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We will now begin the Q&A session. If you have any questions please use the raise hand icon at the bottom of the screen.
현재 질문해 주신 분이 없는 관계로 조금 기다려보도록 하겠습니다. 첫 번째 질문자는 JP모건의 스탠리 양 님입니다.
We'll take the first question from Stanley Yang from JPMorgan. Please go ahead.
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We'll be waiting for the next question as Stanley Yang will be joining again.
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The next question will come from Junho Lee from Hana Securities.
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Please go ahead.
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I have two questions for you. One is relating to the Socar investment announcement made today. Could you provide more color about this announcement? My second question relates to the Hanwha Aerospace joint venture announcement made in March. Can you also elaborate more on this?
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On the Hanwha Aerospace partnership, which was announced in last earnings call, we have nothing to update you because it is an ongoing matter at the moment. Moving on to the Socar, this closure announcement made today, we will be establishing a JV company on the autonomous driving service together with Socar. Under this newly established entity on the autonomous driving service based on the AI R&D, Krafton will be utilizing the data accumulated across these processes in order to deploy them for our physical AI research and development.
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Next question will be from Eric Cha of Goldman Sachs. Please go ahead.
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Thank you for taking my question. On Subnautica 2, as you're aware, there has been some noise around with the studio, and I'm wondering if there is no changes to the original plan of the early access. If things are proceeding on track, in line with your original plan, please confirm on that. My second question relates to your second quarter guidance and visibility in terms of revenue. I know that so far you have quite substantial reliance on PUBG because the diversification is not substantial yet. Depending on the momentum of PUBG, the earnings results are dependent. Could you please add more color on that?
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First, on Subnautica 2, aside from the noise that you mentioned, I could say that we are facilitating cooperation smoothly with the studio at the moment, and the early access will be planned as is and will be launched as soon as possible.
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On your question on PUBG reliance, as you're pretty much aware, we do have some ups and downs across some seasonalities where there's some peaks and off seasons depending on the quarters. Our Q1 performance does not mean that we'll have the same performance across the other quarters. However, we can say that, the Q1 earnings have enabled us to provide a structural, growth pattern, in going forward.
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If I may elaborate more on the guidance to the second quarter, as I explained in my previous remark, by we're still standing at the end of April. So, we're kind of asserting how the bid is running for April. As for PUBG, our traffic is running quite strong. We based on the various collaboration that we initiated across April, for instance, the Stellar Blade Contender. As for mobile, the X-Suit, we are continuing to drive quite substantial sales and this will continue. If you're asking if the momentum will be sustained in Q2, we are quite positive to that.
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We'll take the next question from Stanley Yang from JPMorgan.
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I have two questions for you. First is on the PUBG IP. It seemed that the sales for the quarter is quite strong. But I'd love to hear more on the regional part. If we look at the third- party data for India and China, the data space, there seems to be some gap. Please add more color on that. My second question relates to your share buyback policy. So, wondering what kind of criteria you have in mind to run and implement this policy. Do you have certain criteria for the undervalued share from the management side, which is linked to the earnings when you calculate that? Are you considering the company wide strategy, like the new pipeline, down the road or when these strategies are being materialized?
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On your question to the sales of the PUBG IP, I think it's natural for you to refer to the third-party data. However, there has to be some inaccuracy around that data. Relatively speaking, in terms of the size and the sales of the region, I don't think there is a huge gap.
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More specifically on PUBG Mobile, in line with the Ramadan season, which was a part of a premium product which worked really well especially, and being received really well across the MENA users. This product was able to post a double digit growth.
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As you are aware, as a Krafton follower, in Q1 centered on the Lunar New Year, we had substantial growth from the China side, for PUBG PC and also for the Peacekeeper Elite.
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On your question on the treasury share, we do have a various list of criteria that we're considering, including if the current level of share is undervalued or not. These are set internally based on the three-year shareholder policies that we set before.
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However, when it comes to the precise criteria sharing for the share buyback, I don't think it's appropriate to share in detail because if we do share the mathematical formula behind taking these actions, there may be some misinterpretation from the market. However, what I can say you now is if you look at the Q1 operating profit amounting to KRW 56 billion, and considering the current level of our stock price, it is undervalued at the moment, which is kind of easy to say.
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Next question will be from Junhyun Kim of HSBC. Please go ahead.
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Thank you for taking my question. My first question relates to the PUBG BM. I know, I think that there has been a quite lift in your fandom based on the various collaboration and popular items that you initiated. I guess there has been some increase for the paying users and wondering how the ARPU works for that. Also you've mentioned that the Xeno Point had no cannibalization effect.
However, if you look at the Steam figures, there has been some jump in the user trend traffic. What was the contribution effect of the Xeno Point per se? My other question relates to your partnership with and JV initiatives from the gaming industries and wondering what you're expecting out of this. Can you talk a little more comprehensively about the consolidated operating profit or how about the timing of gaining the margins, et cetera?
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On PUBG BM, relating to the lift in our Paying Users, it's difficult to disclose our operating metrics. As for the CCU figures, I think you can browse them from the Steam database.
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If we compare our actual user base against the revenue of NCC, which went quite up, it actually went quite up. We do look across various metrics like the users time spent, the retention, the paying users, and the Average Revenue per User. Across all these metrics, we have achieved a double-digit growth.
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Your next question was about the Xeno Point effect. You mentioned the word cannibalization.
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We cannot view it as a single factor attributable to Xeno Point because at the time of Xeno Point launch, we were also concurrently running other appealing products like the Stellar Blade Contender.
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However, on the backdrop of Xeno Point and with the start of the service, we've seen substantial growth in traffic across the PUBG IP. Specifically speaking, this year we are embarking our initiative to introduce more Well Made Modes, and Xeno Point is the first very well case in point. Before we used to run Arcade Modes, however, Xeno Point marks the highest peak CCU ever.
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If we look at Xeno Point, which is offering a PVE mode inside the PUBG universe, we could witness that over one third of Battle Royale users were playing the Xeno Point mode. Therefore, we think this achievement is spectacular.
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On your question to the JV establishment with the non-game sector. With our very own AI capabilities, we'd like to expand into physical AI business. Centered on our software AI capabilities, it is mandatory and required to work together with the businesses that have the offline edges. Hence we are engaging in this JV. As for Socar, as with TADA company before, they do have the extensive or perhaps the largest scale of car and driver related data and management skills.
Through initiating this autonomous driving business, we'd like to create big synergy out of our own AI capabilities and their edge over their expertise, where we can open up new business opportunities. Meanwhile, we can use these type of data accumulated from this new business entity into our physical AI domain. We believe that this part, this kind of partnership will continue in the future by combining our own strength and AI capabilities and their offline expertise. We're just getting started at the moment. When things materialize in the future, we'll give you more update on the timing of profit realization.
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Next question will be from Junho Lee of Hana Securities. Please go ahead.
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I have two questions for you. The first is on Xeno Point mode. You know, I know that you used to have Arcade modes before, but it appears that the Xeno Point mode will disappear and discontinue towards the end of the year. I am wondering if you have any plans for additional updates or is this just a temporary mode? My second question relates to PUBG M. As you are aware, we have had the Ramadan break out in the beginning of March. I am wondering if there has been any changes in terms of traffic across MENA and Southeast Asian users.
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On your question on the Xeno Point mode, this was our very first attempt to adopt the PVE mode as part of our PUBG Well Made content. In these PVE modes, the play session tends to be quite short. We would like to have the users enjoy and play the game, the mode for a certain period of time, and additionally offer new modes based on upgrades. That is how we can maximize the effect and what users are expecting out of us. In line with our Xeno Point mode, we are also preparing for some other always on modes.
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On your question on the so-called war, relating to geopolitical, political risk, it is difficult to comment in line and in connection with our business. As you might be aware, when things like a war breaks down, then there's a great constraint in terms of mobility. There tends to be a trend where the traffic is lifted. However, in Q1, it's not attributable to such geopolitical risk. It's rather attributable to the Ramadan themed item where we drove substantial traffic. It's difficult to say that it's attributable to the war. Rather we can say the well-made content and the user satisfaction is a main driver to growth.
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This concludes Krafton's 2026 Q1 earnings presentation. We sincerely thank all the investors and analysts for your continued support and interest for Krafton.