I'm young, I think. I'm 26 years old. I'm a junior employee at Netmarble. I've been working here for 2 years and I'm currently a junior employee. Good morning and good evening. Thank you all for joining the conference call for the Netmarble earnings results. This conference will start with a presentation followed by a Q&A session. If you have a question, please press star and 1 on your phone during the Q&A. Now we will begin the presentation on Netmarble's 3rd quarter of fiscal year 2026 earnings results. .,. 2026 3 1 3 31 1 एनालिस Thank you, everyone, for joining us today. I'm Jiwon Lee, the CFO of Netmarble Corporation. I will be presenting the results of the 3rd quarter of fiscal year 2026. I'm Gi-wook Do, the CFO of Netmarble Corporation. Good afternoon. This is Ji-won Lee, head of the company's IR team. Thank you sincerely to all investors and analysts who have taken the time to attend our 2026 Q3 earnings conference call amidst your busy schedules. Present with us today are CEO Byung-gyu Kim, CFO Gi-wook Do, and other members who will be available to answer questions following the earnings presentation. Please note that this presentation is prepared prior to the completion of our external audit. Therefore, some details may be subject to change based on the audit results. Now, I will hand it over to our CFO, Gi-wook Do, to proceed with the earnings presentation. Good afternoon, everyone. I'm Byung-gyu Kim, the CFO of Netmarble Corporation. One day, I pay you to make sure I don't die. That's how much you take care of me. Good afternoon. This is Gi-wook Do. Let me begin by presenting our business results for the 3rd quarter of 2026. Please refer to page 2 to look at our revenue and EBITDA. Netmarble Corporation 3rd quarter revenue reached 634.7 billion won, down 15.3% QOQ and down 8.8% YOY. EBITDA fell 28.6% QOQ and 34.6% YOY to 80 billion won, and EBITDA margin was 12.6%. Revenue and EBITDA decreased QOQ primarily due to delays in new game launches. 300.86 trillion won of net sales. EBITDA, 3.5 trillion won. EBITDA, 3.4 trillion won. Net income, 3.7 trillion won. Net income, 3.7 trillion won. EBITDA margin run, uh, Let's look at EBITDA now. Netmarble's EBITDA and EBITDA. Gibetsu Suni, IBEK, Irohonu, Irokaesuna. Thank you so much again. The next page covers the company's earnings. In Q3, operating profit was 50.4 billion won, net income was 22.4 billion won, and net income attributable to controlling shareholders was 20.1 billion won. Net income declined QOQ partly due to the base effect from the gain on the disposal of G Tower recognized in the 2nd quarter. The Taewon Game Portfolio Earnings. Take part in our event. Our report highlights the lack of 2 Pro, 1 Pro, and 0 Pro to grow the company. The following page provides an overview of our game portfolio. As of the end of the 3rd quarter, revenue contribution by major titles was as follows. Soul Enchant, Marvel Contest of Champions, and Lotsa Slots each accounted for 8%. Cash Frenzy, Jackpot World, and RF Online Net each accounted for 7%, and Vampyr accounted for 5%. The 3rd quarter's revenue was 2.5 billion won, up 4.5% from the previous quarter. In Q3, Soul Enchant, launched in June, contributed for a full quarter. and accounted for 8% of total revenue. RF Online Next, which expanded into global markets, also delivered positive results and significant revenue growth. Supported by its strong gameplay and IP recognition. Leveraging our accumulated expertise in global publishing and live services, we successfully expanded Vampyr into global markets on October 28th. We are also making steady progress with phased updates designed to extend the product life cycles of our existing titles. The town was here mid-19th century. Netmarble Corporation announced its 3rd quarter financial results. The Q4 and Q3 combined Q3C sales growth rate was 10.7%, Q3Q2 growth rate was 34.7%, and Q3Q1 growth rate was 33.4%. Next, breakdown of revenue by region and channel. In Q3, revenue by region was comprised of North America, at 40%, Korea 25%, Europe 12%, Southeast Asia 10%, Japan 8%, and other regions at 5%. By genre, revenue was composed of casual games at 37%, RPG at 32%, MMORPG at 25%, and others at 6%. In particular, the revenue contribution from Korea increased by 3 percentage points, reflecting a full quarter contribution from the domestic launch of Soul Enchant. In addition, the global expansion of RF Online Next drove an 8 percentage point increase in the revenue contribution from MMORPG. The term on 2-year P&L is a bit different. By marketing business, You can pay for our company's loan, and it's cheaper than what a credit card is. The next page outlines our key cost structure. Q3 operating expenses amounted to 584.3 billion won, down 12.7% QoQ and 3.4% YoY. Marketing expenses decreased 22.2% QoQ primarily due to delays in new game launches. Labor expenses decreased 6.8% QoQ to 1,700 billion won. Finally, the commission expense ratio increased by 1.6 percentage points QoQ to 0.8%. QoQ, driven in part by increased share of revenue from Excuse me, increased by 1.6 percentage points QoQ to 33%, driven in part by an increased share of revenue from external IP games. Thank you. Uh, Good. Now on the more level of current market, on the broadest way, Hekima IP franchise, Aokero, Japan, on the broadest way, I'd like to ask you, Mr. Chairman, how come the company's profit is not increasing? You are told also, Don't worry, so now on the level of horizon, King of Fighters All-Stars, you know, Chun-Guk Choi Seung-ho. Junbyul Ha Go-in-nam. Jiwon Lee. Next, an area of, I believe, great interest to all of you is the upcoming game lineup. In 2027, we plan to release 6 previously announced new titles including Shangri-La Frontier: The Seven Colossi and Solo Leveling Karma. Both of which we are further refining through global gaming exhibitions and user testing. WB All-Star Mayhem, an idle RPG combining 9 major Warner Brothers IP franchises, and Guardian Tales: Digdot, a casual roguelite title featuring pixel art graphics. We're also planning to sequentially launch 7 additional titles within the year, including Babel Protocol and Dark Priest, which we are announcing for the first time at this earnings presentation. In addition, we continue— we will continue expanding existing titles into new markets, including the China releases of Solo Leveling: Arise and The King of Fighters All-Star. to sustain our growth momentum. Gi-wook Do, Eui-Hoon Chung, We are devoting our full efforts to building a foundation for future growth. By strengthening the fundamentals of our existing titles and improving the quality of our upcoming games. In the 4th quarter, we will focus on enhancing profitability through updates to major titles and efficient cost management so that we are able to outperform our earnings that we are currently reporting for the 3rd quarter. Oh, And at the same time, we will thoroughly prepare our new lineup to drive the company's medium- to long-term growth. We look forward to your continued interest and support. This concludes our earnings presentation, and now we'd be happy to take any questions you may have. Thank you. Now Q&A session will begin. Please press star 1, that is star and 1, if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2, that is star and 2 on your phone. The first question will be provided by Junhyun Kim from HSBC. Please go ahead with your question. Hi, Junhyun Kim from HSBC. Hello, Byung-gyu Kim. My name is Junhyun Kim from HSBC. Thank you for this opportunity to ask my question. I would like to ask my question regarding the announcement that you have made related to your upcoming title release. We have just heard that for 2027, the company is planning to launch 13 new titles, which is actually a lot more than you have actually been launching on an annual basis historically. I know that some titles are going to be carried over from 2026, but I would like to better understand from the company whether or not the proposed title releases scheduled for 2027, would there be any possibility that there could be some delays? Of course, I know that in instances there can be some titles that will be delayed, but because you are— will be planning to launch many more titles than you have actually done in the past, I would just like to better understand the company's plan or strategy and how you'll be able to launch all of these titles for 2027. And I would also like to further ask why some of the titles that you were actually planning to release in the second half of 2026 have been pushed to 2027. If the company can share more color on this, I would appreciate it very much. Yeah, I know that can be a bit loud. Sun Park, let me turn it over to you. This is CEO Kim Byung-gyu. And to my understanding of your question, I think you were asking 3 things. First question was related to how— what the reason for why some of the titles that we were planning to launch in 2026 had been delayed to 2027. The second question is about whether or not the company is able to launch 13 to 15 titles in a given year. And at the same time, the last question was related to any potential changes to the schedule that we have already been announcing. Yeah, So if I already prepared them, but then at the end, could change their schedule, but then it would be like a bottleneck. Now, I know, uh, And so A simple way to explain the reason why the company decided to actually postpone the release of those titles is because I think that it would be very important if you can understand how how we can actually approach this. On one hand, you can actually release titles and into a new genre and be a first mover. Or if you're going to actually launch a title for the existing genre, it's very important that you are able to have a very competitive title to be launched into that genre. The titles that we have been preparing for, uh, 2026, I second half was really not to target become the first mover and secure a new genre, but really going into an existing genre and be able to actually infuse the elements that we do very well as a company and to make sure that we have a very complete serviceability as well. Yeah, Jag har trott att det kan vara en del av det som vi har gjort under de senaste åren. And one more thing to add is that we've also learned from our experience, uh, in launching some of the titles that, uh, we did back in 2025, Mondial Star Dive and The Seven Original Sins. We felt that we should be able to launch new titles that we would be more comfortable in launching. And so moving to your second question about how feasible is it for the company to launch 13 titles in 2027, just going back to the lineup that we have prepared for 2027, I would like to inform you that our own publishing titles would be 10, and we'll also be using our Chinese as well as overseas entities to publish 3 titles. And so just to go back to your question, I think that you wanted to know whether or not Netmarble has the capacity to be able to launch these, uh, 13 titles. Uh, And of course, uh, when we're talking about us being responsible for the launch of 10 titles, I know that this is a significant number, but from the company's perspective, we believe that it is feasible. Because we can leverage our experience in previously launching our game titles as well as our experience in operating the game services as well. And at the same time, because we have actually put in a lot of effort to build an AI-native environment, we have now a system to support the launch of the 10 titles. So based on our calculation, we believe that we are able to successfully launch these number of titles in a given year. And this is all possible because in terms of how we actually do the servicing, very well known that we have a very strong record of being able to launch multiple titles by leveraging our development studios. And by being able to leverage this, we know that we are able to achieve meaningful outcomes and success in the AI environment as well. So because we have this internal system, to further validate the possibility of leveraging this process, we can handle multiple titles. And so once again, going back to your question, we are able to successfully launch 10 titles in 2027. Choi Seung-ho, HSBC. And moving to the last question is whether or not there has been any change to our launch strategy. There has— is fundamentally no change in terms of company stance. to focus on multi-genre and multi-platform. But there was a lesson learned from the launch that we have done in 2026. For us, we at times were able to launch at multi-platform simultaneously. And from that experience, we learned that sometimes it's actually better to do it in phased approach than doing it simultaneously. So when it comes to the multi-platform, that strategy is still there. But at the same time, from time to time, rather than doing it simultaneously, we feel that it's better to prioritize a certain platform depending on the game title and then focus on that platform and then be able to expand to other platforms in phases. Choi, uh, And just one more thing to add related to our upcoming titles lineup. We know that we are going to be introducing a lot of new titles. And so we believe that it's more— it would be better for us to set aside a dedicated time to have this discussion with all of you. separately so that we can actually go in and do a deep dive on each title to talk to you about which genre it represents and what would be our launch approach. to these respective titles. So our plan is to get back to you and to be able to have a separate dedicated time to have a deep dive on our upcoming titles with you separately. Thank you. We'll take the next question. Currently, there are no participants with questions. Please press star 1, star and 1 to give your question. The following question will be presented by Eui-Hoon Chung from Eugene Securities. Investment & Please go ahead with your question. Hi, I'm Jaemin Ahn, Eui-Hoon Chung's colleague. Thank you. Thank you for this opportunity. I'll just ask 2 very short questions. So first question is, what is the company's outlook for Q4 earnings performance? And secondly, what is your outlook in terms of your cost structure and profitability for next year? Thank you, Byung-gyu Kim. Oh, hi, Byung-gyu. Nice to be here. Uh, to the 3rd quarter. And in the 3rd quarter, we expect to see a significant increase in our profit. Not an eye color of a killer hawk. Thank you. This is CFO Gi-wook Do, and to address your first question related to our outlook for the Q4 earnings performance, As you have discussed, the titles that we were planning to launch in the second half of this year have been postponed to next year. So when we're actually looking at the potential top-line growth, I believe that the performance would be in Q4, similar to what we are actually been able to announce for Q3. But I think that in terms of profitability, I think there's room for us to see an improved profitability in terms of how we'll be managing the cost in Q4. Thank you. Uh, income, And moving to your question related to the company's view in terms of the overall performance in 2027, as we look at 2027, as we have previously mentioned, I think that when you're actually looking at the top-line performance, this is going to be very much dependent on the performance of the upcoming titled performance that we will be launching for 2027. So I do want to address more on the profitability structure and the company's profitability in more detail. I think that what we need to focus on will be 3 main items. First, on the expense side, we have the labor costs. We also have the paid commission and also marketing spend. Just looking at the labor expense portion first, I don't think in 2027 there's going to be any huge change in terms of the current headcount. Change to the current headcount. As we move to the marketing expense, we believe that in terms of us being able to make the marketing structure more efficient. I think that there's also going to be some room for us to improve the marketing expense ratio to the revenue as well as the labor cost expense ratio to the revenue as well, because we do anticipate that the top line will be higher in 2027 compared to 2026. And then there's the additional upside that we can anticipate on the paid commission side. We are seeing an overall increase in the share of the PC payment as well as the Google commission policy coming into effect. So when we combine all of these factors, I believe that we can actually expect a significant uplift in terms of our profitability in 2027. Compared to 2026. Kanjin Monbakesu Nida. Currently, there are no participants with questions. Please press star 1, star and 1 to give your question. The following question will be presented by Seung-ho Choi from Hyundai Motor Securities. Please go ahead with your question. Uh, the chairman, K.H. Ham-sun, the other vice chairman, Byung-gyu Kim, to begin with, the vehicle sales, the sales of the Tera, Um, On the loan, the securities due, uh, You sound good. Thank you for this opportunity to ask questions. And I just want to follow up on what we just have heard related to the commission fees. And as you have reported, because of the revenue increase of the external IPs, uh, in this quarter you have reported 33% for the paid commission. But because for next year you will also be operating games that will be using a lot of external IPs, I'm just wondering what the overall commission percentage would be for the company going forward. I'm just— I do recognize that the policy, commission policy of Google will also play a role. But if the company can actually give some insight related to how we can actually expect the overall commission portion would be for the company, that would be very helpful. So any guidance would be very much appreciated. Web IP, web capabilities, game, game, the market to serve, etc. This is Byung-gyu Kim, and I would like to talk to you about the commission rate and in terms of how our cost structure in this area is, uh, both we have to consider the use of external IP as well as the games that are developed by third-party developers. and also the at-market commission rate. Next, we have Byung-gyu Kim. to the Eui-Hoon Chung. Web IP, And the reason why we actually saw a QOQ increase of the commission rate in Q3 to 33%, it was not because of the growth. in the revenue of external IP. It was mainly because of the game Soul Intent, which was developed by an external developer. By being a by publishing such game, we actually had to pay royalties to that third-party developer. That's all. We have a question about the game. Can you please tell us about the impact of the increase in royalties on Netmarble's revenue? And in respect to the guidance for the commission rate for 2027, what I can share with you is that in respect to our planned launches for 2027, many they're mainly actually developed in-house. That means that the portion of the external developers' games that we'll be publishing will be relatively small. So for us in 2027, you're not going to see an increase in the commission rate that we have just experienced for Q3. Um, And moving to the Google Market App Commission Policy and what kind of impact this will have on our business, our cost structure. Currently, it's actually set at 30%, but the new policy is designed to apply 20% to 30% rate to as a commission. Taman to iship, e-shipment, and shipping. And the way it will be decided, and depending on the game, some will actually get 20%, others will get 25%, some games will still get 30%. And what will be the 2 main reasons or determinants to decide the final commission rate will be on 2 things. First is how much the company can apply the company's Level Up program, and the second would be at what point in time would the users be installing these games. So based on these 2 factors, the game's commission fee will be set either at 20%, 25%, or 30%. Eui-Hoon Chung, you have any views on the issue that may make it so that Byung-gyu Kim can't take over the role of the co-chairman of the Senkakura Co., or there are other issues that could arise? And so at this point in time, we are doing our effort— we're making efforts in order for us to be able to accommodate Google's Level Up request to as many games as possible. But once again, at present time, it's not going to be feasible for me to actually comment what that average at-market commission fee rate will be. But what I can share with you is that compared to 2026, in 2027, we'll be very much focused to make sure that we actually can perform as we have done in the past. And our Our focus is to make sure that the at-market commission fee rate is actually at the very beginning of that 30% range. We'll take the next question. The following question will be presented by Junhyun Kim from HSBC. Please go ahead with your question. Thank you. Hello, I'm Kim. Schedule, which I'm happy about, is there? So how long will it take for the project to be executed? And also, is the project ongoing or completed? Thank you. I have a follow-up question related to my earlier question. Just going back to the fact that the company is planning to launch 13 titles in 2027, Simply put, that means that the company will be releasing one game per month for 2027, which means that starting from January, you will be rolling out games every month. So that means that there should be some communication related to your expected launch schedules for the beginning part of next year. Sometime maybe in December. And so I'm just wondering whether or not the company can actually share additional information related to this, especially when I look at the newly unveiled titles for 2027, some of the titles are just being reported under their project names, as I can see. Project D, Project X, and Project Z. And so if it's possible, to the extent that you can comment, I would very much like to better understand how feasible it is for you to be able to meet the schedule target. Would it be more appropriate for me to actually take a conservative view in terms of the expected title launches. It would be very much helpful if you can actually, not on a monthly basis, but maybe on a quarterly basis, you can comment about some of the scheduled title releases and how you're going to be showcasing these games in perhaps game shows and competitions. To the extent that you can, please comment. Chair Yoo Chul-ae, the company has achieved significant success in the past 2 years. However, my conclusion is that Byung-gyu Kim's project is a very long way. Choi Seung-ho's game development project and Choi Seung-ho's project are very different projects. However, the company has achieved significant success in the past 2 years. However, my conclusion is that Byung-gyu Kim's project is a very long way from Choi Seung-ho's project. Yes, thank you for those comments, and I think that your comment is actually well grounded. In respect to our plan, what I can share with you is that as we look at these schedule launches for 2027. On the left-hand column, we talk about the titles that we have previously announced, and the 3 titles that are on top So that would be Shangri-La Frontier: The Seven Colossi, second, Solo Leveling Karma, and third, WB All-Star Mayhem. These 3 titles are scheduled to be released in the first quarter of 2027. As we move to the right-hand side, we are unveiling new titles for the first time, and we are, for some titles, using the project names. But because this is the first time we are sharing these titles, to the public that there was a limitation in how we can actually convey the information in writing. And that is the reason why, as we have said earlier, we want to set a dedicated time as early as that's feasible to be able to have a specific session to discuss the upcoming titles that we are planning for 2027. And so once we are able to schedule that and invite all of you to attend, we will give you a full briefing in respect to our plans for these titles and give you more additional information to what these respective titles can— is going to be about. Uh, If there are no further questions, we will conclude the 2026 Q3 earnings presentation. For any additional inquiries, please feel free to reach out to our IR team. Thank you once again for your participation.