Good day everyone, and welcome to NEXON's 2022 Second Quarter Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Takanori Kawai, Team Leader of Investor Relations. Please go ahead, sir.
Hello, everyone, and welcome to NEXON's Earnings Conference Call. Thank you for joining us today. With me are Owen Mahoney, President and CEO of NEXON, and Shiro Uemura, CFO. Today's call will contain forward-looking statements, including statements about our results of operations and financial condition, such as revenues attributable to our key titles, plus prospects, including with respect to the online games industry. Our ability to compete effectively, adapt to new technologies, and address new technical challenges. Our use of intellectual property, and other statements that are not historical facts. These statements represent our predictions, projections, and expectations about future events, which we believe are reasonable or based on reasonable assumptions. However, numerous risks and uncertainties could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Information on some of these risks and uncertainties can be found in our earnings-related IR documents.
We assume no obligation to update or alter any forward-looking statements. Please note, net income refers to net income attributable to owners of the parent, as stated in NEXON's consolidated financial results. Furthermore, this conference call is intended to provide investors and analysts with financial and operational information about NEXON, not to solicit or recommend any sale or purchase of stock or other securities of NEXON. A recording of this conference call will be available on our investor relations website, www.ir.nexon.co.jp/en/, following this call. An authorized recording of this conference call is not permitted. I'd now like to turn the call over to Owen.
Thank you, Kawai-san, and welcome everyone to NEXON's Second Quarter 2022 Earnings Call. On today's call, we will update you on our Q2 results, including a strong top-line performance from MapleStory in Korea, improved player metrics from Dungeon&Fighter in China, and another outstanding quarter from FIFA Online 4, and sustained success from Dungeon&Fighter Mobile in Korea. NEXON is a loaded spring, coiled for step change improvement in our earnings profile as we grow our existing virtual worlds and bring new virtual worlds to the global market. Our foundation of existing franchises continues to deliver steady revenue growth. Our unique portfolio of long-lasting virtual worlds, anchored by our world-class live operations, allows us the time and the creative freedom to perfect new titles for release as we grow our portfolio in the coming quarters.
Many elements contributed to our success in the second quarter, but one common denominator stands out in the performance of each of these games: live operations. NEXON pioneered the art and the science of live operations in the 1990s and invested heavily in the decades that followed. Today, we are best in class, enabling continued growth in massive virtual worlds, some of which began nearly two decades ago. Knowing how to operate and grow a massive virtual world is the backbone of NEXON's business. It provides a steady stream of content that keeps games fresh and fun. It handles the matching, ensures balance, discourages cheating, and encourages player engagement. It's the difference between a game that lasts for two months and one that continues to thrive and grow for two decades or more.
To illustrate how live operations impacts game performance, I'll start with MapleStory in Korea, where second quarter revenues increased by 38% year-over-year after a relatively brief period of decline last year. This is another proof point in how our belief that well-managed virtual world games experience periods of flat or declining growth before entering a new period of dynamic growth. The MapleStory franchise launched in 2003 and has been on a steady, if nonlinear, growth trajectory ever since, including a near doubling of annual revenue in 2020. Over the last three years, it has grown at a compounded annual growth rate of 25% and is now in its 19th year. Growth in a live game over such a long period of time has never been done in the global games industry, not even close.
In 2021, players voiced concern about probability disclosures relating to the purchase of in-game items. The entire sector was put on notice, but NEXON was uniquely aggressive in responding. We expanded disclosures on in-game purchases and opened a new and ongoing channel of communication to get input from players. This process resulted in our prioritizing stronger relationships with players over short-term monetization. These initiatives meant slowing monetization while adding new content to excite the base and bring back players. Net Promoter Score, or NPS, an important indicator of player satisfaction, tells the story of how the team in Korea strengthened player trust. In July of this year, MapleStory recorded a Net Promoter Score that is actually higher than the great year we had in 2020. Throughout this period, our communication to investors has been clear and consistent.
In 2021, we urged investors not to worry about short-term variance in monetization, and that MapleStory's best days are still in front of us. Our results in Q2 and early Q3 support that prediction. Thanks to best-in-class live operations, MapleStory is back in position for dynamic growth in what will soon be its third decade of operations. Another example of prioritizing player retention for long-term growth is Dungeon&Fighter in China, where the live operations team recently executed a well-planned level cap release. A level cap increase, which introduces new content to enhance engagement with players, can dramatically change the in-game environment and requires careful management. The new content, such as dungeons, are generally well-received, but it takes time to develop characters and new equipment. To maintain positive sentiment, we avoided aggressive monetization while players level up. Returning to growth remains a long-term goal for Dungeon&Fighter.
We're pleased with how it performed in Q2, capping a strong performance following the leadership change we made a year ago. Looking toward the future, we are excited with what this tremendous franchise can achieve. In the short term, however, our focus is in driving user engagement rather than revenue growth as we manage this leading franchise for success over this next decade. Next, I want to highlight a spectacular performance by the team supporting FIFA Online 4 in Korea. In Q2, the combined revenue of our PC and mobile versions came close to doubling what we delivered last year on this franchise. Football is enormously popular in Korea, delivering results 24% above the high end of our Q2 estimates goes beyond excitement about the sport.
In addition to starting with a great game from our partners at EA, the live operations team has been driving hard to keep the game fresh, balanced, and fun. Our plan in Q3 is to stay close to players and keep them engaged as FIFA World Cup approaches in Q4. Another demonstration of great collaboration between the developers and live operations is the ongoing success of Dungeon&Fighter Mobile in Korea. The game, our first major virtual world released in 2022, launched in March and quickly attained the number one position on both the Apple and the Google game rankings. In the second quarter, revenue from the game exceeded the high end of our expectations, driven by steady and high player engagement. The buzz on mobile serves to remind PC players to come back and play.
Clearly, DNF Mobile benefits from being one of the largest entertainment franchises in Korea and in the world. Over 850 million people have played the game around the world, it has generated well over JPY 20 billion in global revenue life to date. For the launch of DNF Mobile in Korea, the IP success has been amplified by great development preparation and equally strong live operations. Before launching, we took time to develop an extensive content plan that would ensure sustained engagement by players. Once in the market, we prioritized long-term player retention over short-term monetization. Dungeon&Fighter Mobile continues to exceed our expectations, while it's too early to make projections on how that success will scale in the years ahead, we are making plans to expand the game into new markets.
The success Dungeon&Fighter Mobile reaffirms our thesis on how to develop and sustain virtual worlds. These lessons can be applied to launches we're planning for later this year and in 2023. Moving to new games in development, KartRider: Drift is being developed on multiple platforms for a global launch later this year. In May, we completed a successful internal beta test on the mobile version. Another new title is HIT2, an MMORPG in development for PC and mobile. Pre-registration started in June ahead of a launch in Korea on August 25th. Now I'd like to discuss two new virtual worlds from Embark Studios in Stockholm, ARC Raiders and Project Discovery. We are pleased with the progress being made on both games and excited about sharing both with players in the months ahead.
I'll start with Project Discovery, a free-to-play, team-based first-person shooter that is moving steadily through development. By way of background, the global first-person shooter market is massive. To be successful, a developer needs to not just be able to make a high-quality game, but one that stands out from other games with something truly unique. Fortunately, the Embark team knows this market extremely well since they are some of the most creatively and commercially successful developers in the first-person shooter space. It has become clear that the development team's progress is faster than we previously thought. The team is planning a large-scale beta test in the early fall, which will provide valuable feedback and help us decide on launch timing. As it stands, Discovery will be Embark's first game to market, and they'll be sharing more details about the game shortly.
Simultaneously, we've decided to add a major new mode to ARC Raiders, an enhanced player versus player, high-intensity survival experience. ARC Raiders tech base, physics, environment, character art, and enemy AI are in great shape. We're bringing the new mode to maximize the game's longevity. With Discovery moving faster than we previously anticipated, we also don't want to try to launch two major new triple-A franchises at the same time. Net, our plan is to launch Discovery around the end of this year and ARC Raiders next year. The incredible success of DNF Mobile and its sustained strength since its launch underscores the wisdom of launching new games only when we feel strongly that the game is thoroughly ready. Both Project Discovery and ARC Raiders are expected to launch on a trajectory that is common to virtual worlds.
Revenue in the initial weeks is likely to be small as players register and explore the new game, and then ramps up over time. The true test of a virtual world is reflected in the months and quarters that follow. The growth and stability of NEXON's legacy franchise allows us the time and the creative freedom to get it right. With that, I'll turn the call over to Uemura-san.
Thank you, Owen. Now I'll review our Q2 2022 results. For additional details, please see the Q2 2022 investor presentation available on our IR website. We achieved record-breaking Q2 revenue. Group revenues were JPY 84.1 billion, up 50% year-over-year on as reported basis, and up 40% year-over-year on a constant currency basis. Our performance was driven by the growth of multiple major titles and a significant contribution from the recently launched Dungeon&Fighter Mobile. Overall, our top-line performance was within the range of our outlook. FIFA Online 4 and Dungeon&Fighter Mobile both exceeded our expectations, while Dungeon&Fighter in China was lower than planned. By region, revenues from Korea, North America, and Europe were within the range of our outlook. While revenues from rest of world exceeded our expectations, revenues from China and Japan came in lower than expected.
Looking at the total company performance by platforms, mobile revenues exceeded our outlook, while PC revenues were below our expectations. Operating income was up 47% year-over-year and within our outlook at JPY 27.7 billion. Following an adjustment to our Embark release schedule in Q2, we recorded an impairment loss of JPY 2.2 billion on the ARC Raiders game IP. Net income was up 176% year-over-year at JPY 24.7 billion, which exceeded our outlook. The outperformance was primarily driven by an FX gain of JPY 27.7 billion, related to the depreciation of the KRW and JPY against the USD and its corresponding impact on USD-denominated cash deposits. Let's move on to results by region. Revenues from our Korea business were JPY 51.2 billion, representing record-breaking quarterly revenues in Korea. This performance was within the range of our outlook.
On a year-over-year basis, revenues increased by 57%, and on a constant currency basis, revenues increased by 49%. FIFA Online 4's PC and mobile combined revenues significantly exceeded our outlook, driven by successful events and sales promotions. MAU, paying users, and ARPU all increased year-over-year. As a result, its revenues more than doubled and marked a quarterly record high for two quarters in a row. MapleStory grew by 38% year-over-year. MAU, paying users, and ARPU all increased year-over-year, driven by the well-received 19th-anniversary update in April and summer update in Dungeon&Fighter grew by 34% year-over-year, while Sudden Attack revenue decreased as expected. Consequently, PC revenues in Korea increased by 52% year-over-year. As for the mobile business in Korea, revenue from FIFA Online 4 M exceeded our expectations.
Dungeon&Fighter Mobile continued its strength as user engagement remained high, driven by the rich content and carefully managed live operations. On a year-over-year basis, mobile revenues in Korea increased by 65%. Contributions Dungeon&Fighter Mobile and Blue Archive, as well as growth of FIFA Online 4 M were partially offset by revenue decreases in V4 and The Kingdom of the Winds. On a quarter-over-quarter basis, mobile revenues increased by 25%, primarily driven by revenue increases Dungeon&Fighter Mobile and FIFA Online 4 M. Revenues from our China business were below our outlook, increased 43% year-over-year on an as-reported basis, and 25% year-over-year on a constant currency basis. Dungeon&Fighter, revenue increased year-over-year, driven by the well-received package offerings for the Labor Day update introduced on April 21st.
We continue to focus on increasing user engagement rather than short-term monetization. While revenue was lower than planned, user metrics steadily improved, driven by the well-received 14th-anniversary update and the level cap release introduced on June 16th. MAUs and paying users increased sequentially despite the seasonality. ARPU decreased as usual quarter-over-quarter. Year-over-year, MAU slightly decreased, while paying users and ARPU increased. Revenues from Japan decreased by 1% year-over-year. There was a contribution from CounterSide, this was offset by revenue decreases from TRAHA and V4. Revenues for North America and Europe increased by 30% year-over-year, driven by the growth in MapleStory M and contributions from new games, despite revenue decreases from Choices and MapleStory.
Revenues from the rest of the world increased by 77% year-over-year, driven by the growth in MapleStory franchises and contributions from new games. Moving on to our FY 2022 third quarter outlook. In Q3, we expect FIFA Online 4, Korea MapleStory, and Dungeon& Fighter Mobile to maintain their strong momentum and a significant contribution from HIT2, which is scheduled to launch in Korea on August 25th. Consequently, we expect our Q3 group revenues in the range of JPY 96 billion-JPY 104 billion, representing a 27% to 37% increase year-over-year on an as-reported basis, and a 13% to 22% increase year-over-year on a constant currency basis.
We expect our Q3 operating income to be in the range of JPY 30.1 billion-JPY 36.6 billion, representing a 1% to 23% increase year-over-year on an as-reported basis, and a 13% decrease to 6% increase year-over-year on a constant currency basis due to increases in HR costs and increasing marketing expenses primarily associated with new titles. I will discuss the details on this shortly. We expect net income to be in the range of JPY 21.6 billion-JPY 26.4 billion, representing a 43% to 30% decrease year-over-year on an as-reported basis, and a 52% to 41% decrease year-over-year on a constant currency basis. While we record an FX gain of JPY 16.1 billion in Q3 2021, we do not factor in the FX gain or loss in the guidance.
In Korea, we expect growth from FIFA Online 4 and MapleStory, and contributions from Dungeon& Fighter Mobile and HIT2, which is scheduled to launch on August 25th. Consequently, we are looking for revenue in Korea to be in the range of JPY 61.4 billion-JPY 65.5 billion, representing a 52% to 62% increase year-over-year on an as-reported basis, and a 38% to 47% increase year-over-year on a constant currency basis. As for the PC business, while we expect revenue decreases from Dungeon& Fighter and Sudden Attack, which performed very well last year, we expect FIFA Online 4 to contribute to growth significantly year-over-year. We also expect MapleStory to maintain a strong momentum and to grow year-over-year.
Driven by the successful summer update introduced in the end of June, MAUs in July increased significantly compared to the same period of last year and reached to a level of Q3 2020, where we achieved that good Q3 revenue. Consequently, we expect PC revenues in Korea to increase year-over-year. Regarding the mobile business in Korea, we expect Q3 revenues to significantly increase year-over-year. We expect significant contributions from Dungeon& Fighter Mobile and HIT2. In addition, we expect a contribution from Blue Archive and a year-over-year growth in FIFA Online 4 M. We expect these to be partially offset by year-over-year revenue decreases in The Kingdom of the Winds, KartRider Rush+ and V4. Turning to China.
Last year, we achieved 33% year-over-year growth on a constant currency basis, driven by the successful update of our popular cast as well as well-received new initiatives Dungeon&Fighter. Given the challenging comparison, we expect revenue from our China business to be down in Q3. We are looking for revenue to be in the range of JPY 20.3 billion-JPY 22.9 billion, representing an 11% decrease to flat year-over-year on an as-reported basis, and 25% to 16% decrease year-over-year on a constant currency basis. For Dungeon&Fighter, we introduced the summer update, which includes avatar package offerings on July 14th. We are scheduled to introduce National Day update in September as usual.
In July, MAUs and paying users were at their lower level year-over-year due to a tough comparison with the strong performance in 2021, driven by the anniversary and the summer updates.
Looking forward, we are focused on engagement over short-term monetization, particularly retaining existing players and attracting returning players. In Japan, revenues are expected in the range of JPY 2.5 billion-JPY 2.9 billion, a flat to 16% increase year-on-year on as reported basis, and a 4% decrease to 11% increase year-on-year on constant currency basis. Contributions from CounterSide and Blue Archive are expected to be partially offset by decreases from TRAHA and V4. In North America and Europe, we expect revenues in the range of JPY 5 billion-JPY 5.5 billion, 10% to 21% increase year-on-year on as reported basis, and 6% decrease to 2% increase year-on-year on constant currency basis. We anticipate contributions from new games, which are expected to partially offset a decrease from Choices.
We expect revenues in the rest of the world in the range of JPY 6.8 billion-JPY 7.3 billion, 23% to 30% increase year-on-year on as reported basis, and 10% to 17% year-on-year on constant currency basis. We anticipate contributions from new games. In Q3 2022, we expect operating income to be in the range of JPY 30.1 billion-JPY 36.6 billion, increase of 1% to 23% year-on-year on as reported basis, and decrease of 13% to increase of 6% year-on-year on a constant currency basis as increasing revenue is expected, which will contribute to an improvement in operating income year-on-year. However, compared to Q3 last year, we expect cost increases due to business growth as well as upfront investment in talent and marketing associated with new releases. First is increased variable costs due to revenue increase.
Second is increased HR costs related to headcount for development and launch of multiple new virtual worlds, as well as bonus accruals for contribution to great performances. Third is increased marketing expenses, primarily associated with promotions for new games such as HIT2. Lastly, we expect increased server costs related to expansion of our mobile business, including Dungeon&Fighter Mobile and HIT2. The high end of operating income is expected to increase year-over-year on a constant currency basis as revenue increase will be larger than cost increase due to upfront investment. Overall, in Q2 2022, we leveraged our strengths in live game operations to improve user engagement, which led to the growth of multiple major titles, including FIFA Online 4, Korea MapleStory, and China Dungeon&Fighter. Dungeon&Fighter Mobile also maintained its strong momentum, resulting in record high Q2 revenues.
In Q3 2022, we will stably operate our major titles and the new mobile games, including Dungeon&Fighter Mobile and HIT2, through appropriate updates and carefully managed daily operations. This will further stabilize our business foundation for growth in 2022 and beyond. In addition, we are making good progress in the development of KartRider: Drift and Embark Studios's first title, Project Discovery, as well as in the development of other highly anticipated new titles, including MapleStory Mobile, by making upfront investments into new recruitment and title talent. We remain confident that NEXON could maintain a strong growth in 2022 and beyond by leveraging our highly anticipated new titles on top of our stable existing business, all of which are backed by our strong live game operations. Lastly, I would like to provide an update on the shareholder return strategy.
Based on our 2022 shareholder return plan, the board of directors today approved a payment of a JPY 5 per share dividend for the interim period to those shareholders who are on the registry as of June 30th, 2022. We are planning to pay the same amount for the year-end FY 2022. Regarding our three-year JPY 100 billion share repurchase policy announced on November 10th, 2020, we have completed all of the repurchase operations by the end of Q2 2022. Today, our board has approved a new JPY 100 billion stock repurchase policy, which is executed over the next three years. We plan to complete the operation by August 2025, while considering several factors, including investment opportunities, financial position, and market conditions. This concludes my remarks. Back to Owen, please.
Thanks, Uemura. Before we take your questions, I thought it would be worthwhile to underscore a few points we've made before. In an increasingly volatile world of recession, collapsing supply chains, collapsing discretionary spending spurred on by ballooning inflation, and collapsing advertising revenues, NEXON's business stands out as a port in a storm, one of the few truly anti-fragile businesses in the world. This is due to the way we've decided to run our business. First, We are in the microtransactions business, not in the macrotransactions business. We don't monetize our users heavily or focus on so-called whales. As a result, our business does well, not just in times of economic growth, but also in times of contraction. Second, our content development focus is on customer retention over near-term monetization.
Very much like exercise and eating right, this approach can be harder in the near term, but makes for a much better long term. Third, we invest our profits in technologies that benefit the long-term growth of our virtual worlds. This proprietary technology stack has enabled us to scale our virtual worlds while keeping a lid on costs. Fourth, our sustained investment in immersive virtual worlds has made them some of the biggest IP in the entire global entertainment industry, with hundreds of millions of fans and with unmatched, indeed unheard of, longevity. Finally, we have positioned ourselves to benefit from the work of the platform providers, who have made mobile devices so powerful that we can deliver the same immersive virtual worlds experience on billions of mobile devices that were previously only possible on only hundreds of millions of game playable PCs.
That means our total addressable market is expanding by literally 10x. Our stable base of revenues, sustained over many years, means we don't have to replace a current product at the end of its life cycle with a new product. We can instead obsess over making sure our new products deliver a great user experience, both at launch and for many years in the future. It also means we tend to do well even in, especially in, times of great economic upheaval. This is the future that many other media and technology companies have tried to build. This is the power virtual world's business that NEXON invented in the 1990s and continues to advance. Operator, we're ready to take questions now.
Thank you, Owen. Next, we would like to open up the lines to live Q&A. Q&A session will be conducted with Japanese, English or English, Japanese consecutive interpretation. Please be noted that interpretation will come between your questions and our answers. Please hold for interpretation before you hear our answers. Our answers will also be followed by interpretation, so please hold until the interpretation finishes before moving on to the next question. For those of you who have more than one question, we will take your questions one by one. Now, we'd be happy to take your questions.
Today, we will accept questions from conference call participants. If you have a question, press zero one on your touchtone telephone. Once again, if you have a question, press zero one on your touchtone telephone. When we receive your input, you will hear the guidance. If you do not hear the guidance, please press zero one once again. If you need operator assistance, please call the operator by pressing star zero. We will begin taking your questions shortly. Please hold on for a moment.
This is Yamamura of Citigroup speaking, thank you very much for giving me this opportunity to ask you questions. There are three questions altogether. I would like to ask the first question. Looking at the constant currency basis in China, looking at your forecast as well as the ARPU, it seems that you are trending favorably. In April, you have the Labor Day package, it trended better than you had expected. I understand that the core user was revitalized, because of that, ARPU went up.
In Q2, you mentioned that you tried to not work on further increasing ARPU, the actual figure actually shows that. Looking at the ARPU number on a year-on-year comparison, I see an increase of about JPY 1,800. Do you think I see this number in ARPU increase because of the mix of FIFA and also because of the FX impact? I know that in Q2 you conducted level or cap release you were able to further enhance the users to come play the game. I want to know whether you have been impacted by the lockdown or not. Can you respond to the first question?
Thank you for your question. I understand that your question pertains to the disclosed KPIs the numbers that you are looking are for the total PC. It is a mix of different KPIs altogether, it does not only pertain Dungeon&Fighter. If I may be more specific, the number that you are looking at contains an increase of ARPU in Korea, also there is an impact of FX as well. Just talking about Dungeon&Fighter, as mentioned last quarter, we did bottom out in Q1 we are on a recovery trajectory. We are not working on any short term achievement, rather we are operating with mid to long term perspective.
Having said that, I believe that we are trending favorably as we are expecting. In Q1 and Q2, we were able to increase year over year. In Q3, as you know, in the previous Q3, IE Q3 of 2021, the number was great. We were able to increase year over year 33%. Given that high comp, I believe that in Q3 of 2022, we will be seeing some decrease. As to the lockdown in China, we can say that there was almost no impact on our business.
Thank you very much for answering the first question. Let's move on to the second question, which is on cost. I understand that the cost is trending as budgeted, you have already explained about that. For me, it seems that the increase in HR cost is becoming quite conspicuous. I see that you are increasing the number of headcounts, I thought that in terms of per head cost, it will stabilize. In actuality, I am seeing some increase in the per talent cost as well.
I know that last year you've paid a bonus as well. You are paying a bonus this year as well. I really do not understand why this is the case, meaning that there is still an increase in per headcount cost. Do you think it is because of the FX impact, or do you think that trying to hire new personnel in this market situation is becoming more costly than ever before?
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As you've mentioned, there is a big impact of FX, but more than that, since our titles did very well, we paid the bonus accordingly. That's another major factor and the reason for the increase in the HR cost. Also, we are hiring new talent. That's another factor contributing to the increase of the HR cost. Our bonus scheme is such that the more the top line grows, we provide the bonus accordingly. Also in terms of hiring, especially in Korea, which is our major market, the labor market is becoming very competitive. Under that environment, we are trying to attract very high caliber talent by appealing the merits of working for NEXON. I believe that hiring new people and investing in people are upfront investment.
We want to develop a very rich pipeline. Also, we want to maintain the current franchise. Therefore, in order to realize that, which will in the end of the day lead to a greater revenue, we will be investing in HR cost. We believe that even though at this point in time the HR cost is increasing, we will be seeing a top line growth in the future as well. Once again, HR cost increase is an upfront cost or investment that we are making in human capital, and this is not becoming any burden on our business.
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My last question is on the rescheduling of ARC Raiders launch. My understanding of this title is that it's going to be the brand that will indeed represent the Embark Studios. I understand that you were saying that Project Discovery is more challenging than ARC Raiders. Is the delay in ARC Raiders launch just because of the progress difference between the two titles? Also, as far as I know, ARC Raiders is scheduled to be launched on PlayStation 5, and 5 is the only PlayStation that you are catering to. Do you think the delay in ARC Raiders has something to do with the platform? You decided on rescheduling the launch of these two titles after you've seen the test results of these two titles?
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If there is any marketing input that I need to know, I want to know about that as well.
Thanks for your questions. Junko-san, this is Owen. First, let me clear up two points that I think I heard in your question. First of all, we never said that Project Discovery was more challenging than ARC Raiders. The other thing that we have not said is anything about exact platforms. We have not made any announcements about what platforms they'll be on or any announcement about PS5.
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Just to be clear, we have said it'll be multi-platform on PC, Xbox, and PS5.
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To get to the crux of your question, let's first remember that as we said in our prepared remarks, that discovery is going faster than we expected. As we said, we don't want to launch them right on top of each other. Now, as you know, bringing a virtual world to market is very different from traditional games. We know from experience what works. As we get ready for launch, what we really do is we test among progressively larger groups of people, and then we take a look and we decide what's needed for the game to succeed over years or decades. In the case of ARC Raiders, what we decided to do is we liked where the game is today. We liked the tech base, we liked the art, the backstory, the content pipeline, but we wanted to add a major new mode.
That decision wasn't for the short term, it was for the long term. We wanted the game to last for years and decades. A while back, we made essentially the same decision with Dungeon&Fighter, and it worked out great once we launched it. Our live ops people are thrilled with the retention rates that that game has had since we launched it. We think it's the right approach if you want to have a business that lasts. I would just reiterate also that we're enormously thrilled with both games, both Project Discovery, which we plan on launching first now and with ARC Raiders.
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Thank you very much. I understood it very well.
Thank you.
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The next speaker is Mr. Seyon Park from Morgan Stanley. Mr. Park, please.
Hi. Thank you for the opportunity. I have two questions. I'll start with the first question, which is going to be on FIFA Mobile, which I think is a name that a lot of investors typically don't ask too much on. I think the trends that we're seeing this year did kind of catch my eye. Can you maybe explain some of the reasons behind this trend? I mean, obviously it's a game and the franchise has actually been out for some time. I'm just kind of curious as to whether FIFA Online 4 globally has been doing well, or whether this is more of a Korea-specific phenomenon. Maybe, is it being impacted by either the popularity of Tottenham Hotspur and the English Premier League among the Koreans, or maybe an impact from the expected World Cup at the end of this year?
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Thank you for the question. For FIFA Online 4 it is true. Also FIFA Online 4 Mobile. There are multiple factors which is allowing this title to do so well at the moment, such as daily operation and successful content update, as well as marketing activities, events and promotions and so forth. This title is launched in the Korean market. We are talking about the Korean situation at the moment. As you may know, in Korea, soccer is a major sport and in that sport, FIFA Online 4 is the most popular game for soccer. We hope that we can continue to provide enjoyment to the users and through great operations and have a good result in South Korea. There are many factors, but the World Cup games at the end of the year is one of the reasons there is excitement around it.
Also we are doing a good job in marketing promotions and so forth. Also the players in Europe, their popularity is one of the reasons as well, as you have mentioned. The title is not doing well only on a single factor reason. It is doing well because of many different factors combined together.
Thank you for the answer. My second question is a bit hypothetical. I know that either Owen or Shiro Uemura-san may not have the right answer for this, but just regarding the share buyback program, can you give a little bit of background as to why it concluded earlier? This new program has been put in place. The reason I talked about this hypothetical question is, given the situation at NXC, and I know there's a lot of uncertainties there. In the hypothetical case that NXC does end up selling a part of NEXON shares in the market, would the company be willing to use that buyback program to absorb any potential supply of the shares? Could it actually be the case where that buyback program could be used to entirely insulate the impact of such a scenario?
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Hi, Seyon. It's Owen. Thanks for your question. Look, as you anticipated, we're not going to make any comments about what may or may not happen by one of our shareholders. It's just not something that we're going to have anything to say about. As you can tell, we really like our future, and we're feeling really confident about our future. In that environment, when we're feeling confident and good and we like our pipeline, we like what we're doing, we like the way our live game operations teams are operating, and we love our business model. All those things mean we are confident that the price at which we're looking at our stock is a good use of our funds, and it's a great way to return money to shareholders, and it's a great way to invest in our own future.
In that environment, it's a good time to do a share buyback, to announce a re-up of our share buyback. There's nothing more to it than that.
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I think that makes sense, Owen. I did think that the mastery of the Live Ops really shined this quarter and look forward to seeing that continue this year. Thank you again.
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The next question is that Mr. Nagao of BofA Securities.
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Thank you very much. I am Nagao of BofA Securities. I have three simple questions. First question is on the revenue forecast for Korea in Q3. If possible, can you give me the breakdown between PC and mobile?
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Regarding the guidance policy, please do understand that we do not give you the breakdown between PC and mobile for each region. I really appreciate your understanding.
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The second question is on ARC Raiders. I understand that its launch schedule has been delayed to 2023. If possible, can you give me the details of your new launch schedule? Is it going to be in the first half of 2023 or the second half of 2023?
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As already mentioned by Owen, in ARC Raiders, we have decided to add a new player versus player mode. Our new launch policy is such that internally we have to be satisfied with what we have. Therefore, that being the case, we will work on with the development further of ARC Raiders and try to head towards the longevity of this title. Once we become sure that the satisfaction level as well as the possibility of the game longevity is ensured, then the time will be right for us to make the announcement.
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Thank you very much. My third question is related to what Owen has mentioned in the opening remarks. You mentioned that you have a plan to Dungeon&Fighter Mobile in other new markets as well. If there is any progress in your plan vis-a-vis China, can you elaborate on that?
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Unfortunately, there is no update that I can provide to you today. The situation is the same as we have talked about it last time.
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Thank you very much.
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The next speaker is Miss Eiji Maeda from SMBC Nikko Securities .
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That is about ARC Raiders and postponement about it. Sorry for asking this question many times, originally I think it was on TPS and Project Discovery was on FPS or FPS. Between TPS and FPS, there are two different types of users or markets. That is my understanding. What is the understanding or perception of your company in this regard? What are the expected revenues for each title? If you could share with us any. Owen said that you don't want to launch the two major AAA titles at the same time. What would be the minimum necessary interval between two launches in your mind? If you could give us any comment, that would be appreciated.
I'll take your first question first and then allow time for translation, then come back to your second question. Just to be clear, yes, ARC Raiders has been shown as a third-person shooter, and Project Discovery has been shown as a first-person shooter. It's hard to answer your question in the games business. We do know that the first-person shooter genre is massive, as I said in the prepared remarks, you really have to bring something special to the table if you're going to win in it. Meaning something that's differentiated in a different look and approach to doing the genre. I would underscore something that we've said several times. We think that this is one of the most creative and bankable teams in the West, the Embark team, and we think that the work that they're doing in this area is phenomenal.
In fact, FPS is really where they started. It's sort of their home. For all those reasons, and the fact that we feel that the project they're working on is very differentiated and also incredibly fun, we feel very good about it. It's a little hard to answer your question directly because what happens over and over in the games business is when you do true innovation, you find that the market is much bigger than the existing rigid genres might suggest. Market sizing before product launches and before you see how people respond to it, and before you look at the retention numbers, becomes a very challenging task. What we do believe is that both games will address a large market, and our objective is to make them incredibly fun and fun moreover for many years. That's what we're building.
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I believe your second question was about what is a minimum interval in between launch and games. It's a good question. Again, it doesn't have an easy answer. I guess the short answer to your question is not in the same quarter. The slightly longer answer is when we launch a major new virtual world, remember, these are not packaged goods games. These are virtual worlds. You've got to think long and hard and do testing. You have to set up servers, you have a lot of player communication, you've got marketing. All those things happen when you launch a major new virtual world, and you want to make sure that you handle that smoothly and well. At a bare minimum, you don't want to do that in the same quarter.
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Thank you very much for your answer. I have one follow-up question. You said that this is going to be a new virtual world and that's why you need thorough testing, communication, and marketing plans, taking enough time to make them perfect. For the Discovery part, it seems that recently you have announced that the launch schedule will be put forward to the end of this year. My question is whether you have done the beta test for Discovery already, and whether you have done any player communication, enough communication, whether it was done or not. If you have already done a beta test, as a result of that, isn't it possible that you may have to add another function later on? Is there a possibility that you may postpone the launch of this title again?
Well, I can't share anything beyond what we've said in our prepared remarks today, which is that we've been very happy with the progress of this game over a rapid period. Beyond that, we don't have any additional details to share.
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Understood. Thank you.
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The next question is from Mr. David Gibson of MST Financial, please.
Thanks very much for the question. This one is actually a follow-up on Project Discovery. I'm just wondering, Owen, whether your confidence in that title has changed over the last three months. Now that it's shifted up to being more sooner, have your expectations improved, stayed the same, or changed at all in terms of this particular title? That's all. Thank you.
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You're asking a really hard question. Look, I'm a game fan as well, what I can tell you is this is a game that I personally am really looking forward to playing and am very excited about. I think when we show the world what we're working on, the world will be as excited as I am. I think there's a lot of other people out there like me. I think that's what I can tell you. That's usually a pretty good guide for what works well financially in the video games business.
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Thank you very much.
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Thank you.
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The next question is from Kenji Fukuyama from UBS Securities. This will be the last question because of the limitation of time.
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I have two questions. The first question is the actual number for China. Because of the enhanced engagement, it looks like you are trying to improve, but the actual numbers have gone down in China. Is there anything unexpected during the quarter? Were there any changes to any KPIs that led you to make changes in your policy in China? Could you give us more details about what was happening in the quarter?
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As we have mentioned earlier, we thought that the Q1 would be the bottom and that the business is improving since then. That comment or view that our company has is unchanged even today. However, it is just that more than expected, the impact of the actions that we are taking were short lived more than we had expected. For example, we have taken various actions like level cap release, and that was impacting the KPI positively, but the impact did not last as long as we had expected. That was the reason. Even though in that case, the level cap release did give a positive impact on the KPI. It went up at once, but it didn't last as long as we had expected.
For KPIs and user behavior, we would like to monitor these trends more closely than in the past, and that's how we are operating the gains at the moment. Having said that, on a YoY basis, we believe that we still have a positive growing trend. For the longer term, the trend is very positive. We are happy with that. For the Q3, rather than focusing on the short-term measures, we would like to keep focused on the medium to long-term perspective and try to ensure the continuous recovery in China.
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Thank you very much. My second question is for Owen. This is about PC games and its competitive environment. The Japanese developers at the moment are announcing their enhanced focus on the PC titles going forward. I think that PC games are the areas that your company has competitive advantages. Suppose that the market is becoming more competitive and the competition is becoming more intense going forward. With the changing environment, what is your current stance towards the PC titles? What kind of view do you have towards the market?
Thanks for your question. I think the first thing that I would say about your question is that we're a very different company than a lot of game companies. We use the word virtual worlds to describe what we are, which is we for 25 years now have made deeply immersive experiences in simulated virtual environments with thousands of other players in the same game world at the same time. That's very different than the type of single-player experiences that you see oftentimes in more traditional games. That would be a very, very important point number one. I'll let that translate first.
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The second thing that I would say is I'm happy that more game developers, particularly Japanese ones, are focusing on the PC business, because that means there's more content, and the PC business has always been underserved in Japan, in our view. Whereas it's been very, very popular for many years in places like Korea, China, and the U.S. Our observation is that the Japanese market has never really considered the PC as a content consumption device. It's considered it as an office automation tool or a content creation device. We think it's terrific that more companies, and therefore hopefully more consumers, are going to see it as a content consumption device.
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The third thing that I would say is to put whatever's happening in PC in the context of mobile. I've said this several quarters in the past, but the iPhone 13 that is likely in your pocket right now is an unbelievably powerful device. It's what we would have called a workstation, meaning the kind of device that can only fit under your desk with a lot of power on it just a few short years ago. The GPU measured in teraflops is exceedingly strong, and the networking layer on that device is exceedingly strong. Essentially anything that's an iPhone X or up, or equivalent Android device, is an extremely powerful workstation that we can deliver a very deep, immersive virtual world. Now that by itself is important, but the numbers are what you need to keep in mind.
There are roughly, by our estimates, 3 to 400 million game playable PCs operating in the world today. There are roughly, by our estimates, 3 to 4 billion -- this is in publicly available information -- 3 to 4 billion iPhone X or up being operated today, user base. That's a total addressable market expansion of 10x. We think it's important to deliver our unique virtual worlds on all those devices, on PCs, on consoles, and on mobile devices. We think that the TAM expansion is just an incredible force that works in our favor, because now we can deliver deeply immersive virtual worlds to billions of people instead of just hundreds of millions of people.
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I'm going to just add one point at the end, or just one final point to conclude. I think it's a very common analytical fallacy that you see in the video games business, because we are in the consumer business, to focus on competition and issues of market share. It's common for a number of reasons. One of them is that we get a lot of people who come from a consumer packaged goods business. It's an analytical fallacy because in our view and in our experience, we're not suffering in the games business from an excess of competition. We're suffering from a scarcity of great new ideas and creativity. I've spoken publicly about the reasons for this in the past.
Our view, and it's served us very well over the years, is that if we do something really special, especially in online virtual worlds, if we do something special, then we end up with a vast market, a vast market that grows over time. That, for all the reasons that I've just said, dwarfs any near-term issues of potential competition, which may or may not exist.
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Thank you very much. Understood very well.
Thank you very much.
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This concludes the question and answer session. Mr. Kawai, at this time, I'd like to turn the conference back over to you for any additional or closing remarks.
Thank you. If there are no further questions, I would like to take this opportunity to thank you for your participation in this call. Please feel free to contact the NEXON Investor Relations at investors@nexon.co.jp should you have any further questions. We appreciate your interest in NEXON and look forward to meeting with you, whether it is here in Tokyo or in your corner of the world.
Thank you. That concludes today's conference. Thank you for your participation. You may now disconnect.