
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Also at this week's G-STAR, which is planned, we will provide around a 30-minute demo build so that users will be able to directly play the game.
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As we are nearing the completion of the game development, we are seeing more visibility about the timeline.
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That is why, as we had shared with you in the previous quarter's earnings conference call, we are going to participate in a global game event at the end of the year and communicate more details to you.
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We are going to do our best until it is finally completed and perfected, and also work hard on our marketing so that we can have great performance.
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I would like to update you on our results and our current status for Black Desert China.
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For Black Desert China, we started official service on October 24th.
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We have had about 20 classes since the launch, and we have been offering diverse and various content and are receiving great acclaim from our users.
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Regarding the performance, since it took us a very long time to service in China, our goal is to not have a very high performance like completely new title games.
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However, we are working very hard with our publisher so that this game can safely and stably take root in Chinese markets, so that we can service this game for a very long time with a certain amount of capacity.
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Based on our operation know-how in the global stage, we are going to work hard on our service and do our best so that in China it can also consistently contribute to our performance.
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I will answer your third question regarding DokeV.
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For DokeV, we have been consistently accumulating our assets and have been developing this along with Crimson Desert.
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In particular, because we are nearing the completion of Crimson Desert, we believe that the development of DokeV will become more accelerated.
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Although we have been focusing our marketing on Crimson Desert until now, we will also share with you the development status of DokeV at the appropriate moment.
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As I had mentioned previously, with DokeV, we have been accumulating many assets. With our BlackSpace Engine, we have had more efficiency in our development. We are going to do our best to complete development quickly after Crimson Desert.
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The answers were from our CEO, Heo Jin-young , and CBO, Kim Gyeong-m an. We will take the next question.
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The next question will be presented by Jaemin Ahn from NH Investment & Securities. Please go ahead with your question.
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Thank you for the opportunity. I have several questions to ask you. I know that you have been preparing for Crimson Desert for a long time. I know that there have been many games using different graphics that are early Unreal Engine 5, or other types of these unreal game development engines that have great forte in graphics. Can you tell us about what is the advantage or competitive edge of Crimson Desert? My second question is related to your marketing budget for next year. Can you give us more color? My third question is a little bit of a trivial question, but I've seen that your additional costs have been increasing for this quarter. Can you tell us about the reason why? Thank you.
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Thank you for your questions. I would like to give you a little more color about what is a strong point of Crimson Desert and give you more information about our marketing budget. We participated in gamescom, TwitchCon, and Paris Games Week, and we had the hands-on demos for the users, media, and influencers.
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Many people exclaimed at the Crimson Desert game details, the degree of immersiveness and high quality, and did not hesitate to give out top-notch acclaims for its great performance.
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In particular, we saw high acclaim for surprisingly high-quality visuals, and that people were very impressed by our unique gameplay, which was actually based on our engine. We could also find out that many were very positive about the game, saying that it is very fresh and it is a game unlike any other game they had seen before.
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Crimson Desert has a very high degree of freedom that goes beyond the open-world games that have existed until now, and is trying very hard to show a level of game experience that is one notch higher than before.
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We are going to do more of these hands-on demos so that we can heighten expectations for Crimson Desert, and we will work hard to perfect the game until its official launching.
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I would like to answer your second question related to Crimson Desert marketing expenses.
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For Crimson Desert, we have engaged in our focused marketing in Q3 as well. Our advertising for Q3 went up 22% QoQ.
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For Crimson Desert, we plan to intensify our marketing efforts in Q4 as well as for 2025. We believe that expenses will go up.
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However, we are preparing for efficient marketing through our diverse partners and channels, so we are not actually expecting a great deal of marketing expense increase.
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I would like to explain about the third issue that you asked about, which was heightened additional cost.
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QoQ, we had about KRW 3 billion of increase in our additional expenses, which were mostly one-off costs.
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In Q3, we had the tax audit for our regional taxes and our corporate taxes. We had those KRW 2.5 billion expenses going toward these tax audits and other preparations.
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We had about KRW 500 million of increase because of the very hot summer we had this year. That is why we had a higher electricity bill, because we had to pay more for electricity for air conditioning.
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We had answers from our CEO, Heo Jin-young and our CFO, Cho Seok-woo. We will take the next question.
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The next question will be presented by Seungho Choi from Sangsangin Securities. Please go ahead with your question.
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Thank you very much for your opportunity. I am Seungho Choi from Sangsangin, and I have two questions. I'm sure that we will get to see it soon, but I'm curious about the demo build for Crimson Desert. Will it be similar to that was shown in gamescom? And are you going to also show or will reveal new demos as well? And I also have some questions about EVE Frontier. Can you explain more about what the game is about, when it will be launched, and what we can expect? Thank you very much.
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Thank you very much for your questions. I will answer your first question regarding the G-STAR build and demos for Crimson Desert and other plans.
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At G-STAR, compared to gamescom, when we had some limited time and many users, we are going to showcase one more new boss in our demo build. So you will get to experience it at G-STAR.
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However, for more details, you will actually have to get a look at it at the day at G-STAR, because it will be only revealed on site. So we ask for your kind understanding.
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For Crimson Desert, we plan to continue to show you more footage and hands-on demos in 2025 as well. In the phase of our marketing, we are going to do our best to show you diverse aspects of the game. Regarding our demo versions, we believe that it will probably go along with our marketing plans, but we will communicate more details with you going forward. Next, I will explain more about EVE Frontier.
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CCP Games, during the past couple of years in order to secure new growth engines, have been developing EVE IP based new titles.
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EVE Frontier, among these titles, is a blockchain-based sandbox game that has an economic system. After its reveal previously, we have been actually implementing many play tests and have been refining the game's completeness.
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We will engage in many tests until its official launch, and we will share the details of our development process as we go along. Regarding the issuance of tokens for this blockchain project, we are currently reviewing the different regulations for different countries. Through CCP Games, we will give you more information.
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Our CEO, Heo Jin-young , answered the question. We will receive the next question.
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The next question will be presented by Dongh wan Oh from Samsung Securities. Please go ahead with your question.
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Thank you very much for the opportunity. I have two questions, and they're all related to Crimson Desert. I know that we have heightened expectations for Crimson Desert, and can you tell us about any revenue goals you have for the first year after it's launched? And can you also tell us about how many titles you plan to sell, or how many titles you think will cover your development and marketing costs? My second question is about console games like Crimson Desert, which tend to have more concentration of sales and revenues in the first and second quarters after it has been launched. From a financial perspective, can you tell us about how you plan to grow revenues the year after it has been launched? Thank you very much.
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Thank you very much for your questions. I will answer your question related to Crimson Desert expectations and goals.
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Crimson Desert has a very high degree of freedom that goes beyond the existing open world games, and is showing a very high game playing experience that is one level higher than the existing games. Also, because we have very immersive stories and graphics and a high degree of perfection, we believe that we can have the performance that befits this type of high-quality open world game.
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Actually, I cannot give you more detailed figures on our expectations for revenues, but I can just tell you that I know that probably the market has some expectations for this, but internally, we believe that we will do our best to perfect the game so that the results are higher than what is expected.
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Your next question was about the fact that since Crimson Desert is a single play game, you were wondering about the sustainability or continuity of the revenues and performance of this game.
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This is our first attempt at this type of single play game, but we have very high expectations for this special game. Although we are currently developing Crimson Desert as a single play game, we are actively considering to have this in a multi-play mode or a DLC so that many users can play together.
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Since we are targeting other games that use our BlackSpace Engine, so that the other launching games have a very fast lifestyle, we believe that we will be able to get the great results that we expect.
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The answer was given by our CEO, Heo Jin-young .
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It seems that there are no other questions in the queue. With this, we will conclude the 2024 Q3 Pearl Abyss business results conference call. Thank you for your time.