Hello, I'm Eleanor from Kakao CAC IR team. Let's begin the third quarter 2022 earnings conference call. I'm joined by Simon Hong, CEO, and Jae Bae, CVP of CAC in charge of the investment governance. Please be reminded that the earnings results are consolidated estimates under the KIFRS basis and are subject to change upon the auditor's review. Forward-looking estimates are based on assumptions, so actual results may differ from figures included in today's presentation. I will now invite Simon to presentation on business highlights for Kakao, the parent, and the major business results of the platform. Thank you, Eleanor. Good morning and good evening, everyone. I'm Simon Hong, CEO. First and foremost, I believe investors will have great concern regarding the recent Pangyo data center fire. KakaoTalk is a service used by almost everyone. I therefore believe we must live up to our duty expected of us. To that end, we will inspect thoroughly and develop and implement measures to prevent such failure from ever occurring again. Under the Emergency Response Committee, which is a control tower for the data center fire incident, we set up three subcommittees for root cause investigation, prevention, and compensation. The investigation subcommittee will conduct a thorough investigation into the direct and indirect causes behind this incident. Prevention subcommittee will improve our shortcomings and put in place rigorous and highly disciplined measures to prevent recurrence of any such similar failure. Lastly, compensation subcommittee will review how to compensate users, partners, and stakeholders who suffered damage from the outage. Kakao will disclose all technical situations and improvement process related to this incident as transparent as possible and make it an opportunity to contribute to the technological advancement of the whole IT industry. I am sure that companies do have emergency plans on their own, but I believe lessons and knowledge gained from experiencing an actual incident are quite different in nature. Kakao will definitely share relevant information and plans, and we will do our utmost to earn back the trust. Data centers, either planned or currently under construction, will be equipped with fire retardant and anti-seismic features built for greater safety. Also, to prepare for blackouts and emergencies, we will install the uninterrupted power supply and backup generators to further enhance inherent stability of the data center. For your reference, we are in the process of building number one data center at Hanyang University's ERICA Campus in Ansan, slated for completion in 2023, and we are also currently weighing options on number two data center at Siheung Seoul National University Campus. As NK, former co-CEO, recently stepped down, I understand there are also concerns over the continuity of the business direction adopted since NK took office. I can assure you that even before assuming the CEO position, while I was the head of the CAC, NK and I had closely consulted one another on the vision of KakaoTalk. Our strategy to evolve KakaoTalk to an interaction-based service for strangers is firmly placed intact. Above all, this incident made me ponder deeply about Kakao's social responsibility and fundamentals when the service serves the entire nation, not just 10 million or 20 million users. The communication itself was actually not lost because there was a phone call or text message up and running. Nevertheless, it made us deeply think about the reason why it felt like daily lives of people had suddenly stopped when KakaoTalk was down. I think providing free service for the entire nation is a very heavy weight for a company to bear, but also resilient fundamentals of Kakao at the same time. Kakao is determined to improve the service that users want and need. I truly believe if KakaoTalk expands its positive function further, it is going to become a more sustainable company. Going forward, Kakao Corp is determined to focus more on users. Before moving on to Q3 earnings, let me first update you on Kakao's ESG management. Last April, we announced our sustainable development initiative, outlining the use of KRW 300 billion from the fund over five years, which is actively being implemented as we speak. Credit for Credo campaign helps small vendors with digital communication, especially for those running their business with a clear mission despite the challenging situation. The program provides mobile marketing support, enabling merchants to use KakaoTalk Channel to win frequent customers. We have so far extended more than KRW 6 billion to a total of 20,000 small merchants. Kakao Makers has a project called Jegabeochi, which helps to sell over-supplied agricultural, livestock, and fisheries product at its rightful price. Since beginning in August, total of 2,100 tons of produce have been sold, purchased by 390,000 consumers, and amounting to a cumulative GMV of KRW 10 billion. Kakao Mobility will also raise KRW 10 billion fund over five years to support mobility workers, i.e., taxi drivers and drivers for hire who are suffering from disease or injuries from accidents. Kakao Group donated KRW 2.2 billion to Hope Bridge Korea Disaster Relief Association last September. We also decided to collaborate with Jeju City to enhance digital service access for people traveling to Jeju who are in need of help in using various modes of transportation. We will also upgrade Kakao Map services to enhance convenience for the impaired, for example, by providing information on the physical gap that may exist between the train and the platform. Kakao will push ahead with sustainable growth, standing side by side with the community. Let me now move on to business performance, first on the platform business. The Talk Biz advertising business, in sluggish advertising market, posted a growth of 4% YoY. Despite a difficult economic backdrop, we launched Bizboard CPT product in Q3, supporting advertisers' branding campaign to drive meaningful results. Kakao, to date, lacked advertising product that can communicate the branding messages with strong impact while guaranteeing level of ad impression. After this product launch, advertisers are showing great interest, and we expect it to cater to the demands of advertisers. Talk Channel is a business tool that enables partners to conduct marketing with continuity regardless of their business size based on relationship with customers. Kakao Sync is a business solution offered together with Talk Channel, allowing partners to easily onboard new members, preventing dropouts in the middle of the separate sign-up process, and helping partners grow their Talk Channel friends. With positive feedback, a total of 22,000 partners as of Q3 are using Kakao Sync. Driving a rise in total number of channel friends as well as outbound messages, Talk Channel revenue thus went up 37% YoY. The next is on Talk Biz Commerce. Talk Biz Commerce total GMV was up 12% YoY to KRW 2.2 trillion. Talk Gift GMV was up 11% YoY, and premium delivered gifts were well received over the Chuseok holidays, driving delivered physical gifts GMV up 13% YoY. Since the reopening, domestic e-commerce market growth has been sluggish and GMV growth for Kakao's commerce business slipped marginally. We plan to explore new engine for growth, maximize strength of our services to sustain the uptrend of our business against the overall sluggish market. The biggest strength of Talk Gift is that Talk Gift makes it possible for people to conveniently send heartwarming messages and gifts through KakaoTalk to congratulate, thank, and give condolences. Once we revamp the profile page and strengthen social interaction among friends, we expect gift-sending occasions will expand from birthdays to include other everyday events. In step with such change, we plan to have the most optimal product lineup for a variety of events by further adding luxury brands and gift vouchers. KakaoTalk Store is gearing up for another leap forward based on a new facelift of the Talk Channel store. We plan to solidify the nexus, which is the Talk Channel, between the brand and its fandom, and curate Talk Channel stores that users have selected in one view, so as to provide a distinct shopping experience through personalization. Next is on Platform- Others business. For the Mobility business, recovery of demand to pre-pandemic levels have positively impacted taxi and driver for hire services. Also, the parking business, our new revenue stream, had a record-breaking quarter. Kakao Mobility is pursuing a smart parking platform business that shares and connects parking lots based on AI technology and data. Beyond the seamless parking experience, we are currently expanding our parking service and infrastructure so that the parking spaces can be used as a center for various mobility services, like charging and maintenance of electric vehicles. KM Park, which is Kakao Mobility's Parking business, recorded 285% year-on-year revenue growth. Taxi business saw 32% YoY rise in daily average completion rate for premium taxi, i.e., Blue, Venti and Black on explosive demand growth. While designated driver service also maintained high completion rate despite the heavy rainfalls and holidays in Q3. We are also actively seeking investment opportunities in future mobility, such as autonomous driving and urban air mobility. Kakao Pay has seen growth in active users, ticket size per user, and number of transaction, with total TPV for Q3 up 21% YoY, reporting KRW 31 trillion. On growing number of domestic global merchants, online and offline payment displayed solid growth, while day-to-day life payment, which include paying for property tax, utility bill, is expanding quite rapidly thanks to its usability. In financial services, following the launch of margin loan for stock trades in September, revenue stream was further diversified with the release of credit card recommendation service in October. As a result, revenue TPV, which includes payment and financial services, was up 28% YoY, with its share against the total TPV growing to 30%. Next, Jae, CVP of CAC, will walk through Q3 highlights of Kakao's content business. Hello, this is Jae. I'll start with key business highlights for the global story business. This quarter, under the macro uncertainties, Kakao's global story business concentrated on strengthening business stability over top-line expansion. Regionally, in Japan, Kakao Piccoma kept its above 50% market share in the app comics market and steadily growing, while ranking number one in top grossing app, including games in both Google and App Store combined. Driven by robust growth from paying content and steep rise in ad revenue, which has just started to be monetized, gave a strong traction behind total revenue for Q3. Also, our marketing efficiencies driving decline in operating expense, quarterly operating profit hit a record high figure. Piccoma Europe and France has seen user metrics uptrend, supported by proven story IPs from Korea and Japan. In Q4, leveraging new titles, including proven AAA title, Solo Leveling, which will be the pivot of marketing activities, we plan to create new user experience for the local readership and continue the growth trajectory. In North America, we were able to complete strong coupling across platforms and enhance the efficiencies by designing an integrated global organization led by an expert in K-content distribution. On the other hand, for the domestic story business, there was a revamp of KakaoPage platform to better provide content experience and bolster usability. Thumbnails were enlarged, accentuating the visual information to help people recognize the content intuitively, and we plan to give additional traction to the growth momentum. We will continue to endeavor to build a springboard for global growth, supported by revenue growth through IPs and flexible and efficient marketing spend. For the Media business, the film Hunt, invited to Cannes Film Festival, was sold across 200 countries, while Squid Game, Netflix original, ranked global number one in non-English segment in just two weeks since its release, and ranked top 10 in 86 countries, once again attesting to our content production capabilities on the global stage. We expect demand for K-content to grow on global OTTs, and next year we will showcase highly competitive tempting IPs such as Netflix original Gyeongseong Creature and Disney+ The Worst of Evil. In music division, along with solid growth of Melon platform, strong concert and album sales of in-house artists led robust top line and profit growth. IU was first Korean female single artist to have a solo concert in the stadium, proving her unwavering IP power. IVE became the third K-pop girl group to sell more than 1.5 million albums. These results attest to Kakao Entertainment's expertise in producing and managing such exceptional artists, which we intend to continue through activities at home and abroad. Kakao Games is gearing up for the release of new competitive titles to give traction to global expansion, while Odin: Valhalla Rising and Uma Musume Pretty Derby are on the right track to becoming a long-term hit. Thanks to the update at the end of September, Odin: Valhalla Rising reported record high traffic this year, and we expect meaningful results will follow with the release of Siege Warfare in Q4, which is a large-scale PVP content. For Uma Musume Pretty Derby, there will be priority placed on active communication with users, and will focus on winning hardcore user base through continuous game updates and event. In Q4, the release of Dysterra will reinforce PC lineup, and in Q1 of 2023, new titles such as Eversoul, ArcheAge: War, will be released. Kakao Games will be ready to upgrade itself into a global gaming company. Next is on key financial highlights for Q3. In Q3, consolidated operating revenue was KRW 1.9 trillion, up 2% QoQ and 7% YoY. Platform revenue was up 6% QoQ and 27% YoY, reporting KRW 987 billion. While Talk Biz revenue was up 3% QoQ and 15% YoY to KRW 467 billion. On slower ad market growth and slow seasonality, Talk Biz ad revenue was down 4% QoQ. Thanks to sustained revenue expansion from Talk Channel, there was 18% YoY growth. Talk Channel posted 37% YoY growth on greater partner satisfaction over the efficiency offered by Talk Channel and active use for marketing purposes. While Bizboard posted 4% growth due to smaller budget of large advertisers. Despite rise in outdoor activities and economic slowdown, driven by growth from gift delivery and rise in health supplement and food category sales during Chuseok holidays, Talk Biz commerce revenue posted 14% QoQ and 12% YoY growth. On the back of slow seasonality, ad revenue from Daum Portal declined marginally. We started to see ad monetization from KakaoPage and other subsidiaries platform, which drove Portal Biz revenue up by 7% QoQ. On YoY basis, with the removal of few subsidiaries from consolidation, revenue fell 8%, reporting KRW 110 billion. For Platform- Others revenue, on top of steady revenue from taxi and driver for hire, which benefited from recovery in demand, parking platform revenue increase drove hike in mobility revenue growth. On back of higher revenue from Kakao Pay's payment and financial services and Kakao Enterprise education sector cloud revenue was up 9% quarter-over-quarter and 61% year-over-year at KRW 410 billion. Next, content revenue was down 2% quarter-over-quarter and 9% year-over-year, reporting KRW 872 billion. Despite revenue from the new mobile title, Uma Musume Pretty Derby, on moderation of Odin: Valhalla Rising's Taiwan's downward trend and off-seasonality in non-game businesses, game revenue was down 12% quarter-over-quarter and 36% year-over-year, reporting KRW 296 billion. Supported by steady revenue stream from Melon platform and global music distribution business further expanded, and there is greater business results from the artist concerts and global ventures, which drove music revenue up by 20% QoQ and 27% YoY to KRW 250 billion, the highest revenue in the content division. Even with the sizable reduction in promotion to enhance efficiencies, with growing share of original content and focus on retention, entertainment and Piccoma platform revenue all went up, driving story revenue up by 2% on quarter and 6% on-year to KRW 231 billion. Lastly, due to the high base effect last quarter of elevated production revenue, media revenue declined by 20% QoQ, but on greater number of productions, there was 13% increase YoY. For your information, media revenue may fluctuate on a quarterly basis depending on the timing of production and sale to OTT platforms. Next is consolidated operating expense and operating profit. In Q3, consolidated operating expense went up by 3% quarter-over-quarter and 9% year-over-year, reporting KRW 1.7 trillion. In terms of breakdown, labor cost rise was limited to 2% QoQ on moderation in new hires and lower stock-based compensation. Due to new hires and inclusion of subsidiaries, followed by rise in wages and bonuses, labor costs went up by 41% YoY to KRW 433 billion. On growth in 1P products for Talk Gift and rise in commissions paid to outside game studios for Uma Musume Pretty Derby, revenue linked expense was up 9% QoQ to seven hundred and eleven billion won. There was 12% YoY decline due to base effect in commissions related to Odin: Valhalla Rising's domestic launch. As Kakao and its affiliates expand their service offerings, infrastructure expense which increased 1% quarter-over-quarter. Due to higher mobility related commission, there was 21% YoY growth in total expense, reporting KRW 238 billion. Marketing expense was down 26% quarter-over-quarter and 24% year-over-year to KRW 112 billion on the back of overall business efficiencies, including the global store business and marketing cost controls. For your information, marketing spend ratio against the revenue was at 6%. On rise in depreciation related to new office building, interior design and mobility's parking business, depreciation was up by 13% quarter-over-quarter and 72% year-over-year to KRW 153 billion. In Q3, operating profit reported KRW 150 billion and operating margin reported 8.1%. On a separate Kakao basis, comprising ads and commerce business, revenue was KRW 613 billion, with operating profit of KRW 121 billion and operating margin of 20%. Next is non-operating revenue and expense. Other revenue was flat QoQ at KRW 134 billion, reflecting Kakao Entertainment's disposal gains from subsidiary shares. Due to the base effect from disposal gains from equity method shares relating to Kakao Bank's IPO, there was YoY decline of KRW 666 billion. Other expense reported KRW 36 billion on impairment loss from intangibles, following the service termination of affiliates and rise in donation. Equity method gain reported KRW 24 billion, driven by higher net profit from Kakao Bank. It was up KRW 14 billion QoQ. Equity method loss dipped by KRW 14 billion QoQ, reporting KRW 32 billion on reduction in losses from companies subject to equity method treatment. Financial revenue was KRW 63 billion, mostly from interest income and FX translation gains from foreign currency deposits. Financial expense was KRW 67 billion, reflecting interest expense and FX translation loss from EBs. Q3 corporate income tax was KRW 100 billion, with consolidated net profit of KRW 137 billion. For CapEx, with investments into data center and AI-related equipments and machineries and construction in process. Tangible asset CapEx was for KRW 143 billion, while intangible investments, including IP, was KRW 43 billion, amounting to a total of KRW 187 billion. This ends earnings highlights for Q3 2022. We will now begin the Q&A. The first question will be presented by Jaemin Ahn from NH Investment & Securities. Yes. Hello. I'm from NH Investment & Securities. I am Jaemin Ahn. I would like to ask about two or three questions. My first question relates to the recent fire incident at Kakao. I would like to understand what the financial impact is going to be for Q4 in terms of any losses from on the revenue line item and potential compensation to your users. I think you've mentioned this briefly in your presentation, will we, and do we need to expect any changes with regards to the B2B business direction as NK had previously stepped down? Also, would like to understand what the long-term implication is for your investment into infrastructure. My second question relates to the fact that Kakao is seeing quite significant level of increase in its number of subsidiaries, and there is also growing criticism from outside. Would like to understand what the company's position is with respect to the growing number of subsidiaries within Kakao. Hello, this is Simon, the CEO. I will respond to your first question, and then I will have our CVP, Jae, respond to your second and the third question. The fire incident that we recently experienced was an opportunity and an occasion for us to, once again, really understand that Kakao is truly an essential service that is being provided to the entire population. It was an opportunity for us to have an awakening and really look back on the fact that we had some shortcomings with regards to such service offerings. 카카오가 이용자와 사회에 대한 책임을 다하는 과정에서 비용이 발생할 수 있지만 재무적인 영향은 단기적이고 일회적인 비용일 것으로 생각합니다. I do expect that in the process of living up to the duties that we have against the society, there could be some short term costs that may be generated, but we believe that financial impact will be short term and one-off. 서비스는 복구됐지만, 그 이용자들의 신뢰를 복구하는 데는 좀 시간이 걸릴 것으로 보고 있고요. 이러한 보상 정책과 대응이 카카오에 실망한 이용자들에게 카카오를 더욱 신뢰하고 더 많이 이용할 수 있는 계기가 되면서 장기적으로 보면 우리 서비스가 안정적 성장을 할 수 있는 토대가 되어야 한다고 생각합니다. We were able to successfully restore the service. However, I believe that it will take more time for us to earn back the trust from our user base. Basically, through these efforts, through the compensation and the countermeasures that we will put in place going forward, we wish to lay the basis for enabling a more long-term and more stable services which our users can trust. 참고로 현재까지 파악한 매출 손실과 이용자 직접 보상에 따른 단기적인 재무 영향은 약 400억 원 규모이나 아직까지 지원책 등이 확정되지 않아 확답 드리기 어려운 점 양해 부탁드립니다. 11월 6일까지 이용자 파트너 대상으로 사례를 접수할 예정이고, 이후 적절한 지원 가이드를 마련하여 공유하겠습니다. For your information, in terms of the financial impact, that includes the revenue loss as well as a short-term financial impact with regards to user compensation, is expected to be around KRW 40 billion. With regards to the specific plan for support, we have not yet finalized the package, so it would be difficult for me at this point in time to share with you the specific details. We will receive the filing for damages that our users and partners have experienced up until November 6th. Once we come up with an appropriate support related guidelines, we will come back to you and share that information with you. 두 번째 주신 질문, 첫 번째 주신 질문과 연관된 질문인데요. 남궁훈 대표 사임이 미치는 영향에 대해서 질문을 주셨습니다. 모두 발언에서 말씀드린 것처럼 카카오의 서비스와 비즈니스 전략 방향에 대해 제가 올해 초부터 CAC 센터장으로서 함께 방향성을 고민하고, 새로운 비전을 세팅해 왔고, 현재 내년까지의 서비스 변화에 대한 로드맵이 수립되어 있는 상황입니다. 세부적인 내용은 실행 과정에서 지속적으로 변할 수 있으나, 카카오톡의 성장 전략은 큰 틀에서 변화 없이 진행할 것입니다. Also, relating to that first question, you mentioned NK's resignation and any potential impact that will have on the overall direction of the company strategy. As I mentioned during my presentation, even before being appointed as the CEO of Kakao, as the head of the CAC Center from the beginning of this year, together with NK, we have consulted very closely with regards to the strategic direction for Kakao service and its business. We have worked together in setting the new vision for the company, and we already have in place a roadmap that will be implemented up until next year with regards to the service, with regards to services and businesses. Of course, the specific details may change as we implement this roadmap, but in terms of the big framework regarding the growth strategy of KakaoTalk, there will not be any changes. 다만, 지금은 얼마 전 발생한 사고를 수습하고 재발 방지 대책을 마련하는 것이 전사적 최우선 과제로 설정되어 있어 그동안 준비한 서비스 런칭 일정들이 불가피하게 한두 달 정도 일부 지연될 것으로 예상하고 있습니다. 빠르게 카카오 이용자들의 신뢰를 되찾고 그동안 준비해 온 변화들이 잘 실행될 수 있도록 최선을 다하겠습니다. Now, having said that, number one priority for the company as of today is to respond to and deal with the recent incidents that we have experienced and make sure that we have preventive measures in place so that such failures do not repeat itself. Because of that, there may be about a one or two month delay in the services that we have been working on. However, for us, what is most important is for us to earn back the trust from our Kakao users, and we will endeavor, and we will do our utmost to make sure that all the plans that we've put in place are well implemented. 두 번째 질문, 장기적인 인프라 투자의 증가가 예상되는지에 대한 질문을 주셨는데, 그 부분에 대해서 답변을 드리도록 하겠습니다. 배재현입니다. 데이터 센터 설립 등 인프라 비용 투자는 카카오의 인프라 역량을 강화하는 동시에, 장기적으로 비용을 보다 효율적으로 집행하게 해줄 것으로 저희는 기대를 하고 있습니다. 현재 당사는 외부 데이터 센터를 임대하고 있고, 임대료, 전기료 등을 포함해서 연간 1,500억 원 규모의 비용을 부담하고 있습니다. 단기적으로는 카카오 공동체 서비스의 확대에 따라 지속적인 인프라 수요가 증가할 것으로 예상하고 있고, 자체 IDC 센터 인력 등 운영 비용과 건물에 대한 감가상각 비용이 추가적으로 발생할 수 있으나, 장기적으로는 자체 데이터센터를 통해서 외부 임대료 등 비용을 효율화하고 서비스를 보다 안정적으로 운영할 수 있을 것으로 기대하고 있습니다. This is Jae. I will respond to your question about our long term infrastructure investment. Our infrastructure investment, especially including data centers, help to drive Kakao's infrastructure capabilities, and at the same time, we expect it's going to help us be more cost efficient. As of today, we are renting out data center space, and we are paying rentals and electricity and utilities fees, all in all amounting to about KRW 150 billion per year. From a short term perspective, as we expand Kakao and its affiliates, we are expecting rise in infrastructure demand. If we think about the actual running of our own data centers, there will be headcount-related costs and operational costs, as well as additional depreciation costs for the buildings and fixtures. However, from a long-term perspective, by operating our own data centers, we will be able to manage our costs more efficiently and be able to operate our service in a more stable manner. 데이터센터 건립 현황에 대해서 조금 설명을 드리면, 카카오는 지속적인 서비스 트래픽 확대와 향후 클라우드 사업 확장으로 늘어날 데이터에 대한 선제적인 대응을 위해서, 2018년도부터 자체 데이터센터를 구축할 계획을 실행에 옮기고 있었습니다. 안산 한양대 캠퍼스에 설립 중인 제1 데이터센터는 2023년에, 내년에 준공될 예정이고, 2024년 1월부터 운영을 개시하는 것을 목표로 하고 있습니다. 제2 데이터센터는 서울대 시흥 캠퍼스와 MOU를 체결한 상태입니다. Just to provide you an update with regards to the construction of the data center. In order to preemptively respond to a higher demand for data, as we are seeing a rise in traffic from our Kakao services, as well as expansion and broadening of our cloud business, we have been implementing our own data center build-out plan since year 2018. We are in the process of building a data center at Ansan, the Hanyang University's Campus. That would be the number one data center, which is expected to be completed by year 2023 and is targeting on operation from January of 2024. The second data center, we have entered into an MOU with Seoul National University's Siheung Campus as well. 저희 데이터센터가 이제 학교 안에 지어지고 있는 이유는, 해외에서도 사례를 찾기가 조금 힘든데, 저희가 이제 산학협력과 그리고 우수한 클라우드 인재 교육과 개발을 학교와 같이 한다라는 뜻에서 저희가 목표가 학교들과 좀 맞아떨어졌고, 이렇게 해서 학교로부터 이제 유휴부지를 매우 우호적인 조건으로 지원을 받아서 저희가 투자 비용을, 투자 부담을 많이 낮추었습니다. 이에 따른 이제 CapEx를 살펴보면, 저희의 안정적인 재무구조를 바탕으로 2017년 약 ₩1,000억 수준에서 2021년 기준 ₩3,700억대로 증가했고, 2022년 3분기 누적으로는 ₩4,563억 원 이상을 집행하였습니다. 특히 카카오 서비스 확대에 따른 서버 인프라 투자뿐만 아니라 2021년부터 진행된 데이터센터의 착공에 따라 건설 중인 자산의 유형자산 투자 금액이 증가하고 있습니다. 그리고 이 관련 투자 비용은 일시적으로 큰 규모의 현금 유출을 수반하는 구조가 아닌 장기간에 나누어 안분 인식하는 형태로, 당사가 창출할 현금 흐름 내에서 충분히 가능한 수준입니다. Now, the fact that we are building a data center inside the campus of university, this is something that is rarely seen in even other global cases. We have chosen that location so that we can fully leverage our cooperation with the academia and also our interests aligned with the universities and academias in the fact that we could train and nurture talent for a cloud business going forward. That's why we were able to receive very positive conditions in getting the idle lot of land that these university campuses had, and we were able to significantly reduce the investment burden. In terms of the CapEx, supported by very steady financial stream of Kakao, in 2017, the CapEx amount was about KRW 100 billion, which increased to KRW 370 billion as of 2021. On Q3 2022 cumulative basis, we have spent above KRW 456.3 billion in CapEx. Basically, with the expansion of Kakao's services and its business, we have seen rise in investment into tangible assets, which include servers and other infrastructure. With the groundbreaking of number one data center, end of 2021, we are seeing significant rise in tangible investment for construction in process since end of 2021. However, the actual spending is not going to be all at once. We will be fully able to support this from the cash flow that we generate from our operations as the relevant CapEx spending is going to be spent and allotted over a period of time. 그리고 그 계열사 숫자가 이제 증가가 많아진다라고 조금 우려를 하고 계신데, 저희 단순한 숫자가 아닌 계열사들의 특성과 구성에 대해서 조금 주목을 해주셨으면 좋겠습니다. 현재 카카오 전체 계열사 중에서 30인 미만의 소규모 회사가 80%에 이르고 있고, 이런 소규모 회사들은 대부분 그 웹툰, 웹소설 스튜디오, 게임 개발 스튜디오, 영상 제작 스튜디오, 음악 제작 스튜디오 같은 저희 글로벌 IP 콘텐츠 제작사라고 봐주시면 됩니다. 그 외에는 일부 스타트업 회사들이 있긴 합니다. 이러한 소규모 회사를 제외하고 보면 카카오의 주요 계열사는 숫자는 열 개 미만이라고 생각하시면 되겠습니다. Responding your question about growing concern over a large number of subsidiaries under Kakao Group, I think what's important is not to look at the simple number itself, but the characteristics of who these subsidiaries are. If you look at all the subsidiaries under Kakao Group, small size companies with less than 30 headcount account for 80% of our total subs, subsidiary profile. If you look at these small companies, what they do is they are IP producing studios that are, you know, coming up with webtoons, web novels and producing games, musics, and video content. These are small studios and developers who actually produce and create the original IPs. They are mostly in the areas of content production, and there are also other startup companies as well. If you set aside these small scale studios and developers, the actual number of, I guess, major sized subsidiaries under Kakao is less than 10. 말씀드린 콘텐츠 제작사 이외에는 스타트업의 경우가 대부분인데, 카카오는 초창기 때부터 많은 스타트업에 투자하는 방식을 통해 국내 스타트업들과 상생하면서 카카오와 스타트업 모두의 성장을 이끌어 왔습니다. 카카오는 앞으로도 사회적 책임과 위상에 맞게 스타트업 생태계의 기여도를 높일 수 있는 방식의 투자를 고민하고 있습니다. Aside from these content producers, most of the subsidiaries are startups. From the very beginning of our business, we have taken an approach of investing into a startup and growing together with these startups side by side. At Kakao, we have been driving growth of all of these entrepreneurship based startups within our group. Going forward, Kakao will continue to live up to its social duty and its status and make sure that we come up with the most optimal ways to invest into the overall startup ecosystem. 다음 질문 부탁드립니다. We will take the next question, please. 다음으로 질문해 주실 분은 eBest Investment & Securities의 성종화 님입니다. The next question will be presented by Jong -hwa Sung from eBest Investment & Securities. 질문 기회 감사드립니다. 두 가지 질문드리겠습니다. 첫 번째 질문은 비용에 관한 질문입니다. 올해 매출 대비 마케팅비 비중 가이던스는 2분기 실적 발표 때까지는 7 내지 8%였는데 그 이후 7%로 효율화를 위해서 하향 조정된 것으로 알고 있고요. 상반기 비중이 7.6%였고, 3분기 비중이 6%이면, 4분기는 비중도 금액도 재차 다시 크게 증가하게 되는데요. 혹시 연간 매출 대비 마케팅비 비중 가이던스를 7%보다 조금 더, 이 마케팅비 비중이 7%보다 조금 더 낮아질 수도 있는지요? 그리고 이 3Q 기타 비용이 무려 600억 원 정도로서 QoQ 한 20% 이상 급증했는데, 기타 비용은 최근 거의 매분기 QoQ 가파른 급증 추이가 지금 계속되고 있고요. 어느 사업의 어떤 성격의 비용이 이렇게 가파른 증가세가 지속되고 있는지, 그리고 수익성 개선을 위해서 이 부분을 좀 컨트롤하기는 어려운 것인지요? 두 번째 질문은 9월 말, 9월 30일에 친구 탭에 Bizboard 광고를 출시했습니다. 초반 한 일주일 정도 시점에서는 인벤토리 완판 시 월 한 80억 내지 90억 정도 매출 수준으로 체크되었는데, 한 달 남짓 지난 지금 현재 상황은 어떤지요? 인벤토리는 모두 완판되고 있는지요? 그리고 초반처럼 월 한 80억, 90억 내외 정도 수준의 매출이 계속 발생하고 있는지요? 이상입니다. Thank you. I would like to pose two questions. First is on your marketing expense guidance. In the second quarter, you've guided that you were looking at about 7%-8% of marketing expense against the revenue. Would like to understand whether you could expect actually lower marketing costs as against the revenue less than 7%. I would like to get some color on that aspect as well. Second part of this question is, if you look at your other expense, it is KRW 60 billion, and you've been experiencing quite steep QoQ rise for some time now. I would like to understand which business is driving this steep rise in other expense, and is it not possible to control this line item for the benefit of improving your profitability? Another part of the question is, as of September 30th, you introduced Bizboard on the Friends Tab. If I look at the first week metrics, I see that you're making about KRW 8 billion-KRW 9 billion in revenue on a monthly basis based on the selling out of the inventory as of and after the first week after the release. I would like to understand what the current metrics looks like. Are you still making that KRW 8 billion-KRW 9 billion in revenue every month? 먼저 마케팅 비용에 대해서 답변을 드리도록 하겠습니다. 3분기 마케팅비는 매출 대비 6% 수준의 비용을 집행을 했습니다. 사업별로는 전 분기 공격적으로 마케팅을 집행한 카카오피코마와 엔터테인먼트의 보수적인 비용 집행으로 마케팅비가 감소한 반면, 카카오게임즈는 신작 타이틀 우마무스메 출시에 따른 마케팅비 집행을 소폭 확대하였습니다. 마케팅비의 축소는 불확실한 경기 상황과 신규 시장 상황에 따라서 투자 대비 마케팅의 성과가 나오지 않는 상황에서의 대응 전략이라고 보시면 될 것 같습니다. 북미 스토리 사업 부분에서도 마케팅비를 많이 줄였는데, 우선 손익분기점을 달성하는 것을 우선 과제로 하고 있고, 피코마는 웹 서비스의 구매 전환율과 이용자 잔존 비율 등의 주요 지표를 개선해서 내실을 마련하는 것을 우선적인 목표로 삼고 있습니다. 말씀하신 대로 3분기 누적 매출 대비 마케팅비 집행률은 7.1%이고, 연간 마케팅비는 매출 대비 7% 수준으로 집행을 전망하고 있습니다. This is Jae. Responding to your question about marketing spend. In Q3, our marketing spending is against the revenue posted 6%. For each of the business line, Kakao Piccoma in particular, has been quite aggressive in spending its marketing. Let me stand corrected there. Previous quarter, the businesses have been quite aggressive in spending marketing costs, while Piccoma and Kakao Entertainment, as we enter into this quarter, have been much more conservative. Hence, we've seen a decline in the marketing spend. On the other hand, Kakao Games have slightly increased their marketing expenditure on the back of release of a new title, Uma Musume Pretty Derby. The reason why we have adopted this strategy is because of the uncertain macro backdrop, and we are in a market where, compared to the amount of investment that we put in, we're not getting an appropriate level of marketing result. Also, if you look at North America's story business, for us, we slashed our marketing expense because for us at this point, our priority is to reach a break-even point. Also for Piccoma, our number one priority is to make sure that we solidify its fundamentals in terms of the key indicators, such as the conversion rate as well as the retention rate for the users. In Q3, on a cumulative basis, the percent of marketing spend against revenue reported 7.1%, and on a per annum basis, we are looking to see at around 7% level. 기타 비용 관련해서 질문을 주셨는데, 이 부분은 일부 파생상품, Kakao Pay 증권의 파생상품 평가 및 처분 손실 발생에 따른 영향으로 말씀드릴 수 있을 것 같습니다. 또한 종속회사들의 지급 임차료 등의 금액이 증가를 했었고요. 증권업이라서 해외 주식 트레이딩과 관련해 환율 헤지 목적으로 외환 매도 계약을 체결하고, 계약 환율보다 환율이 오르게 되었을 때 파생상품 손실이 발생을 하게 됩니다. 다만 실제는 이 매출에도 파생상품 평가이익이 발생하고 있어서 매출과 이 양쪽에 반영이 된다라고 보시면 될 것 같습니다. Now, responding to the question about other expenses, this is mainly attributable to the valuation disposition loss with regards to derivatives that's been used by Kakao Pay Securities, and also some of the rise in the rental fees that we pay from our subsidiaries and affiliated companies. Now, for Kakao Pay Securities, because they provide an overseas or global stock trading services, there is an FX hedge that is taken. And if the FX rate actually rises compared to at the timing of the forward contract for that foreign currency, there's going to be an FX translation derivative related translation loss that's going to be incurred. On the flip side, there's also going to be a positive impact on the revenue line item from the valuation gain from the derivative. 네 번째 주신 질문에 대해서 제가 답변드리겠습니다. 저는 홍은택입니다. 질문 주신 대로 Bizboard의 CPT 상품이 지난 9월 30일에 베타로 출시됐습니다. 광고주들이 브랜딩 효과를 극대화할 수 있는 자유도 높고 풍부한 소재 활용에 대한 니즈가 있는 상황에서 그에 맞는 상품을 출시를 했습니다. This is Simon. I will respond to your third question. Yes, you are correct. On September 30th, we released the beta version of Bizboard CPT product. We decided to launch this product because we felt that advertisers were seeking for a product that will help them maximize their branding impact, and that, because we identified that there existed a need for them to employ a product that provides them with high level of freedom, with abundant advertisement elements. 출시 이후에 여러 가지 테스트를 하고 있었던 중이었는데요. 불의의 사고가 10월 15일 나면서 일단 중단이 됐고, 그 이후에 이용자 공지와 서비스 장애 피해 접수 창구로 활용해 왔기 때문에 아직 그 테스트를 좀 더 해봐야 정확히 말씀드릴 수 있을 것 같고요. 그래서 액수에 대해서 지금 가이던스를 드리기 좀 어려울 것 같은데, 제 생각에는 이 상품의 매력도 플러스 친구 탭의 활성화가 이 매출에 영향을 줄 거라고 보고 있는데, 친구 탭은 프로필 개편이 되면 아마 친구 탭의 트래픽에 긍정적인 영향이 있을 거라고 생각합니다. 지금도 보면 친구 탭에 업데이트한 친구는 일 구백만 명이 찾을 정도로 굉장히 인기 있는 코너가 됐고, 프로필 개편은 그걸 더 강화하게 될 것으로 예상이 됩니다. 그래서 이거는 아마 다음 분기쯤 좀 더 정확하게 목표와 현황에 대해서 말씀드릴 수 있을 것 같습니다. Since the release, we've been testing this new product. Unfortunately we had to experience the unfortunate incident on October 15th, and we have to put on hold the testing of this product because we've been using that space to provide information and notification regarding the incident and to receive filing from our users with respect to any damages that they may have experienced. We would, for the time being, need to resume that test and only then we will be able to provide you with more clearer guidance as to the metrics and the performance that we are seeing from this product. In light of the appeal that this product provides and the fact that this is located under the Friends Tab, I believe that the level of activation of the Friends Tab is going to have a direct impact on the amount of revenue that's generated. Once we do additional facelift on the profile page, I believe that this will have a positive impact on the Friends Tab, thereby having a positive impact on this ad product as well. We now see that there are about 9 million users that actually visit the updated friends segment, which we have added. As such, once we revamp our profile segment, we will be able to further bolster the level of activation that we see on the Friends Tab. Come next quarter, we will be able to share with you more tangible figures. 네, 다음 질문 받겠습니다. We will take the next question, please. 다음으로 질문해 주실 분은 JP Morgan의 양성욱 님입니다. Your next question will be presented by Stanley Yang from JP Morgan. 안녕하세요. 질문 기회 감사합니다. 두 가지 질문드리겠습니다. 첫 번째 질문은 올해 10% OP 마진 가이던스가 지금으로서는 좀 어려울 것 같은데요. 내년도 마진에 대한 어떤 아웃룩을 주시면 감사하겠습니다. 그리고 인건비도 어느 정도 상승을 내년에 예상을 하시는지, 그다음에 전체적으로 마진 트렌드는 어떻게 될지 말씀해 주시면 감사하겠고요. 두 번째 질문은 최근에 Holdco discount, NAV discount가 좀 커지고 있는데요. 저희가 자회사가 아무래도 비상장 자회사가 향후에 상장을 또 계획하고 있는 자회사도 있지 않습니까? 그래서 내년도 그런 어떤 자회사 상장 계획에 대해서 다시 한번 좀 말씀해 주시면 감사하겠습니다. 이상입니다. Thank you. I would like to ask two questions. First, it seems that you will probably be missing the 10% OP margin guidance that you previously communicated. Can you provide some color as to what your outlook is for your next year's margin? And also, do you expect your labor cost will rise as we enter into next year? What do you think is going to be the margin trend, do you expect to see going forward? Second question is we are seeing higher level of discount being applied to your NAV, the Holdco level. You still have many unlisted subsidiaries. Would like to get some color as to what your IPO plans are for your subsidiaries? 먼저 자회사 상장에 대해서 먼저 답변을 드리도록 하겠습니다. 저희가 이제 최근 카카오를 둘러싼 그 다양한 이해관계자들의 우려를 잘 인지하고 있고, 카카오 공동체들의 상장 이슈는 카카오 전체 기업 지배구조 관점에서 다시 살펴보고 있습니다. 카카오의 주주를 보호하고 주주 가치를 제고하는 방향으로 해당 계열사의 기존 주주와 투자자들과 잘 논의를 진행할 계획입니다. This is Jae, responding to the question, first on listing of the subsidiaries. We are fully aware of the concerns that our stakeholders have. Hence, we are going to revisit our IPO plan from point zero from a governance perspective. Our approach will be to have focus on protecting our shareholders, our existing shareholders, and further enhancing the shareholder value. We will closely discuss and consult with our existing group of shareholders and our investors in making the relevant decisions. 그리고 영업이익률 관련해서는 저희가 지금 내년도 사업 계획을 수립하고 있는 단계라서 추후 보다 자세한 사항을 공유해 드릴 수 있을 것 같습니다. 다만 최근의 그 부정적인 매크로 환경에 따라서 저희 광고 사업이 영향을 받고 있습니다. 사분기 같은 경우에는 매출 성장이 둔화되고 있고, 최근 발생한 IDC 화재의 영향이 더해져서 사분기 영업이익률은 매우 보수적으로 저희가 전망을 하고 있습니다. 다만 저희가 내년도에 그동안 준비해 온 서비스들을 성공적으로 런칭하고, 이를 통해서 비즈니스적인 기회도 가질 수 있도록 최선을 다하겠습니다. On OP margin for next year, currently we are in the process of writing up our business plan, so we will be able to share with you more details later. Due to the macro headwind, this is having a negative impact on our ad business, and hence in Q4, revenue growth is actually slowing. On top of that, there was the IDC related incident. With regards to the OP margin for Q4, we are taking a more conservative stance. We will do once again our utmost to make sure that we bring all the services that we are working on at this point successfully into the market, and we will make sure we explore and identify business opportunities along the way. We will move on to the next question. The next question will be presented by Donghwan Oh from Samsung Securities. I believe that in a time where there is a building criticism on the reckless expansion of Kakao's subsidiaries, you have to go back to the most important and essential aspect, which is to focus on monetization at the mother company level. Other than the open chatting, I would like to understand whether you have other additional models to monetize, for instance, leveraging the view tab or adopting a short form video advertisement. Do you have any business models that you are currently thinking of to further accelerate monetization? Thank you very much for a very great question. This is Simon. I do appreciate your advice, the fact that rather than focusing on growth and revenue at the subsidiary level, that it is important for us to focus on monetization at the mother company level. I appreciate that advice. The current situation is that advertising business is quite large in scale. It takes up a lion's portion of the company's structure. To a certain extent, there is quite a bit of concentration, meaning 1% of advertisers are driving 70% of our revenue. I feel that we would need to explore ways to fundamentally bring improvement to this, and I think there is a good possibility that we could actually achieve that. Just as we are seeing people converse with one another through KakaoTalk, our very important strategic objective is to make sure that the businesses also communicate with one another, businesses to businesses, through KakaoTalk Channel. If you look at total number of KakaoTalk Channel, there are 57,000 channels that have more than 1,000 friends, and 1.6 million channels that have less than 1,000 friends. It will be quite important for us to expand that pool to include small and medium-sized advertisers, as well as small merchants. I believe that we do have that potential. Although KakaoTalk Channel is known to be a very effective marketing tool to many of the smaller and mid-size advertisers, there existed some entry barrier. Basically, they've found it quite difficult to massively send out messages to their KakaoTalk Channel friends, so hence, they were a bit inactive. There were hurdles that existed for these companies. One of the key business solutions that could remove such pain point for smaller sized advertisers is Kakao Sync. Currently, there are about 23,000 businesses that have adopted Kakao Sync, and we expect that we will need to expand this space further. One of the difficulties was that when the businesses wanted to adopt Kakao Sync, what they need is developers in the process. That worked as an entry point, the hurdle for the smaller to mid-sized companies. Within the year or early next year, we are planning to link it up with key ECPs, providing support and help to smaller merchants in their process of adopting Kakao Sync. Once we do that, I believe we will be able to see an uptrend. Also currently, we have about 70,000 sellers and vendors on KakaoTalk Store, and only 4% of them, which are about 3,000, are sellers making use of Talk Channel marketing. Hence, once we develop a seamless business tool that could facilitate the marketing activities through the use of Talk Channel for these vendors and sellers, I believe that this will significantly help us expand our advertiser pool. As we speak, we are developing relevant tools to provide to these sellers and vendors so that they could seamlessly and easily engage in marketing activities. By next year, our plan is to expand the number of Talk Channels with more than 1,000 friends to 300,000. If we do that, there will be viral effect that will be created, which will then lead to natural growth. If we are able to move up to about 500,000 businesses, then we will be able to defend against slower economy and macro headwind and be able to sustain a solid and a healthy level of top line revenue. Last point I would like to mention is that it may sound a little ambiguous, but depending on who defines platform, people talk about platform in many different ways. But my definition of platform is that it is a connection and a nexus that brings together numerous number of suppliers with numerous number of consumers. If you look at KakaoTalk, we do have these multiple number of users. However, for it to evolve into a platform, we also need to have many number of suppliers, be that advertisers or sellers. We still do have much more to enhance and improve, so I ask for your continued interest along this journey. If you look at the advertisement market, be it offline and online, the market size is more or less capped at around KRW 12 trillion-KRW 13 trillion in size. All the players are dividing up that market under that cap. If you look at business communication, the budget does not come from advertisement budget, but marketing budget and business budget can be used for that purpose. We can actually go above and beyond the market cap that we see in advertisement. Yes. Since we've spent quite a bit of time, we would now like to take the final question. The last question will be presented by Jin-goo Kim from Kiwoom Securities. Thank you. I would like to ask questions about the advertisers as well as the digital ad market trend. The different elements would be compounding one another. The reason why you feel that the digital ad market is slowing, do you think that this is a temporary phenomenon as we are seeing after COVID-19 more outdoor activities and higher spending on BTL? Or do you think that this is more macro and more secular in terms of the fact that people are expecting midterm economic recession, and are we seeing across the board change in the position taken by the advertisers? There could be multiple compounding elements and variables that are impacting this. Just would like to understand what the company's take is, and also in that same light, how do you project the advertising market to look like going forward? This is Simon. I will first paint the overall picture and then hand it over to Jae, who will talk about more specific figures. I think your question itself already includes the very important elements in the fact that if you look at the overall online market, penetration is already at 55%, hence the growth rate will definitely going to be slower compared to the past. When we are exposed to difficult market economic backdrop, then naturally large, especially large advertisers will start to reduce their advertising budget. These are two major reasons that are the key drivers behind the slower growth that we are seeing out in the market. That is why, as I mentioned in my previous answer, as these advertisers are shedding their ad budget, it will be important for us to develop ways so that we are not dependent on the ads, the budget of the advertisers, but dependent on their marketing budget. Marketing budget would include multiple marketing activities such as giving out discounts, mileages, or giving out coupons. What we want to do is we want these advertisers and businesses to actually choose KakaoTalk Channel as their first choice of marketing tool. Marketing tool of choice, we want KakaoTalk Channel to be that very tool. Once KakaoTalk Channel achieves that positioning, then we will be less impacted by the advertisement budget of these advertisers because this will become an One of the essential activities that the companies and businesses engage in. In that process, we could benefit from that as well. If we want to generate good performance from KakaoTalk Channel, that means that we need to have a very solid foundation of KakaoTalk so that there could be a massive outbound business messages that could be effectively used by these businesses. I think it's a bit confusing because we call this messaging ad, so there is an element of confusion there. I think soon we will be able to see these outbound messaging related budget surpass the size of the Bizboard ad budget. Underpinned by that, we hope to bring in a more robust growth. Yes. This is Jae. Just to elaborate a little more, if you look at our Talk Biz advertisement, in Q4, we believe that we will see some recovery in revenue as the advertisers are going to once again reactivate their marketing activities. Now, having said that, due to economic uncertainties and the fact that advertisers have slashed their ad budget as well as lower existing revenue from the IDC fire and delay in generation of new revenue from our new businesses, despite Q4 being the high season, we think that the growth rate is going to be somewhat limited. If you look at Talk Biz on a Q3 cumulative basis, we reported 18% year-on-year growth. On the back of the fire and its impact on our top line revenue and also due to the delay in our service, refresh schedule, we expect that 2022 full year revenue would only post a growth of 15% year-over-year. Now, from short term we will of course be impacted by slower economy, but once that economy recovers, we will make sure that we are fully prepared to benefit from that recovery in terms of rising demand for advertisement. If you look at out of the total ad market, we expect the digital ad segment to continue to grow. And considering the fact that Kakao's share in that digital ad market is 15%, we think that going forward there is bigger potential for growth. Well, thank you very much. This brings us to the end of Kakao's earnings presentation for third quarter of 2022. Once again, thank you very much for joining us this morning.