Good morning and good evening. Thank you all for joining the conference call for the Netmarble Earnings Results. This conference will start with a presentation followed by a Q&A session. If you have a question, please press star and one on your phone during the Q&A. Now we will begin the presentation on Netmarble's first quarter of fiscal year 2026 earnings results.
[Non English-Content]
Good afternoon. This is Jiwon Lee, Head of the company's IR team. Thank you sincerely to all investors and analysts who have taken the time to attend our 2026 Q1 earnings conference call amidst your busy schedules. Present with us today are CEO Byung-gyu Kim, CFO Do Gi-wook, and other members who will be available to answer questions following the earnings presentation. Please note that this presentation is prepared prior to the completion of our external audit.
Therefore, some details may be subject to change based on the audit results. Now I'll hand it over to our CFO, Do Gi-wook, to proceed with the earnings presentation.
[Non English-Content]
Good afternoon. This is Do Gi-wook. Let me begin by presenting our business results for the first quarter of 2026. Please refer to page two.
[Non English-Content]
2026 Q1 revenue reached KRW 651.7 billion, down 18.3% QoQ and up 4.5% YoY. EBITDA fell 43.7% QoQ and rose 2.8% YoY to KRW 83.9 billion, and EBITDA margin was 12.9%. Revenue and EBITDA increased year-over-year, reflecting the performance of new releases including Stone Age: Idle Adventure and The Seven Deadly Sins: Origin.
[Non English-Content]
Next page covers operating profit and net income. In Q1, operating profit was KRW 53.1 billion, net income was KRW 210.9 billion, and net income attributable to controlling shareholders was KRW 209.7 billion. Net income increased, reflecting gains from the disposal of held assets.
[Non English-Content]
The following page provides an overview of our game portfolio. As of the end of Q1, revenue contribution by major titles was as follows: Jackpot World, Lotsa Slots, Marvel Contest of Champions, and Cash Frenzy each accounting for 8%, Seven Knights Re:Birth 7%, and VAMPIR 6%. Our game portfolio continues to become more diversified. In particular, the new titles Stone Age: Idle Adventure and The Seven Deadly Sins: Origin, released in March, successfully gained traction in the market. Despite a limited contribution period, each accounted for 3% respectively of the first quarter revenue.
[Non English-Content]
Next, breakdown of revenue by region and genre. In Q1, revenue by region was comprised of North America at 41%, Korea 21%, Europe 13%, Southeast Asia 12%, Japan 7%, and other regions at 6%. Overseas revenue ratio reached 79%, up two percentage points quarter-over-quarter. By genre, revenue was composed of casual games at 40%, RPG 37%, MMORPG 16%, and others at 7%.
[Non English-Content]
Next page outlines our key cost structure. Q1 operating expenses amounted to KRW 598.6 billion, down 12.8% QoQ and up 4.2% YoY. Marketing expense ratio increased by 3.4 percentage points QoQ, primarily due to the upfront execution of marketing spend for new title launches. Labor expenses declined by 7.9% QoQ and 2.6% YoY to KRW 167.6 billion as the headcount reduction trend continued. Finally, commission rate declined by 0.8 percentage points QoQ to 30.8%, driven by an increased share of revenue from proprietary IP games.
[Non English-Content]
Next, upcoming game lineup. The company plans to expand Game of Thrones: King's Road in traditional Asian markets in May and launch Soul Enchant in June. In the second half, we plan to sequentially release four new titles: Solo Leveling: KARMA, Shangri-La Frontier: The Seven Colossi, Project Octopus, and Evil Bane, along with new titles from overseas subsidiaries, including Project Aegis.
[Non English-Content]
We expect top line growth to gain meaningful traction as the performance of newly launched titles is reflected on a full quarter basis starting from the second quarter. In addition, ongoing cost efficiency efforts combined with a more favorable external environment, including the commission rate, are expected to drive gradual structural improvement in profitability. In the second half, we plan to sustain stable momentum by sequentially launching a diverse lineup of new titles across genres with anticipated global reach expansion. We appreciate your continued interest and support.
[Non English-Content]
That concludes our earnings presentation. We'd be happy to take any question you may have. Thank you.
[Non English-Content]
The first question will be provided by Choi Seung-ho from DS Investment & Securities. Please go ahead with your question.
[Non English-Content]
Thank you for this opportunity. I'm Choi Seung-ho from DS Investment & Securities. I have two questions. First question is related to the performance of your The Seven Deadly Sins: Origin, as well as MONGIL: STAR DIVE. I would like to ask the company to share what you can related to the performance of these titles. Moving to my second question is regarding the recent announcement related to your upcoming plans to launch the game title called Project Aegis. Could you please share the scale of the development, what genre this title is going to be? Unfortunately, I don't have much information related to this title. I would greatly appreciate any information that the company can share regarding the Project Aegis title. That would be very much appreciated.
I also would like to take this opportunity to ask an additional question related to your existing title's performance and your plans to continue to maintain or, and improve the sales of your existing titles, including, for example, Seven Knights Re:Birth, which is currently actually experiencing a steep decline. If you have any plans to expand regional service or any games update, that would be greatly appreciated as well.
[Non English-Content]
This is CEO Byung-gyu Kim. I would like to thank you for your questions. Let me first address your first question regarding The Seven Deadly Sins: Origin. As you may be aware, we launched the PC and console version in the middle of March, and it was towards the end of the first quarter that we launched the mobile version. During the earnings presentation, we were also able to share with you the percentage of contributions that this title is actually delivering.
[Non English-Content]
Regarding MONGIL as well as The Seven Deadly Sins, I would like to share with you some of the common factors that these two titles have. Specifically, they were targeting the global market. We were able to launch these titles in multiple countries as well as in multiple platforms.
[Non English-Content]
Thus, this is actually very much in line with the strategy to become a multi-platform player. This is something that we have challenged ourselves and have executed accordingly. As you also can understand that when we're talking about these platforms as well as countries, each platform as well as each country has its own way of gameplay as well as its own way of how the game titles grow in its respective marketplace. As we look at the countries as well as the platforms that we are seeing user traffic coming from, we are making the necessary updates accordingly in order to actually elongate the PLC of these titles.
[Non English-Content]
Regarding these two game titles, the focus for the company was to ensure that it had a very successful long term PLC rather than the company focusing on driving up the revenue in the early days of the launch of these titles. We thought that this approach will be more conducive for the company, and as such, our direction going forward is to deliver the update accordingly to meet the strategic goal that the company has for these titles.
[Non English-Content]
Moving to your second question related to Project Aegis. Now, this game title has been in development for the past two years by our North American subsidiary, Kabam. Just to first speak about the genre, it is an AFK genre.
[Non English-Content]
In respect to Project Aegis, Kabam is actually working very closely with a major global IP holder and also very much working very closely with Netmarble as well. For today, rather than talking about the overall scale of the title and the expectation that we have for this title, I think it would be more appropriate for us to set a separate time when we are ready to be able to talk about Project Aegis in greater detail.
[Non English-Content]
In respect to your third question related to the company's approach, regarding our live games. Just to give you a high level overview of what we are thinking specifically for Seven Knights Re:Birth. This follows its very successful performance and the basis that we have been able to build with the successful launch of its pre-predecessor, which is Seven Knights. Thus we are very much aware of what we need to be cautious of and what we need to prepare for.
[Non English-Content]
Very soon the title will be celebrating its first year anniversary. For the first quarter, the focus for us was to really set up the appropriate long term PLC for Seven Knights Re:Birth. As we get closer to the anniversary of Seven Knights Re:Birth, I think that the company will be able to share with the market more about what we actually are planning for the anniversary celebration as well as for this title.
[Non English-Content]
Just to touch upon the company's plans for regional expansion, we also see this as an important opportunity for the company. As such, we were able to expand into Taiwan in the first quarter with the VAMPIR title. In the Q2, we are actually preparing for a regional expansion of RF Online. If we look at the game characteristic as well as the look and feel of RF Online, we also believe that there is going to be a great global appeal for this title as well. This is the expectation that the company has for RF Online.
[Non English-Content]
Thank you.
[Non English-Content]
[Non English-Content]
I have three questions. My first question is related to what the company is going to be doing related to the recent performance of your newly released titles in the first quarter of this year, including MONGIL. In respect to the performance of your recently launched titles, I have to say that their performance has been actually less than market expectations. I would like to understand if the company has done some internal analysis to better understand the cause for the underperformance. Also have you made any plans to make a turnaround in respect to how you can actually prevent what you have assessed to happen again for the upcoming titles and what you are planning for to further the improvement of these performances?
Moving to the second question is related to the trend that we're seeing not only at your company, but for game companies as a whole, because there is a growing increasing portion of PC-based payment. For the outsiders, it's very difficult for us to really have a clear understanding of the revenue breakdown in respect to how much is coming from PC payment. Whether we're talking about The Seven Deadly Sins as well as [Non English-Content] if it's possible, could the company share the breakdown versus the mobile payment and PC payment? If it's possible, could the company actually give us an indication as to say that the PC payment portion is at present this percentage, but you have a target to grow this percentage to the X percentage going forward.
My last question is related to the earnings presentation. You have mentioned the sale of held assets. Can you also provide additional color in respect to what those assets were?
[Non English-Content]
[Non English-Content]
Thank you first of all for your questions. To address your first question related to the underperformance of the MONGIL as well as The Seven Deadly Sins: Origin, you asked about whether or not the company has done a root cause analysis, based on our assessment, what we actually are going to do going forward. I think I would like to take this time to say that the overall direction or the approach that we're seeing is somewhat different. When we actually have an actual tangible outcome, then yes, I understand that we have to analyze and then identify areas of improvement, and that will be the appropriate approach going forward.
When we're talking specifically about MONGIL as well as The Seven Deadly Sins: Origin, as you are well aware, we have launched simultaneously these titles in multiple countries over multiple platforms. That you have to understand that we needed a period to observe and explore the user behavior and patterns by country and by platform. By having this understanding, it gives us insight to what we want to put in for future updates of these titles. That was the strategy that we had taken, and we are going to follow in respect to how we are going to provide updates going forward. This is something that is going to be somewhat not in line with what the market had expected for the titles, because you may say that it underperformed.
For us, it was very important to understand and explore what was happening to be able to identify the pattern so that we can actually take that and build our ongoing strategy for these titles. By saying this, you may say that effectively we are talking about the same thing. For us, it was important that looking at the different platforms, whether it's PC, mobile or console, it goes beyond having different devices to play these games. It was very important that each platform had a different way of having the gameplay pattern and how the gameplay was going as well. It's not going to be feasible for us to, at one go, be able to satisfy these diverse platform users with the game title and the way they play the games.
It was important for us to understand what was happening and then, based on that, be able to reflect that in the future updates and which we actually did, because we did have a major update for the Seven Deadly Sins: Origin. This was really understanding the gameplay pattern and to ensure that we were doing the right update that will ensure the long-term PLC of this title.
[Non English-Content]
Moving to your second question related to the portion of our of the payment happening, using our own platform. I think what is a good reference is what the information that we actually share with you on page six. If you go to our top line performance for 2025, it was KRW 623.9 billion. During this time, we actually had the commission rate portion to be around KRW 219 billion. Whereas in 2026, we are actually seeing that we had been able to improve our top line to around KRW 650 billion, but we were able to actually have a lower portion of the commission payment. Even though top line grew, we were able to actually reduce the commission payment to around KRW 200.9 billion.
[Non English-Content]
Having said that, I think that we have to look at other factors that drive the shift in respect to how the payment is actually being made for these games. I think we have to think about three more overriding factors rather than the company's willingness or drive to increase the own payment portion. I would say that mainly, you have to understand the intrinsic characteristic of the platform itself, also the app market commission policy, and also lastly, game genre.
[Non English-Content]
[Non English-Content]
In respect to the platform and having your own payment system in place, in order to be able to have that, you also have to understand whether technologically there is the foundation or availability so that we can actually introduce our own payment system in a given platform. That's one factor. Moving to a second important factor is related to the app market commission policy, which is actually determined by the respective app market players. You may think that this is very much a fixed item, but the app markets actually have very different characteristics, and also there is variability as well. We are very much affected by this. The third factor is not it may not be so well known to the market.
In respect to introducing the PC payment, we also have to understand what the user is actually going to do, and also you have to understand the different nature that each genre has. We have to be mindful of this. We cannot just totally disregard this difference and to drive our operating profit performance, introduce PC payment. We have to be very much mindful whether or not the users and based on the genre game that they are playing, that they are also going to be willing to make PC payments. Having said that, I would just like to share with you that the company has its drive to increase the PC payment so that we're able to actually control the variable cost better, which is really the commission payment.
We believe that this is in line with improving and improving shareholder value. What is actually more important is the three factors that I've mentioned, that's really going to determine how the PC payment is going to be able to be rooted in the marketplace. Thank you. In respect to your third question related to what our assets were disposed, this is very much in line with what we had already communicated in the market in our disclosure back in February. Specifically, we're talking about the share disposition of the interest that we have in HYBE. We'll take the next question.
Currently, there are no participants with questions. Please press star one, star and one to give your question.
If there are no further questions, we will conclude the 2026 Q1 earnings presentation. For any additional inquiries, please feel free to reach out to our IR team. Thank you once again for your participation.