Good day, everyone, welcome to NEXON's 2023 third quarter earnings conference call. Today's call is being recorded. At this time, I would like to turn the call over to Maiko Ara, Head of Investor Relations and Corporate PR. Please go ahead, ma'am.
Hello, everyone, welcome. Thank you for joining us today. With me, 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 operation and financial condition, such as revenues attributable to our key titles, growth prospects, including with respect to online game 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.
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 owner of the parent, as stated in NEXON's consolidated financial results. Futhermore, 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/followthiscall. Unauthorized recording of this conference call is not permitted. I'd now like to turn the call over to Owen.
Thank you Ara-san, and welcome, everyone, to NEXON's third quarter 2023 conference call. Q3 was another record-breaking quarter for NEXON, with revenues up 52%. Our strategy of focusing resources on games with the biggest potential to grow on multiple platforms is paying strong dividends, particularly in Korea, where revenue and player engagement has again exceeded our expectations. Uemura-san will take you through the detailed review of NEXON's performance in the third quarter in a few minutes. My introductory remarks will be comparatively brief and focus on only a few points that are key to understanding our company and our industry. To start, NEXON is the world leader in a segment of the entertainment business which is not yet well understood, virtual worlds. By that, I mean deeply immersive multiplayer online games played primarily on PCs and increasingly on smartphones.
Many are aware that NEXON pioneered the genre in the 1990s, that through our live operations expertise, we have a unique ability to grow blockbuster franchises over span of decades. What is less understood is how well NEXON is positioned to capture enormous opportunities from advancements in mobile technology, as virtual worlds are now played on mobile phones. Just as the evolution of console technology took us from Pong to Pac-Man to Call of Duty and Grand Theft Auto, a steady pace of breakthroughs in mobile capabilities, both devices and networks, is enabling billions of new players access to NEXON's sweet spot, virtual worlds. Our performance this quarter highlights the robust strength of NEXON IP as we bring our games onto mobile platforms.
Extending franchises like MapleStory, Kingdom of the Winds, KartRider, and Dungeon Fighter to mobile represents a massive increase in our total addressable market, from a couple 100 million game-playable PCs to several billion smartphones. As of Q3, mobile represents 42% of our revenue, from 26% a year ago when we embarked on our focused strategy. I'd like to address the durability and diversity of NEXON's business, in particular, the core franchises that have lifetime revenues exceeding $1 billion. Today, we announced record-breaking revenue and operating income for the third quarter. Of course, we're proud of this achievement. What makes the third quarter remarkable is that we achieved this performance even without the benefit of the launch of mobile Dungeon Fighter. We are very much looking forward to launching M D&F.
The point is, even though we did not launch it in Q3, our revenues still went up by over 50%, and it was our best Q3 ever. Q3 highlights the power of our franchises and the strength and solid execution of our focused strategy. In other words, as massive as Dungeon Fighter is, NEXON is more than Dungeon Fighter. NEXON is an extraordinarily well-balanced company with fast-growing revenue streams from multiple franchises, markets, and technology platforms. Third, I'll highlight NEXON's IP, which includes some of the largest franchises in the global entertainment industry. You'll recall that last year we sharply focused our strategy around fewer games with bigger potential for breakout hits, on leveraging our own IP, and on bringing those virtual worlds to mobile. The early results of this initiative point to a breakthrough success.
There's a common misunderstanding in the broader games industry that the success of a game is determined in days that follow its launch. This dates back to the era of offline packaged goods games, when any title that wasn't a hit on day one was destined to fail. That's not true anymore, and it never really was true in the business of virtual worlds. At NEXON, we don't measure success in days or weeks. We measure it in years and decades. Here are examples of some of our biggest virtual world franchises. Our MapleStory franchise launched in 2003. In Korea, it grew 132% year-over-year in the first quarter, 151% year-over-year in the second, and 71% year-over-year in the third. Lifetime revenue is greater than $3 billion.
Dungeon&Fighter, which originally launched in 2005, is having a particularly strong year in Korea, where it grew 53% year-over-year in Q1, 49% year-over-year in Q2, and 56% year-over-year in the third quarter. Global lifetime revenue now exceeds $15 billion. KartRider launched in 2004. It has been played by more than 50% of the population of Korea and 45% of all Taiwanese. Today, lifetime revenue exceeds $800 million. And finally, The Kingdom of the Winds. The game was originally released by NEXON in 1996, making it the first and most enduring massively multiplayer online role-playing game. In Q3, we launched a mobile version, The Kingdom of the Winds: Yeon, which has performed far beyond our expectations. In fact, its performance on mobile this quarter was more than 20 times the performance of the existing PC version.
Our focus on virtual worlds and our live game operation strengths have helped NEXON to engage existing players, bring back lapsed players, and recruit new players as we provide a steady stream of new content and franchises that our players know and love. That brings me to my final point, growth opportunities layered onto our highly scalable and robust core virtual world franchises. Revenue from these core franchises generates more than $1 billion in annual operating cash, which strengthens our balance sheet and gives us strategic flexibility to invest in new high-growth initiatives. As you know, our next new title is a highly mobile Dungeon&Fighter, which we expect to launch in the near future. Following that will be new games on multiple platforms from our Embark Studios in Stockholm.
We plan to provide more details on that in the next quarter, but we're extremely excited about the groundbreaking innovation and fun we're seeing in the game. We plan to launch the next generation of KartRider in 2021. The first version of the franchise has been played by more than 380 million players on PC alone, and the next version will extend well beyond PC. Our objective is to bring it beyond its core markets of Korea and Taiwan to major new audiences in the U.S., Europe, and around Asia. Let me summarize with three key points about where NEXON is today. First, NEXON is a pioneer and leader in the business of virtual worlds, a segment of the entertainment industry that is in the early stages of massive growth, thanks to the explosion in mobile handset capabilities.
Second, our business is durable and diversified across multiple franchises, multiple regions, and multiple platforms, and it is getting more diversified all the time. Today, more than 40% of our revenue comes from mobile. We have not one but several monster IP franchises that are as big as some of the biggest in the entire global entertainment business. And third, on top of the extremely stable existing business, our content strategy is to launch a focused number of global blockbusters on multiple platforms in multiple regions, which continue to grow for decades. Our Q3 results highlight the strength and diversity of our portfolio. Our focus strategy is working, and I've never been more excited about NEXON's future.
Finally, I would like to welcome a new member to NEXON's Board of Directors, Kevin Mayer. Many of you know Kevin for his role in reinvigorating Walt Disney as a global force in film, television, and streaming. Kevin's experience, insights, and counsel will be invaluable to helping chart NEXON's path to becoming a global entertainment powerhouse. With that, I'll hand the call over to Uemura-san.
I will review our Q3 results. For additional details, please see the Q3 2020 investor presentation available on our IR website. NEXON just completed another record-breaking Q3, proving once again the significance of our focus strategy and the strength and diversity of our portfolio, which includes MapleStory, The Kingdom of the Winds: Yeon, KartRider Rush+, and FIFA ONLINE 4. While we did not benefit from Dungeon&Fighter, which was included in our outlook, our exceptionally strong performance in group revenues from other games exceeded our expectations and brought us within the range at JPY 79.4 billion, up 52% year-over-year on an as-reported basis, or on a constant currency basis. By region, revenues from Korea, North America, and Europe, and rest of world exceeded our expectations.
Revenues from Japan were in the range of our outlook, and China was below our outlook due to the postponement of the Dungeon&Fighter launch. Looking at the total platform performance on a platform basis, PC revenues exceeded our outlook, driven by MapleStory's strong performance across geographies. Mobile revenues, of course, were negatively affected by the delay of Dungeon&Fighter and came in below our outlook. However, we expect our mobile titles to perform well during the quarter. The Kingdom of the Winds: Yeon significantly exceeded our expectations, KartRider Rush+ and V4 also exceeded our expectations. Year-over-year, PC and mobile revenues grew by 20% and 114% respectively. PC revenues accounted for 58% of the group revenues, while mobile revenues accounted for 42%. Operating income was JPY 27.6 billion, which was below our outlook.
This was due to the absence of Dungeon&Fighter, which is a high margin royalty business, as well as a JPY 3 billion impairment loss, primarily on business decisions to Big Huge Games. However, we achieved record high Q3 operating income, which grew 13% year-over-year, driven by our strong performance in Korea. Looking at the cost items, our internal costs in Q3 were lower than our plan, while we recorded higher than planned payment gateway fees and royalties in relation to the strong performances of the co-developed mobile game, The Kingdom of the Winds: Yeon, as well as other mobile games including KartRider Rush+ and V4. As a result, our costs exceeded our plan.
Net income was JPY 16.3 billion, which was below our outlook, primarily due to the operating income underperformance, as well as JPY 6.6 billion FX loss related to the appreciation of the Korean won against the U.S. dollar during the quarter and its corresponding impact on U.S. dollar denominated cash deposits. Let's move on to results by region. Revenues from our Korea business in Q3 exceeded our outlook, primarily driven by stronger than expected performances of the new mobile games The Kingdom of the Winds: Yeon, as well as MapleStory, KartRider Rush+, and V4. We saw strong results from all four of our major PC titles. MapleStory demonstrated strong momentum throughout the quarter. Its revenue exceeded our expectations and grew 71% on a constant currency Dungeon&Fighter increased its revenue by 56% year-over-year. Both MapleStory and Dungeon&Fighter achieved record high Q3 revenue.
Sudden Attack also grew by 35% year-over-year. FIFA ONLINE 4's PC and mobile revenues combined slightly exceeded our outlook and were slightly up compared to Q3 2019, when its revenues grew significantly year-over-year. NEXON's development strategy is making steady progress on platform expansion and bringing our flagship titles to mobile. We began with MapleStory, then KartRider and FIFA in Q2. On July 15th, we launched The Kingdom of the Winds: Yeon, which combines nostalgic aspects and pixelated art of the original PC game with contemporary mobile gameplay. The game was immediately popular with a broad demographic, including longtime fans as well as new, younger players. These younger audience of players in their teens and 20s account for more than half of all the players of this game. Both user engagement and revenue significantly exceeded our expectations in Q3.
The recent success of The Kingdom of the Winds: Yeon, a franchise originally launched in 1996, stands as a clear validation of NEXON's strategy to bring well-known brands to the mobile platform. KartRider Rush+ and V4 also performed well in Q3. In addition to these titles, as well as a contribution from FIFA Mobile, which launched in June, revenues from our Korea business grew 114% on an as-reported basis, or 115% on a constant currency basis year-over-year, and achieved the highest Q3 revenues. The revenue from our Korea business in Q3 accounted for 64% of NEXON Group's revenues. Revenues from our China business were below our outlook due to the Mobile Dungeon&Fighter, which was scheduled for release in August. Excluding of Mobile Dungeon&Fighter revenues, were within our expected range.
On a year-over-year basis, revenues decreased by 11% on an as-reported basis or on a constant currency basis. During the year ago period, we launched a large scale update for KartRider Rush+, which performed particularly well and created a difficult comparison this year. PC and Dungeon&Fighter's Q3 revenue was in the range of our outlook, but slightly decreased year-over-year. In Q3, in addition to the seasonal updates including the summer update in July and the National Day update, which began in late September, we conducted events and other updates as an ongoing initiative to stabilize and improve the user metrics. However, the number of active and paying users decreased both year-over-year and sequentially. This was primarily due to lower usage engagement from the winning effectiveness of key update in March, as well as continued strengthening of player identity verification and protection functions.
ARPU increased sequentially due to the typical seasonality, while this was more than offset by the decrease in paying users, resulting in a quarter-over-quarter decrease in Dungeon&Fighter's revenue. As a reminder, in Q3, we recorded an adjustment of JPY 2.3 billion for one-time royalty income related to Dungeon&Fighter sales. Revenue decreased slightly year-over-year, while ARPU increased compared to Q3 2019 as the portion of light users decreased compared to a year ago. This was more than offset by decreases in paying users as well as sales from the National Day package offerings. Revenues from our Japan business were in the range of our outlook. On a year-over-year basis, we recorded a revenue decrease of 17% on an as-reported basis and 16% on a constant currency basis, primarily due to the disposition of gloops.
Excluding the impact of gloops, revenues increased year-over-year. We are currently in a transition period in Japan as we streamline our portfolio and operations based on our group-focused strategy. Next year, we expect to strengthen our capabilities as we begin to benefit from these efforts. Revenues for North America and Europe in Q3 exceeded our outlook. On a year-over-year basis, revenues increased by 21% on an as-reported basis and 22% on a constant currency basis. MapleStory on a constant currency basis grew 178% versus the year ago period. Revenues from the rest of the world exceeded our outlook. On a year-over-year basis, revenues grew 55% on an as-reported basis and 56% on a constant currency basis. MapleStory grew 165% year-over-year on a constant currency basis. I will now discuss our Q4 2020 outlook.
We expect the strength and diversity of our portfolio, including MapleStory, The Kingdom of the Winds: Yeon, and KartRider Rush+, to drive our group performance in Q4. We anticipate year-over-year revenue and operating income growth at a group level, driven by strong growth in Korea as well as growth in all other territories excluding China. We expect our Q4 revenues in the range of JPY 60.7 billion-JPY 65.5 billion, representing a 22%-33% increase year-over-year on an as-reported basis, and a 24%-33% increase year-over-year on a constant currency basis. We expect our Q4 operating income to be in the range of JPY 12.3 billion-JPY 16 billion, representing 173%-254% increase year-over-year on an as-reported basis, and 131%-252% increase year-over-year on a constant currency basis. I'll discuss the details of this shortly.
We expect net income to be in the range of JPY 8.7 billion-JPY 11.6 billion, representing 167%-255% increase year-over-year on an as-reported basis, and 168%-230% increase year-over-year on a constant currency basis. We expect another strong quarter in Korea. We anticipate MapleStory and Sudden Attack to grow double-digits and Dungeon&Fighter to grow double-digit year-over-year. In addition, we are looking for strong contributions from The Kingdom of the Winds: Yeon, KartRider Rush+, and FIFA Mobile. As a result, we expect revenues from our Korea business to be in the range of JPY 38.2 billion-JPY 40.4 billion, representing a 57%-66% increase year-over-year on an as-reported basis and a 58%-67% year-over-year on a constant currency basis.
In regards to The Kingdom of the Winds: Yeon, we are extremely pleased with the stronger than expected engagement from players, and along with our co-development partner, we have committed more development resources to accommodate the need for additional content. While the team works to refresh the content, we foresee a sequential decrease in Q4 revenue to be followed by a return to sustained success for the game. Turning to China, we anticipate Dungeon&Fighter's revenues to decrease year-over-year. Accordingly, we expect revenues from our China business to be in the range of JPY 11.8 billion-JPY 15.3 billion, representing a 24%-15% decrease year-over-year on an as-reported basis and a 25%-16% decrease year-over-year on a constant currency basis. As a reminder, our Q4 China outlook does not include any contribution from Mobile Dungeon&Fighter.
In addition to making changes that assure the game complies with Tencent's player protection systems, our team at NEXON has used this extra time to develop additional exciting content and adding polish for a great mobile experience. We are in close contact with Tencent and hopeful that the game will be available soon. We will keep you posted on our progress. As for PC Dungeon&Fighter, the National Day update has continued since September. There has not been a notable change in the number of active users or paying users from Q3. We expect the user levels to remain at low levels throughout the quarter. We also expect that the sales from the National Day package offerings, which has a major impact on Q4 revenue, to decline year-over-year due to users being lower than the year ago period.
While we have other updates and events planned during Q4, we anticipate that these will not majorly affect its performance nor improve user metrics. In the near term, we will focus our efforts on sustaining the user metrics at the current level and to stabilize operating gains. As you know, we have a portfolio of franchises that drive the majority of our revenue. These are primarily franchises that have been around for 15 years or more, during which their revenue has fluctuated. Despite there being periods of time when revenues have declined from a given gain, as we tune the game to our players, we have continued to get the titles to stabilize before ultimately returning to growth.
We are continuing to iterate Dungeon&Fighter. As we focus on appealing to existing, lapsed, and new players, over time, we expect the game to follow the same trajectory that we have seen with other titles, where we first stabilize the game and then ultimately return to growth. In Japan, we expect revenues in the range of JPY 2.9 billion-JPY 3.3 billion, representing a 26%-45% increase year-over-year on an as-reported basis, and a 27%-45% increase year-over-year on a constant currency basis.
We anticipate contributions from V4, which launched in Q3 2020, as well as FIFA Mobile, which launched on October 12th, to more than offset the negative impact of gloops disposition. In North America and Europe, we expect revenues to be in the range of JPY 4.6 billion-JPY 5.1 billion, representing a 10%-21% increase year-over-year on an as-reported basis and a 13%-24% increase year-over-year on a constant currency basis. We anticipate MapleStory's strong momentum to continue into Q4 and grow triple digits year-over-year. We expect revenues in the rest of the world in the range of JPY 2.2 billion-JPY 3.4 billion, representing a 15%-25% increase year-over-year on an as-reported basis, and 16%-26% increase year-over-year on a constant currency basis.
We anticipate MapleStory's strong momentum to also continue in Rest of World and grow double digits year-over-year, as well as to benefit from KartRider Rush+. In Q4 2020, we expect operating income to be in the range of JPY 12.3 billion-JPY 16.0 billion, representing a year-over-year increase of 173%-254%. The primary driver for the higher operating income in Q4 2020 is the revenue increase. Favorable factors include a decrease in impairment loss of JPY 9.2 billion recorded in Q4 2019, which will not be repeated in Q4 2020. Unfavorable factors compared to Q4 2019 regarding the operating income increase, first, increased variable costs associated with revenue growth. Second, increased marketing costs associated with promotions for new mobile games, including KartRider Rush+, FIFA Mobile, and The Kingdom of the Winds: Yeon.
Third, increased HR costs associated with increase in performance-based bonuses as well as stock option costs. The high end of the range reflects the fact that we expect the impact of positive drivers to be larger than that of negative drivers, resulting in a year-over-year operating income increase. Overall, Q3 results illustrated the strength of NEXON's portfolio, which consists of several of our major franchises, our live operation capability to make these franchises sustain and grow over the long term, as well as the results from our focused strategy leveraging NEXON's IP, focused on fewer but very deeply immersive multiplayer online games, are NEXON's sweet spot, distributing these games to multiple platforms. In Q4, we expect our portfolio to again drive our group performance and both our revenues and operating income to grow year-over-year.
While we anticipate revenue from Dungeon&Fighter in China to decrease versus a year-ago period, which once again reflects the strength and diversity of our portfolio. Lastly, I would like to give you an update on the shareholder return and capital allocation strategy. As part of our capital allocation strategy, our board has authorized a new JPY 100 billion stock repurchase policy that we expect to complete over the next three years. This is in addition to our M&A strategy as well as our dividend. The interactive entertainment industry is a high growth sector with significant opportunity for investments to accelerate our growth. Our focus remains on driving growth for NEXON and our shareholders, but given the robust cash flow that we generate, we also want to return some of that capital to shareholders through the dividend and in the form of a share repurchase.
Besides these three strategies, we're also using a portion of the cash on the balance sheet to invest in leading global entertainment companies and to enhance the returns on our cash. As of Q3, NEXON's strategic investment totaled JPY 85.9 billion, which accounted for 54% of JPY 1.5 billion that the board authorized and recorded an unrealized gain of JPY 18.6 billion under other comprehensive income. This ends my comments. Back to you, Owen.
Thank you, Uemura-san. We hope that today's call clarifies NEXON's great performance in Q3, and importantly, that we've provided a deeper understanding of the durability and the diversity of our business. We strongly believe that NEXON is at the center of the biggest growth trends driving the entertainment industry. We start with a solid foundation of recurring revenue in a fast-growing segment: virtual worlds. In 2021, we will supplement this with multiple growth catalysts, new games, and investments to drive market expansion. This is why we are so incredibly excited about our future and why we believe NEXON is on a path to become one of the world's truly great entertainment companies. With that, we'd be happy to take your questions.
[Non-English content]. 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-sss Japanese consecutive interpretation. Please note 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 touch-tone telephone. Once again, if you have a question, press zero one on your touch-tone telephone. When we receive your input, you will hear the voice 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'll begin taking your questions shortly. Please hold on for a moment.
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The first question is from Ms. Yamamura from Nomura Securities Co., Ltd. Please, Ms. Yamamura.
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I have three questions altogether, and thank you again. This is Yamamura of Nomura Securities speaking. Those three questions I want to pose are quite granular in nature. Let's start with the first one. First one is related to Korea's Q4. You've mentioned about the plan for Q4 and in Q3, the performance went very favorably. I know that Q4 will be impacted by several seasonal factors, but even then, it seems that the revenue that you have forecasted for Q4 seems to dip pretty low. I've listened to your presentation, and also I looked at different external data, but it seems that the trend has not changed much. Are you forecasting low numbers for Q4 in Korea because of the decline of the cocooning consumption that we have seen so far?
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As you have mentioned regarding the prospect of Q4 in Korea, PC will be impacted by some seasonality. Therefore, we have factored in some decrease. Mobile games are not impacted by seasonality. Regarding Kingdom of the Wind: Yeon, as I have touched upon in my presentation, it will slightly go down temporarily in Q4. In Q3, we have seen performance that far superseded the expectation that we had, and the performance was greatly above what we have forecasted in Q3. Many players were engaged and they enjoyed our content. Therefore, we came across the shortage of content. We will be allocating resources so that we will be able to develop content for the future.
Having said that, even though the performance will slightly go down in Q4, please note that Q4 will be positioned more or less like a stepping stone stage for us heading towards the future and realize continuous growth. All in all, we can say that the momentum of all the titles in Korea is quite good, and the favorable trend will continue into Q4 as well. Once again, regarding the Kingdom of the Wind, we believe that there will be some temporary decline, and we have actually forecasted a slight decrease as compared to Q3.
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Thank you very much. I would like to ask you the second question, which is related to the marketing expense that you have factored in in Q4. As a matter of fact, it will be more or less a question around your marketing strategy rather than just focusing on the marketing expense for Q4. I think that there will be a dramatic increase in the marketing expense for Q4, which is JPY 7 billion. I want to know what are the particular titles that you will be allocating this budget for promotion. Are you thinking of using this expense for KartRider, FIFA Mobile and the Kingdom of the Wind? I know that these title wise, they are doing very great already.
Considering the timing in which you are about to allocate the marketing budget, my first impression is that, is NEXON going to beef up with the marketing activity so that you can further increase the momentum of these titles? Or is it because it's a year and you are planning to have more allocation of marketing expenses for these titles? Or is it such that because of your promotion strategy, we should expect you to continue allocating a specific amount of budget for each title going forward?
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The basic principle is to consider the ROI impact in allocating marketing promotional expenses. This time around, we have a plan to launch FIFA Mobile in Japan. That will be one title in which we will be allocating the marketing expense. Also, there are several games that are trending very favorably in Korea. We will continue analyzing the KPIs and allocate the marketing budget accordingly, so that we will be able to further expand the user base. Once again, heading towards Q4, we will conduct our analysis and allocate the marketing expense that we have secured for Q4.
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Thank you. My final question is on confirming the status of PC Dungeon&Fighter in China. In Q3, you had a National Day, but it seems that Q-on-Q wise, the revenue went down. I know that you have increased the core users. In order to increase the core users, you conduct various events. Heading toward the Lunar New Year, I am sure that you are planning different events. Can you tell me what is the core relationship between the events and the revenue that you can generate? Once again, talking about the Q3 National Day impact, even you put aside the royalty impact, still we see the drop in revenue Q-on-Q.
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Regarding Dungeon&Fighter pc, we had a major update in March, the major update was really welcomed by the existing users, we succeeded in stabilizing the basic users that have already Dungeon&Fighter on PC. However, the impact of major update in March waned as time passed by, in Q3, both active users and paying users declined. With that backdrop, we are seeing some challenges around Dungeon&Fighter.
When you look at the recent KPIs, we can see that the remaining core players continue enjoying this title, we are seeing some stabilization of the core user group. We will try our very best to retain such a core current user base. In Q4, because of the seasonality, our ARPU go down by about 20%. Even Dungeon&Fighter performance is declining, it is still a very important title for us. We want to stabilize this title and aim at mid to long term performance growth. In short term, our focus will be to stabilize the core users who are staying with the game right now.
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Thank you very much.
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The next question comes form Mr. Han Joon Kim from Macquarie Capital Limited. Mr. Kim, please.
Thank you for the chance to ask question. I also have three questions. The first one is on the nomination for Mr. Mayer on the Board. I think management's discussed in the past that they feel the movie business or linear media business has lower ROICs han the interactive entertainment business. I presume nominating him to the Board doesn't mean they won't go into linear entertainment, how should we understand his nomination and what it means for how we look at strategy and the direction of how we leverage his expertise to grow our business?
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Hi Han Joon. This is Owen. Thanks for your question. Quickly on Kevin. The short answer to your question is, do we plan on getting into the movie business or do we plan on becoming a major movie studio anytime soon? The short answer is no. As a quick background, as you know, Kevin was the head of strategy for Disney for a long time. During the time that he was there working for Bob Iger, the two of them basically put together, from what I can tell, is the most impressive media flywheel strategy that I've ever seen. I think when it goes down in history, it's going to go down as two of the best strategists in the entertainment business since Walt Disney himself. We've known Kevin for a while and been enormously impressed with him.
We also are of the belief that the media companies, the big entertainment companies of the next 50 years are going to be much different than the media companies and big entertainment companies of the last 50 years. You've heard us talk about this before. We think that there's a massive secular shift going on in the entertainment business right now. It's not well understood. To make a long story short, it's about the shift from offline to online, from linear to interactive, and from the physical to the virtual. We think this is a very, very important secular shift that's going on. As we work through these strategies, there's going to be a new set of leverages and a new flywheel that develops.
We think that virtual theme parks are going to be the center of the next 50 years, the way that physical theme parks were at the center of Disney's strategy the last 10- 15 years. We're very, very happy to leverage his advice and counsel on the Board of Directors.
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Great. Thank you for that. My second question is on the difference between the Korea franchise right now and where the China franchise is. The Korean Dungeon&Fighter, for example, has been doing fantastically well over the past few years, whereas I think the China version has gone down a little bit. I recognize that there's differences, but can you illustrate for us what are some of the things that are working for us in the current franchise that were operationally or content-wise that seems to be working better for China? Or is it just more of a monetization and content cycle that's just natural and just different timing of it?
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Thank you very much. The game that we would have in Korea or China, Dungeon&Fighter, it's all done under the same operation, same content. Of course, we do the same update. Of course, there are a bit of a localization that we do. What we always do usually, we first of all do the update in Korea, and what we do then is going to be after the update, we'd be looking at the result, and it's like a leading indicator before we'd be able to do some improvements before we do this update in China. In other words, we basically are launching the same game.
Of course, Korea and China would be in different phases. To give you an example, Korea Dungeon&Fighter, you may remember that there were some areas that we've been struggling all the way till 2018. In 2019, we used the entire 12 months so that we'd be able to ratchet up the momentum bit by bit. When we did the very major update that we've been talking about, Dungeon&Fighter in Korea was already in a very good situation. We were already in a very good situation in the game, and that was exactly the time when we did that major update. That is why we have been able to find momentum growth in Korea Dungeon&Fighter.
Looking at China, you may remember that from the latter half of last year, performance started to falter. There we also did the same update. That major update was well appreciated by the existing users. We were not really able to grasp back the lapsed users, the users that left the game. I think we can say this. PC online games is something that we want to operate for a long time.
We'd like to make sure we do well in the content upgrading as well as do the live operation. Like we've always been saying, there's always some ebbs and flows to the game performance. If you look at this in the mid to long range, we want to make sure that we will be able to find some growth. China, it is true at the moment, we think that we're struggling, we want to make sure that we do stable operation so that in the long term, we will be able to enjoy growth.
Great. Thank you for that. Last of my questions to you about is, yes, there's obviously ebbs and flows, I think we respect that. At the same time, you guys are very much aware that the mobile market seems to be quite volatile, particularly these days. In this environment, how do you think about the buyback that you just announced? What are the key triggers you're looking for to support the share price in the market, given the kind of volatility we've been seeing over the past few days or few weeks?
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Thank you very much. First of all, when it comes to share price, it's certainly something that we would not be able to directly control. We do believe share price very much reflects on the performance, the growth that we'd be able to show to the market. Of course, it is going to be important that we try to strive so that we'd be able to find a good business growth. In that perspective, I do believe we have been able to generate very strong cash flow every year. This is something that we do want to make sure that we'd be able to use for stable operations. I think this is something that we'd be able to keep on doing as long as we'd be able to stably operate our game business that we do.
There's no change to that for us. At the same time, we always do want to make sure that whatever capital, whatever cash we have, we'd be able to use it in the most effective manner. Of course, we'd be thinking of shareholder return. At the same time, we do also want to keep an eye on how we'd be able to use the cash for our growth. Looking at our cash position at this moment, we do believe we'd also be able to offer return in a well-balanced manner. In other words, we're looking at this JPY 100 billion size of cash, we do want to make sure we'd be able to utilize that so that in the three years time period, we'd be able to offer returns to the shareholders.
We always are going to be mindful that we always be keeping an eye on the situation in the market, situation around the business. We also do want to keep an eye open to various factors that surround us so that we would be able to keep on making investments for our future growth.
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That's great. Thank you very much for your time.
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The next question is from Mr. Seyon Park of Morgan Stanley. Please, Mr. Park.
Thank you for the opportunity. I have two questions. I guess the first question is, I think a question everybody really is quite keen to hear. This is related to Mobile D&F . I'm assuming that management is also in a situation where there's some things that you can disclose and not. Maybe can you provide a bit of an update on what is continuing to kind of play a role in the delay? Given that you've not included Do we take this as a message that it will not come out this year? Or does it mean that just given the uncertainty that the game can come out, but just to be conservative, you're not putting it into the fourth quarter guidance? Some clarity on how we-
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We have announced the postponement of of Mobile Dungeon&Fighter in august, and we have stated this during that announcement. Basically, Tencent is trying to update the anti-addiction program that they are pursuing. That is the reason of the postponement. Also at the same time, we are thinking ahead in time, meaning the post-launch period and really enhance the content that we can provide to the users. With this time that is given to us, we are bolstering the content that we can provide to the players. That is why we cannot include the title in Q4 guidance.
Practically speaking, it's already mid-November, and therefore we haven't yet announced the launch date for the title yet. If we were to make this announcement after we definitively decide on the launch date, we have to conduct marketing activities again. Given the timeframe, retail-wise, I guess it is not very realistic to think about the launch of the title in Q4. Even if we did, the contribution will be negligible given the timeframe. That is why we cannot include in the Q4 guidance.
Thank you for the clarification.
Yeah, this is Owen. I just want to emphasize, just from my end, we are really excited about the game, and we join our partner and 60 million pre-registered users in being extremely excited to see it in the market.
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The second question is the other, I think, big title that investors are kind of looking forward to is the new title from Embark. I think there was some expectations that maybe we could at least get an update or at least some screenshots of it within the year. Just was curious whether that's still on track and where you imagine right now things the game can potentially come out in the future. Thank you.
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This is Owen. What we said before is we'd start talking about it at the end of the year. We are getting towards the end of the year, we expect to start talking about it soon. What I can tell you is, actually, we're a lot more excited than we were before. We think this is going to be something really special coming from one of the most creative and disciplined developers on the planet right now. I personally will be playing Build this coming weekend because we've got a new build coming out internally that we'll be doing an internal test, and we're really excited about it. I think you're going to see stuff in the game that you haven't seen before.
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Okay Thank you. I look forward to speaking with you.
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Thank you. We will take the next question from Mr. Atul Goyal from Jefferies Singapore Limited. Mr. Goyal, please.
Thank you very much for giving me this chance to ask questions. Owen, I have two questions. First one has been partially asked already, which is again, just trying to understand what's holding back the D&F Mobile. My second question, which we'll just focus on that, is to understand in the mobile game space, until last year, you had not much success in most markets. This year you've had a lot of success in Korea. So far, while you do have some revenues in Japan, Europe and U.S., we can't call them real successes so far, as the games are not showing up in top five or 10 rankings regularly. What do you think is different in these markets?
Are the markets very different, or is it that in Korea, NEXON's IP is very well known, very powerful, and that's why it has that success rate higher than elsewhere? Is it because of marketing? What is different across these markets in your view?
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Thanks for your question. It's a really good question. To give it justice, I'm going to just give a little bit of context. As you recall, last year in the second half, we made a major strategic shift. A big part of that strategic shift was to narrow down the number of products that we were making, to really focus on deeply immersive worlds, then bring those immersive worlds to mobile in addition to PC, to other platforms in addition to PC. As you noticed, we just brought up our percentage of mobile revenue from 26% a year ago to 42% this quarter. It's a pretty big change. We really just started this strategy. We're into Q3 now. It's been basically less than a year. We've only got a few major products in the market in countries around the world.
For example, in Korea, we have MapleStory, KartRider, FIFA ONLINE, now Kingdom of the Winds. Those are all on mobile. We plan to shortly Dungeon&Fighter Mobile then, after that, Mabinogi Mobile. As that strategy of fewer, bigger, better, fully immersive worlds on mobile plays out, that will flow throughout the world. Today in Japan, we just launched FIFA in Japan. We plan on shortly Dungeon&Fighter Mobile. in China, we'll be launching other games. This strategy will play out in the coming quarters and years. I'll let the translator do her work for a second, I'll add to that answer.
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Two other quick points. I think that you're right that these franchises that have launched are huge franchises, huge IP franchises in Korea. We've also traditionally had great strength in China, that's worked really well. We also, keep in mind are, because we're focusing on fewer, bigger, better titles, we can put more effort on bringing them around the world. I think you'll see a product like the next iteration of KartRider, the next generation of KartRider that we plan to launch on multiple platforms. The marketing program that we're spending a lot of time talking about as a management team is not just about, for example, Korea and Taiwan, where half of the populations of those two regions have played the game, but also in multiple different geographies around the world. Our ambitions are big about that.
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I hope that answers your question.
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Thank you.
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Thank you very much. This is not a question, just a quick comment that fingers crossed, hopefully these games work in multiple markets because as of now, we don't have too many companies which we can highlight to investors which have had multiple success with mobile games. They've had some success in some markets, but it will be great to see NEXON succeed. All the very best. Thank you.
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Yes, Atul . I hope you don't mind me piling in here and I want to watch our time. You know, you're asking probably a broader question or you're making a broader comment. I'd like to just emphasize one point. We said it in the prepared remarks. I'll say it again because it bears repeating. You're asking a very good question. Look, we just grew 52% in Q3, and that was without Mobile Dungeon&Fighter. we plan to grow about 30% in Q4. I think this really highlights a few of the things that are there at the source of your question. It highlights the strength of our live operations to build up a franchise over decades. It highlights the diversity of our geographies and our intellectual properties, and it highlights the effectiveness of our focus strategy.
If we proved anything this quarter, it's that we're not reliant on one title or one geography. We've been saying it for a while, this quarter really proves that out. If you remember one thing from this earnings call, it would be that point. It would be the diversity of our intellectual property and the growing diversity in our regional base of revenues.
Very good points, Owen, Thank you.
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Our final question for the call will come from Munakata-san of Goldman Sachs Japan.
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Thank you very much for giving me this opportunity. I know that we are running out of time and I should just stay with one question, that question is on Dungeon&Fighter Mobile. In the conference call this time around, you mentioned that you're spending at this time to enhance the content. When I look back at what you have mentioned in your Q2 presentation, I remember you stating that you have sufficient content.
Did you change your evaluation of the content that you have, or are you trying to aim at satisfying higher-level users more than ever before so that you will be able to generate more revenue? Can you tell me what is the nature of this enhancement you're making on the content?
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Regarding the postponement of the Mobile Dungeon&Fighter, it is basically for the reason of upgrading the anti-addiction program. Since that is giving time for the developers to focus work on the content, we wanted to efficiently use this given time so that we can aim at realizing higher level of satisfaction amongst the players. These works are moving in parallel. It's not that we did not have sufficient content in August, or we were not prepared to launch the game in August for the sake of the content that we have.
So once again, I repeat myself, it is basically to upgrade the anti-addiction program and we wanted to make full use of this time that is given to us to enhance the level of satisfaction that we can provide to our players.
Thank you very much.
This concludes the question- and- answer session. Ms. Ara, at this time, I'd like to turn this conference back over to you for any additional or closing remarks.
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Thank you very much. It is time now. If there are no further questions, I would like to take this opportunity to thank you for your participation in this call.
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Please feel free to contact the NEXON investor relations at investors@nexon.co.jp should you have any further questions.
Thank you. That concludes today's conference. Thank you for your participation. You may now disconnect.