Good afternoon. This is Dongwan Kim, Head of Finance Planning at Netmarble. I thank the investors and analysts for participating in Q4 2023, and annual earnings result session, despite your busy schedules. We have here with us CEO, Young-sik Kwon and CFO, Gi-wook Do. They will address your questions after the results presentation. Please note that the contents presented today have yet to undergo an independent audit review and could be subject to future changes upon such review. Now, CFO, Gi-wook Do, will deliver the results presentation.
[Foreign language]
Good afternoon, this is CFO Gi-wook Do . I will give you the annual results of 2023 first. Please refer to page 2. Annual revenue for 2023 decreased 6.4% YOY at KRW 2.5014 trillion. Overseas contribution to revenue was at 83%, and domestic revenue recorded 17%. EBITDA decreased 6.4% YOY at KRW 115.8 billion.
[Foreign language]
Page three is on Q4 results. With full quarter reflection of Seven Knights Idle Adventure, and with the update of Marvel Contest of Champions, Q4 revenue increased 5.4% QOQ, and decreased 3.2% YOY at KRW 664.9 billion. With new titles and updates, EBITDA increased 146.5% QOQ, and 69.2% YOY at KRW 60.4 billion. EBITDA margin rate was at 9.1%.
[Foreign language]
Page four is on operating and net profit. Q4 operating profit was at KRW 17.7 billion. Net loss recorded KRW 195.0 billion, and controlling shareholders' loss KRW 182.8 billion. With temporary increase in corporate tax with asset sales, net loss increased over the previous quarter.
[Foreign language]
Next page is on regional revenue breakdown. Q4 overseas revenue recorded KRW 534.0 billion, and domestic sales KRW 130.9 billion. In percentage terms, overseas accounted for 80% and domestic 20%. With full quarter reflection of Seven Knights Idle Adventure, domestic revenue contribution increased three percentage points over the previous quarter.
[Foreign language]
Yes, and next page is on revenue breakdown per genre. Well, in the quarter of the fourth quarter, one thing that is of particular notice is that with the full quarter reflection of Seven Knights Idle Adventure, well, the contribution from RPG grew three percentage points in Q4, reaching a 38% level.
[Foreign language]
Next page is on games portfolio. As of Q4 end, Marvel Contest of Champions accounted for 12% of revenue, followed by Jackpot World 9%, Lotsa Slots 8%, Seven Knights Idle Adventure 8%, Cash Frenzy 7%, and Seven Deadly Sins Grand Cross 6%. The company's portfolio remains diversified.
[Foreign language]
Next is our major cost structure. Operating cost in Q4 was KRW 647.2 billion, which is a 0.8% decrease QOQ and 9.0% decrease YOY. Fees and commissions paid reported KRW 253.5 billion. With increase in revenue, it increased 6.0% QOQ and decreased 6.6% YOY. Labor cost was at KRW 183.3 billion. With preparation work for several project launches, it saw a slight increase of 1.5% QOQ and decreased 9.5% YOY. Lastly, marketing spend was at KRW 126.7 billion. With absence of new titles in Q4, it decreased 12.5% QOQ and increased 4.4% YOY.
[Foreign language]
Next is on our new titles line. In the first half of this year, the company will launch four new titles, which are Arthdal Chronicles: Three Factions, Solo Leveling:ARISE, RAVEN 2, and King Arthur: Legends Rise. We're planning to take Ni no Kuni: Cross Worlds to China in the same period.
[Foreign language]
With some delays in our planned launches, the company did not fully meet market expectations last year. But with intensified select and focus, the company will minimize further delays and do our best to bring more competitive titles to the market.
[Foreign language]
This concludes the result presentation. Should you have any questions, we will do our best to address them. Thank you!
지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼의 별표와 일번을 누르시기 바랍니다. 별표와 일번을 누르신 순서대로 발언 기회를 드리겠습니다. 질문을 취소하시려면 별표와 이번을 누르시면 됩니다. 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 the number star one. For cancellation, please press star two, that is star and two on your phone. 처음으로 질문해 주실 분은 키움증권의 김진구 님입니다. The first question will be provided by Jin-gu Kim from Kiwoom Securities. Please go ahead with your question.
[Foreign language]
Yes, I have two questions. First is on the launch date of the Seven Deadly Sins: Origin. So when do we expect to see the title in the market? And the second question is on your console strategy. Could you please give us some update on the lineup for the console platform and when will the launches be?
[Foreign language]
Yes, this is CEO Kwon addressing your first question, which is on the launch date of The Seven Deadly Sins: Origin. We are currently in the midst of developing the title as we aim for end of 2024. However, having said that, this is an open world RPG title, which requires a vast development of content, so there is some possibility of a delay. But even if so, we would try to target first half of 2025.
[Foreign language]
As for the second question, which is related to our console strategy, well, as you have mentioned in your first question, we have The Seven Deadly Sins: Origin, which we're developing for the mobile, PC and console platform. So we have two titles currently under development bound for the all three mentioned platforms. And we are working on one title that is purely bound for the console platform. We have communicated our plans for Dev- The Seven Deadly Sins: Origin, of, and that's the only disclosed title bound for the console platform. And should the opportunity arise, we will be communicating the other titles to the market.
다음 질문 받겠습니다.
Next question, please.
다음으로 질문해 주실 분은 하이 투자증권의 윤예지님입니다. The following question will be presented by Yeji Yoon from HI Investment & Securities. Please go ahead with your question.
[Foreign language]
I will give you the translations to the two questions. First is on Solo Leveling:ARISE. Well, the animation is really gaining popularity across the globe. So what would be the influence from this very popular anime title? And my second question is related to fees and commissions for Apple in the European market. Will there be an influence to your numbers starting in the second quarter?
[Foreign Language]
Yes, to your first question, which was on Solo Leveling:ARISE . Well, as you're well aware, the title, anime title, is being aired around the world starting from January this year, and it's top ranked in many countries. We believe season one will be over by end of March. We have plans to conduct an open beta test in the month of March, too. We already have a build which is quite complete for a global launch, but we hope to ride the very high tide with the popularity of anime, this animation title. We believe that timing will come when the first season is over and when you could enjoy the whole season in Netflix without any pauses in between. So we hope to target the date of April.
[Foreign Language]
As for your second question, which was related to fees for Apple in the European market. Well, nothing's confirmed yet, so please understand that at this given point in time, we cannot give you a definitive answer.
[Foreign Language]
This is an add-on from the CFO. As you're well aware, the company's revenue contribution from the European market is not that big. So, even with a fee and commission change, there won't be a significant influence to the company's numbers.
다음 질문 받겠습니다.
다음으로 질문해 주실 분은 삼성증권의 오동환 님입니다. The following question will be presented by Donghwan Oh from Samsung Securities. Please go ahead with your question.
[Foreign language]
Yes, I have two questions. First is your schedule launch in the first half. Well, would it be really concentrated in the second quarter, and what would be the order of the release? And my second question is related to your Chinese business. I think there will be some easing of the Chinese licensing situation. So, well, ideally, what titles would you bring to the Chinese market?
[Foreign language]
Yes. So just your first question. Yes, the order is as is presented, and, well, at the launches will begin in the earlier part of Q2 and continue till the end of Q2.
[Foreign language]
As for our plans for the Chinese market, yes, we're preparing to get the Chinese license. We are simultaneously working on several licenses. As for the timing, well, it will be according to when the licenses come.
[Foreign language]
Next question, please.
다음으로 질문해 주실 분은 NH 투자증권의 안재민 님입니다. The following question will be presented by Jae-min Ahn from NH Investment & Securities. Please go ahead with your question.
[Foreign language]
Yes, the question is, for the Seven Knights, the Idle Adventure, I see the ranking drop compared to the previous period. So is there a possibility that your opening numbers turn red again? And, my second part of this question is related to your cost control. Could you please elaborate on your cost control measures, including labor?
[Foreign language]
Yes, this is CFO Do addressing your question. Yes, it's true that the title has seen a slight ranking decrease, but it was done in a very gradual way, and it wasn't to a significant degree. If I may give you our outlook for the first quarter and 2024 as a whole, well, as was mentioned in our presentation, the lineup of new titles is the releases. It will begin in earnest in the second quarter. So in the first quarter, the influence of the boost up influence from the new titles will be quite small. So compared to the previous quarter, which is Q4 2023, there could be some slight decreases.
But as was mentioned in our previous answer and also in the presentation, we will be starting to release our new titles in the second quarter. And, with this, new title launches for the year as a whole, for year 2024, I think there will be a significant turnaround of our results.
[Foreign language]
Now to the second part of your question, which was on our cost control, including our labor costs. Well, we are continuously working on adding more efficiency to our resources. And as for cost, we have three major pillars. First is fees and commissions, second is labor, third part is advertisement. And as for fees and commissions, it's up to the market mechanism, and we have little control over what would happen to the fees and commissions. And if I may talk more on our labor costs, we have been working on this since the year 2024. We have been constant in delivering message on rationalization and more efficiency when it comes to our labor force. But we are not artificially or firing people, so we are resorting more of a natural attrition.
So when people leave, when it comes to new recruitment, we are more thorough in the evaluation. So we are really being tight on our new recruits, and this stance will continue until the end of year 2024. And with this continued stance, there won't be much of an increase when it comes to our headcount and also labor.
[Foreign language]
If I may add some more on our advertising cost about personal business plan, we are aiming for much bigger growth compared to the previous years. Well, however, having said that, we are not going to increase the percentage of advertisement in our business with more titles to be introduced in year 2024. The absolute amount of advertisement could go up, but on a percentage basis, we are going to contain it.
[Foreign language]
다음으로 질문해 주실 분은 유진투자증권의 정의훈님입니다. The following question will be presented by Eui-Hoon Chung from Eugene Investment & Securities. Please go ahead with your question.
[Foreign language]
Yes, I have two questions related to your SpinX business. What, what CP costs after the acquisition of SpinX? What will be the attrition amount to be in 2024? And, is there a significant change compared to year 2023? And my second question also related to SpinX, how was the social casino market in year 2023, and how do you see it evolving in year 2024?
[Foreign language]
Yes. Right after the acquisition of SpinX, for attrition purpose, we have to spend about KRW 100 billion per year. But last year, we've seen an amount decrease of KRW 600 billion, and this year we also hope to see a decrease of KRW 200 billion. So with this amount decrease, the attrition or this amount would also see a decrease. So if I may give you a percentage wise decrease, well, in year 2023, over year 2022, we saw a 30%-35% decrease. And this year, over the previous year, over year 2023, we hope to see another 20% decrease. So compared to the very early stages of SpinX acquisition, we will see a 50%-55% decrease.
[Foreign language]
Yes, this is CEO Kwon speaking. Well, overall, globally, the social casino market saw a slight decrease. But however, SpinX, it saw a 5% growth last year.
[Foreign language]
The outlook for 2024, we will be working with titles such as Cash Rally and Jackpot Crash. Well, we will be optimizing and updating the titles, and the data improvement will follow in the fourth quarter. So 2024, we are going to work on our social casino business with the four titles.
[Foreign language]
다음으로 질문해 주실 분은 미래에셋증권의 임희석님입니다. The following question will be presented by Hee- Seok Lim from Mirae Asset Securities. Please go ahead with your question.
[Foreign language]
...Yes, my question is on your borrowings liability. Last August, you've mentioned your plans for deleveraging, and I believe this time around, you have serviced about KRW 520 billion. So could you please give us an update on your leverage situation and your plans to work on this number?
[Foreign language]
this is the CFO addressing your question. Yes, we have mentioned to you on our directionality in our August meeting, and we stand by that directionality. In that sense, we have serviced back KRW 520 billion at the end of last year. We're not going to go with the current level. We're going to continuously work on improvement of our leverage situation, depending on the external environment. But once again, our directionality remains. Yes, and as mentioned, we're going to go with the market situation and opt for the optimal. So we're not going to rush anything. So we have established several strategies or directions. So first, is even to think of a refinancing to a lower interest rate vehicle. So this, with this established, we'll be taking a longer horizon and improving our financials.
[Foreigh Language]
Currently, there are no participants with questions. Please press star one. Star and one to give your question.
[Foreign language]
there are no further questions, we will be ending our earnings briefing session here. I once again thank all the participants.