Krafton Inc

KRX:259960

Earnings Call Transcript 2023-Q4

[Unknown Executive]

Good afternoon. I'm [ Sophie Lee ] from KRAFTON's IR team. I would like to extend my appreciation to analysts and investors from both home and abroad for joining our Q4 and FY '23 earnings release. Today, we have our CEO of KRAFTON, CH Kim; and CFO, Dong-geun Bae. Please also note that today's earnings presentation is based on K-IFRS consolidated estimates and business and financial information are subject to change upon the independent auditor's review.

I will first invite CEO, Kim, to walk through 2024 business strategy, after which our CFO, Dong-geun Bae, will share with you the financial highlights.

[Changhan Kim, executive]

I extend my gratitude to investors and analysts from both home and abroad for joining KRAFTON's annual earnings conference call. I am CH Kim, CEO of KRAFTON.

Despite challenging global macro backdrop of high interest rate and low growth in 2023, KRAFTON drove solid growth from its current business based on PUBG IP and to secure new IPs in the future, we made our organizational capacity more resilient. PUBG PC and console continued its top line growth over the past 3 years and in '23, achieved 37% year-over-year growth. Traffic turned upwards and in second half of '23, concurrent users increased by about 70% from trough to peak. Through such experience and outcome, we have gained confidence that we can bring sustainable growth for PUBG IP in the longer run.

In the Indian market, which we consider strategically important, since the [ unveiling ] of BGMI, we came back with a successful relaunch breaking the previous record on traffic and revenues. Especially on December -- December of '23, we broke monthly revenue record validating the market upside in India. Users in India are often known for not making much in-app purchases, but the fact that they opened up their wallet and made the purchases showed the upside to the market. And also shows that if you go over the threshold of making that first purchase, bar is lowered for the second purchase, as such, we can look forward to growth of the market in India.

As KRAFTON is experiencing the growth and changes from India firsthand, we believe and have high hopes that we will be able to discover success worthy games for this market. Last year, we set our strategy under the model of scale up the creative to secure big IPs underpinned by production and stronger publishing capabilities.

All our organization and business direction have been aligned to such strategy. We will seek out original creative and the capability that KRAFTON needs to garner is to scale up such creative. This slogan is not simply about stronger publishing capabilities, but it's a change in point of view that starts from discovery, marketing to enhancements. This is, in turn, connected to our belief that creative needs to be unearthed and powered by organizational capacity.

Scale-up of game IPs can be seen from 6 different angles. In many cases, new gameplay usually originates from underground, so we can actually observe whether a new core gameplay can actually be popularized.

Second, with a specific game IP is born, we can think of whether to diversify into multiproduct domain. If the game is developed, as a monolithic game, we can see whether it can be served live, meaning whether Game-as-a-Service model can actually work. This PC console, mobile have attributes of a platform, we can also think of driving the growth [ through ] platform expansion.

It will be great if we can simply take one game product to a global success, but games intrinsically have the experiential aspect, as well as community aspect to it. So success formula for a specific region is viable. We could think of Indian market expansion by way of BGMI, and we clearly see growing local markets across Middle East and Latin America. We can also think about growing the fan base in line with the age and gender profile we currently have to broaden our audience. KRAFTON's core strategy once again is to explore new creative to scale it up.

I would elaborate on 5 major lineup -- 5 major lineup for 2024 in line with the scale-up the creative strategy. First, Dark and Darker Mobile burst on to the scene back in '22, presenting new experience, which was an attempt to bring [ cool play ] of Dark and Darker onto the mobile platform. What we envisioned was to recreate what we did when we took Battle Royale gameplay of PUBG onto PUBG mobile widening the user base.

Combining the non-targeting action, MMORPG making experience of Bluehole Studio and mobile development experience built up through New State Development and PUBG mobile servicing capability, this is a project that will bring to life scale-up the creative.

With inZOI, we saw there existed demand and expectation brewing from fans from G-STAR and YouTube. Sims was -- while dominated the market for the past 2 decades, so we wanted to quickly bring cutting-edge technology to open up a new market based on unique positioning of hyper realistic life simulation game. Because we were embarking on a challenge, we decided to first check users' response before the official opening of the game, and as such, we were able to verify market demand and expectation, as well as the upside to our unique positioning.

Dinkum Mobile project expand solo developers creative work into the mobile platform. Even though, it's an indie game, it was highly rated for depth of gameplay and detail. So this IP was developed by a single person, there was naturally a limit on scaling-up the game. 5minLab Studio under KRAFTON, equipped with development capabilities will be used to expand this title on to the mobile platform and to migrate to live servicing model.

Black Budget is in the extraction shooter game genre and is under development by early members of PUBG Studio, who made PUBG. We expect extraction genre can be a new shooter genre following the steps of Battle Royale, but is a segment yet to be popularized. The PUBG Studio is seeking to inherit the gun play of PUBG and evolve and popularize this game segment.

Lastly, Subnautica2 is a sequel to Subnautica, which is a mega IP owned by Unknown World Studio. This IP has a strong fan base. And through this project, we plan to create a [ snowballing ] effect to make a bigger fandom. We will gradually adopt Game-as-a-Service model underpinned by replayability and 4-player co-op mode, which is a new feature to be added.

In order to speed up and broaden the breadth of IP discovery, we decided on 2PP model, as our strategic direction, which combines investing a minority stake and publishing. And under this approach, we have already made more than 10 investments, which is definitely quite many compared to investment activities of other games to deals in Korea and global alike. We will continue on with this strategic direction, and at the same time, notch up the speed to discover IPs that have the scale-up potential. Game industry is known to be hit-driven and lack visibility.

[ KRAFTON's ] founding vision is to be a true maker of master pieces, and we believe pursuit of original creative is the only way to make the breakthrough into new game segments and secure globally acclaimed big IPs. To this end, we will be steadfast at carrying out scale-up strategy towards bringing the original creative into a $1 billion IP. Once the IP is gained through continuous service enhancements and content updates, these services will enable long-term growth, while at the same time, big IPs will be discovered and scaled-up, enabling KRAFTON to realize a stepwise growth. This is the vision of KRAFTON. Underpinned by these efforts, 2024 will be the first year that signals the launch of many game title lineup and be the turning point for KRAFTON 's stepwise growth.

Beyond finding and scaling up new IPs, I will now talk about 3 key initiatives for KRAFTON's mid- to longer-term growth. First is investing and developing to make PUBG IP into a franchise. Including mobile, PUBG IP is world's top-ranking game IP, raking in [ $25 billion ] revenue with just one single game IP. To further grow this IP that we have, we are planning to expand investment and development of PUBG IP into a multi-product domain.

Second initiative has to do with India. We have BGMI, which is #1 national game in India. We will make this game into one that can continue to grow for over a decade and based on solid market presence and insights that we have of India, we will expand independent publishing capabilities, so that we may become India's top game publisher.

We will also continue on with the expansion of BGMI Esports, which is a front runner in mobile esport market in India to create esport industry and ecosystem. India has world's #1 population recording high economic growth rate. We grow together with the Indian market. We will explore investment opportunities in relevant industries other than games, and we will carry out new businesses.

Third initiative is to expand investment into R&D of deep learning technology. Deep learning has profound impact on game development, and that is why KRAFTON is focusing its R&D capabilities behind AI. We are bringing generative AI across the overall production process and are developing AI bot that can give practical help in serving the games and eventually, we will arrive at making virtual game friends.

In 2023, KRAFTON published 5 regular track papers at NeurIPS, the most reputable deep learning journal, making KRAFTON #1 out of domestic game companies and #3 out of global game companies in terms of research outcome. This year, we will not only further expand on such research capacity, but we quickly bring this research to adoption, so that it may define and lead the industry.

Last year, we became confident that we can continue to grow PUBG IP to ensure longer-term growth of the IP. At the same time, we have made organizational changes to discover and scale-up new IPs, expanded 2PP and secured lineup of titles that is a perfect match with our strategy. KRAFTON will not lose sight of the core value of original creative and through embarking on challenges with secure IPs that will eventually be on par with PUBG. FY '24 will be a turning point for stepwise growth. Thank you.

This ends the presentation on strategy for 2024. We will now move on to the financial results for Q4 and FY '23 results.

[Dong-geun Bae, executive]

Hello. I'm CFO, Dong-geun Bae. Following the presentation by CH on business strategy, I will now walk you through the financial results of KRAFTON. We communicated 1 year ago, February of '23, that our focus will be on growing the current lineup of titles to achieve annual growth in revenue and operating profit. Despite macro uncertainties, both global and domestic, PUBG IP stood solid breaking record high revenue for '23 at KRW 1,910.6 billion, while on the back of cost efficiencies, operating profit inched up marginally to KRW 768 billion.

PUBG IP forms the basis of PUBG PC and console, and thanks to successful free-to-pay transition and live servicing and steady traffic over the past 3 years, PUBG IP took a stepwise growth path towards becoming a stronger IP. Based on all of this, annual PC console revenue jumped by more than 2x in '23 versus 2020.

Despite challenging operational backdrop, mobile sustained traffic volume, driving an increase in revenue efficiency and on the back of resumption of BGMI service in India, mobile revenue came in flat year-over-year. We expect PUBG IP to continue its growth in 2024 and through PUBG franchise strategy, we will further beef up its value, as a global IP.

Another point to note is that as of end of '23, KRAFTON secured 30 -- around 30 original creatives, building up a multi-publishing line, which will underpin continuous launch of new titles. Based on this pipeline starting this year, we will be able to showcase new titles varying in scale every year.

Now on Q4 financial results. Despite slow seasonality in Q4, KRAFTON saw growth across PC, mobile and console versus last quarter, reporting meaningful top line. Q4 revenue for KRAFTON was up 19% Q-on-Q and 13% Y-o-Y, reporting KRW 534.6 billion.

PC revenue in Q4 reported KRW 167.1 billion, which was up 38% Q-on-Q and 20% versus previous year. In Q4, PUBG PC and console offered content that drove users to spend and purchase these contents and on release of new maps, it's in-game ARPU increased by more than 40% year-over-year. For monetized content, we introduced 4 types of weapon scheme upgrade system at Black Market, which was first rolled out last November, and with the relaunch of Chroma, a color-changing feature, first introduced during Q3 last year, we saw a large pickup in top line sales.

Rondo, which is the 10th map of PUBG PC and console is the largest scale map with oriental background with the biggest play space developed based on the experience from the release of Taego and Deston Map release. Since the launch on December 6th, there was a significant decrease in MAU count, as users were offered the new experience from content specific to Rondo. And since the release through continuous new content update for Rondo, we've been able to maintain the traffic.

FY '23 PC revenue recorded KRW 583.9 billion, up 26% year-over-year. In 2024, supported by higher traffic and continuous improvement made on the monetization system, we will carry forward with investments and prepare and gear up for PUBG IP franchise strategy, so as to build the basis for the extended long-term servicing.

Mobile revenue in Q4 reported KRW 42.7 billion, up 11% Q-on-Q and 35% year-over-year. It's encouraging to see both PUBG mobile and BGMI growing on year-over-year and Q-over-Q basis. PUBG mobile traffic increased in major global regions and on the launch of progressive skin in collaboration with Supercar Pagani, mobile revenue received a boost.

On top of this, through localized content for India and aggressive marketing, BGMI reported highest Q4 quarterly revenue since the start of the service, which made contribution to a record-high total mobile revenue for the fourth quarter. Based on multiple years of experience behind live servicing and competitiveness that we have built, we will continue to grow market influence and drive meaningful growth from the mobile segment in 2024.

Revenue from console segment in Q4 was KRW 17.4 billion, this is 45% Q-on-Q increase and a decline of 74% Y-o-Y. Reason for such a large drop Y-o-Y is from the rollout of CALLISTO PROTOCOL booked in December and base effect thereof.

Next is major operating expense items and operating profit. Labor costs driven by headcount increase affected by multiple number of new title development and due to bonus being booked following the final closing of OP account increased KRW 18.6 billion versus last quarter, reached KRW 120.9 billion, driven by revenue from PUBG PC, console, and all of the mobile platforms.

Platform fees and cost of revenue was up KRW 28 billion Q-on-Q and KRW 30.2 billion Y-o-Y, reporting KRW 87.9 billion. Due to the decline in non-game outsourcing costs, commissions paid was down KRW 2.9 billion Q-on-Q to KRW 61.9 billion on Y-o-Y basis on cost savings from esports and base effect from CALLISTO PROTOCOL server cost, there was a KRW 40.8 billion decline.

PUBG PC, console and Rondo Map release and BGMI marketing, all drove marketing expense up KRW 16.2 billion Q-over-Q. On Y-o-Y basis due to the base effect from CALLISTO PROTOCOL launch, marketing expenses are around KRW 47 billion coming in at KRW 34.2 billion.

Stock-based compensation was up KRW 48.1 billion Q-on-Q to KRW 28.3 billion due to rise in share price, and there was KRW 38 billion increase Y-o-Y. All in all, Q4 operating profit was down 13% Q-on-Q and up 30% Y-o-Y to KRW 164.4 billion. 2023 operating profit was up 2% Y-o-Y, reaching KRW 768 billion.

Q4 adjusted EBITDA after SBC was up 11% Q-on-Q and 37% Y-o-Y to KRW 219.7 billion. '23 adjusted EBITDA was up 14% Y-o-Y to KRW 903.7 billion.

In Q4, non-operating account was impacted by impairment loss on intangibles from invested asset and FX-related loss from FX rate fluctuations, as well as disposition and valuation loss from financial assets. All of this led to Q4 non-operating loss of KRW 138.1 billion. And in terms of FY '23, non-operating loss of KRW 67.7 billion in '22. Following that, we achieved a turnaround in non-operating profit of KRW 60.6 billion.

We arrived at Q4 net loss of KRW 13.2 billion and FY '23 net profit of KRW 594.1 billion, which is up 19% year-over-year. This ends the presentation on the financials.

We will begin now the Q&A.

[Operator]

[Operator Instructions] [Interpreted] The first question will be provided by Jin-Gu Kim from Kiwoom Securities.

[Jingu Kim, analyst]

[Interpreted] I have a quite high-level question. Regarding your PUBG IP, can you provide us as to what your projections are in terms of the top line growth for this year? And if you could give us a breakdown between PC and mobile, that would be helpful?

And also, if you can, can you also close what your peak revenue on a daily basis is for BGMI? And what is your take on the growth potential for the Chinese market this year?

[Dong-geun Bae, executive]

[Interpreted] Responding to your question about what our top line outlook is from PUBG IP. As you would understand and appreciate, we do not provide any specific guidances on these -- regarding these numbers. Now -- and I understand that out in the market, there's been some concern about PUBG IP, becoming more aged as the years go by. But as we have shown last year, supported by our experience and the capabilities that we have built over the years, we've been able to further drive-up traffic. And through revenue efficiencies that we were able to achieve, we actually brought growth last year. And also, for 2024, our objective and plan is to continue on with the growth trend based upon PUBG IP.

Regarding the second question on BGMI, as mentioned during the presentation this year, and we've seen a record high revenue from BGMI being generated. So I can tell you that there's been a quite significant amount of global influence that we've been able to build with PUBG IP. There is, therefore, a group of people that really cheer for our games and for the company, but we have to be also mindful of the possibly some sensitive aspects and hence, that stops us from actually sharing with you the specific number per se.

Now as mentioned in previous earnings presentations, we've mentioned before that BGMI actually accounts for high single digit against the total mobile revenue. And if you were to compare the numbers from last year's Q4 figure and do a Y-o-Y comparison, I think you will be able to [ project ] as to the size of the revenue that is being created through BGMI.

Regarding the question about the potential for growing revenue from the Chinese market, this is a question that we get repeatedly during earnings calls because it is Tencent that is actually servicing this game under Peacekeeper Elite. I think it would be more helpful for you to actually gain the specific guidance from Tencent, if possible. So as we have shown last year, this year, we were -- we believe that we will be able to further grow the PUBG IP franchise because we've been able to prove that over the last year. So we will keep very close tabs on our future efforts in further growing PUBG going forward.

[Unknown Executive]

[Interpreted] Next question, please.

[Operator]

[Interpreted] The following question will be presented by Hee-Seok Lim from Mirae Asset Securities.

[Hee-Seok Lim, analyst]

[Interpreted] I have 2, I want to ask. The first one is the company seems to be emphasizing the importance of deep learning and AI. I would like to understand as to how much are you incorporating and adopting this AI onto your game titles? And what is your plan going forward?

Second has to do with BGMI. I understand that the company is testing advertisement model, as part of the BM of the game. So I would like to know as to going forward, do you think that advertisement-related BM could actually take root for the -- in the Indian market?

[Dong-geun Bae, executive]

[Interpreted] Regarding the application and incorporation of the AI and deep learning technologies, yes, we're quite actively trying to incorporate that into the entire game production and development process. A good case in point is inZOI, which through the G-STAR, we were able to show that we have actually applied our in-house developed AI-related technologies to this game. There are various different types of technologies that is being featured. For instance, image to 3D conversion, TTS and use of chatbot in an MPC conversation. So people could actually very naturally and comfortably engage in the conversation.

Also, we're taking a reinforced learning RL, deep learning and making that into the bot system. And last year, we've actually applied that to some of our games and have actually run tests, and that really showed good effectiveness of these bots as well. And eventually, we will arrive at developing game friends, so these AI-generated game friends could play together with the gamers.

Also, there will be -- there are some efforts put in regarding the anti-cheat features, deep-learning technology is used to develop these anti-cheat features, so that we can defend against any fraudulent behaviors that could be exercised by certain or malicious -- people with malicious intent. So in 2024, we will carry on our business with AI-first mindset and execution plan. And we are moving to apply and incorporate AI across the company. And we have actually set up dedicated organization that will enable that and accelerate that process.

Second question on BGMI and the advertisement BM that you mentioned, you are right. We've been running at BM test since the second half of the year. But will that advertisement model become the main business model for BGMI? I do not think so. Typically, India is considered to be a market, where the ARPU levels are quite low. So at this point, we are currently testing various different types of BMs for that market.

As you know, in India, we've been subject to a ban before. And as we've provided and offered PUBG service across the -- along the years, we -- through that process, we've been able to build up quite a bit of experience and content, and we also brought quite solid success last year. So we have many elements that we can actually leverage and coming up with the BM that best befits this market. So what we need to do at this point is to actually find out, which element will work best for India, and that will be the focus for us in carrying out and deploying the business model from that -- from there on.

[Unknown Executive]

[Interpreted] Next question, please.

[Operator]

[Interpreted] The following question will be presented by Stanley Yang from JPMorgan.

[Stanley Yang, analyst]

[Interpreted] I have 2 questions. First has to do with the buyback of treasury shares. Can you provide color as to the size of the possible treasury share going forward?

Second has to do with the Rondo Map release, I know that, that was the key driver behind a significant rise in traffic in Q4. What is its contribution to your top line revenue? And do you have plans to apply this to your other mobile in either in Q1 or in the first half of the year? And also, would that be also incorporated and rolled out under Peacekeeper Elite. And if so, would that be able to boost revenue?

[Dong-geun Bae, executive]

[Interpreted] Responding to the question on shareholder return. As you know, last year, we announced a 3-year program for shareholder return. And last year being year 1, we kept with that commitment. Basically, after taking out the amount of investment from free cash flow, where basically, we have acquired treasury shares under the [ ceiling ] of 40%. And in the case of last year, we have canceled or retired 100% of those treasury shares. So this 3-year shareholder return program will continue onwards. And for this year, we still have to wait for audited numbers and the resolution of the [ AGM ]. But once we go through all of that process -- once again, we will conduct the shareholder return program, as we've committed.

Regarding the Rondo Map update, yes, of course, top line revenue is important, but I believe that what is the most important impact that we were able to drive from the update and the rollout of the Rondo Map is that we were able to drive healthy and sound traffic. Looking at the regional breakdown, despite the fact that this map is very much of an Asian style, we've not only seen traffic growth from Asian countries, but we were able to see user traffic go up in -- from CIS countries, Korea, Japan, the Americas and the Europe as well.

So in Q4, if you look at our PC and console revenue, the Rondo Map rollout had a very important impact, and we think that it had -- it contributed a lion's share of the growth that we've seen. And whether we will bring this and roll this out under other games or not is something that we are thinking of at this point.

You also asked about its possible impact in the first half of this year, with the elevated level of traffic and even if we look at the statistics, the numbers that we are seeing for February, the traffic level is still quite good. And for us at KRAFTON, I guess, you could say that Q1 is a high season for us to a certain extent. So the traffic is good. So I think that we can look forward to good performance.

[Unknown Executive]

[Interpreted] Next question, please.

[Operator]

[Interpreted] The following question will be presented by Dong Hwan Oh from Samsung Securities.

[Donghwan Oh, analyst]

[Interpreted] I have 2 questions. First, this quarter, you reported a quite good revenue figure. I would like to know what were some of the one-off factors. Any settlement amount or any types of contract amount that we need to be aware of? I read in an article that you entered a settlement agreement with NetEase regarding the IP-related dispute. When did you book this amount? And what is the size of the settlement?

Second question has to do with the schedule for your new titles lineup. You shared with us 5 names. I would like to know as to the time line of their release and which game title do you think is going to play an important role in helping you to achieve your stepwise growth?

[Dong-geun Bae, executive]

[Interpreted] Well, thank you for the question. I remember that you asked a question on one-off previous quarter and thank you for your interest. Regarding Q4 revenue, the figure, yes, was quite good, and that is because of the good revenue we've seen from PUBG PC console, as well as good revenue on the mobile side, especially on BGMI. So I can tell you that the impact is not attributable to any settlement amount or contract-related amount.

If you look at the account line items, any settlement amount will come under non-operating profit line item. So it is not directly -- does not have any direct bearings to the operating profit line. It is true, however, that we did reach a settlement with NetEase, but I hope you understand that we are bound by confidentiality and hence, we won't be able to actually share with you any specific settlement amount.

You asked about the time line of the new title lineup. Dark and Darker Mobile is the one that is actually growing the fastest at this point. For inZOI and Black Budget, we are at this point, planning on early testing and early access. So what's important for us is to run a pretest and closed beta test sufficiently before we decide on the specific time line of the release.

You also asked us to which game is going to contribute the most to our stepwise growth. I can tell you that all of the 5 game titles will play a very important role in scaling-up our capability. I want to emphasize that rather than thinking of which game title will make how much of a contribution to this growth, we are going to exert our utmost best effort, so that we can really unearth and discover the original creative.

And by utilizing our core capabilities and scaling-up these games, where we will be able to introduce and showcase these individual game titles to the market at appropriate timing. And I believe that once they are released through small and big successes, we will eventually be able to arrive at a big IP, which will then fuel the stepwise growth that we are envisioning.

[Unknown Executive]

[Interpreted] Next question, please.

[Operator]

[Interpreted] The following question will be presented by Ha Jeong Kim from DAOL Investment & Securities.

[Ha Jeong Kim, analyst]

[Interpreted] My question relates to the very specific game play of Dark and Darker Mobile. Maybe it's because I'm not imaginative enough, but I would think that Dark and Darker Mobile will also be quite similar with PUBG and that it will have some sort of a battle pass as PUBG does. But if you think about the fact that the universe of Dark and Darker Mobile is in the medieval fantasy, I would think that the type of skins that gamers will be able to utilize or be very much limited.

So if you think about PUBG basically, you start with gold, you move up the ladder and you go exchange it in the marketplace. So would you then provide a mechanism, whereby the gamers would have to actually buy the gold. And if you think about that and that would be pay-to-win type of a big BM model. So if you could provide more specifics regarding how this game is going to be designed, that would be helpful?

[Dong-geun Bae, executive]

[Interpreted] Yes, that's a very detailed question. And basically -- and actually, that is the very area that we within the company are also very seriously thinking of and discussing. But if you also look at the evolution path of PUBG mobile, it wasn't that we first started off with the battle passes or the skin sales from the very onset. What we actually did was we wanted to create a mobile environment and be able to transition to a mobile environment that many people would want to come and spend more time on, that was our focus at the very beginning.

After which, meaning, after we've been able to build up a significant amount of traffic, it was at that point that we started to think about how we could best maximize revenue efficiency, and we tried many different things. So yes, we are thinking very hard as to what form it will take, but we have not yet fixed or confirmed any specific or one single BM at this point.

What's important for us is to make sure that this is game play best fits the mobile environment that we are able to provide an immersive game experience and make sure that the people's time spent on this game is lengthy. So -- and also, if you look at PUBG mobile, it's more of a session-based game, whereas for this new title, Dark and Darker Mobile, it's an RPG based. So we are looking forward to other types of BMs for this game.

[Unknown Executive]

[Interpreted] Next question, please.

[Operator]

[Interpreted] The following question will be presented by Incheol Yu from Citi Securities.

[Incheol Yu, analyst]

[Interpreted] Hello. I'm Yu Incheol from Citi. Since you've mentioned seasonality during the Q&A, I just want to get a little more color on the impact of seasonality. You've mentioned that for PUBG IP, Q4 is low -- slow -- low season, while Q1 is the high season. So would that mean that for Q1 of this year, we could expect Q-on-Q rise in terms of your PC and mobile revenue? Or is it more of a normalization of the revenue because in Q4, you would release new content and new content. So what should we expect is the first question.

And regarding the PC and mobile, can you share with us what the trend or trajectory will look like in terms of the user traffic and the ratio of paying users?

[Dong-geun Bae, executive]

[Interpreted] If you look at our past financial track record, you would very clearly see that seasonality. If you look at PC, usually, Q1, of course, is that's the biggest season for us. Q2 is quite slow. Q3, there is school holidays. So that works quite positively for us. And yes, Q4 traditionally had been an off-season so-called because, of course, we would release certain content, but we will focus more on what is upcoming for Q1 of the following year. But having said that, if you look at Q4 of last year, there was the Rondo Map and the chrome and the weapon system upgrade. So all of that really worked positively. So I'm not sure whether we will be able to call Q4 of last year a so-called slow season.

Now because traffic is quite high at this point, we are, of course, looking forward to very strong performance in Q1 numbers. Now moving on to mobile, although it may not be as salient as a trend, if we look compared to PC, we see a similar characteristics. Many of the mobile titles have been downward stabilized since Q4 of 2022. And so our approach for the mobile titles is that, first, to sustain the traffic level, while driving up the revenue. So that aspect is slightly different from PC business. So regarding the seasonality, [ would ] you've mentioned, yes, they are correct. And also, in terms of the Q1 performance, yes, we do have high hopes for it.

This was no question, but there's a message that I really wanted to emphasize today. As you know, last year, we've committed that we will continuously, of course, grow our PUBG IP, but that we will also expand on our second party publishing the 2PP approach. This is the first -- the beginning of the year earnings presentation. So we have our CEO with us today, and he talked about the 5 upcoming titles. And so I was looking forward to be having -- I was looking forward to an opportunity to be able to really share with you the new approach that KRAFTON had.

We will continuously exert efforts to discover the original content, and we even made some reorganizational work within the company, so that we can strengthen the publishing aspect of our capabilities. So KRAFTON is not going to be a company that just depends solely on 1 or 2 new titles or that company that is wholly dependent on PUBG IP. That is what we've been doing over the past year. We've put in a lot of efforts to affect this change. And so starting this year, you will be able to see new outcomes and these new positive changes.

Yes, the performances of each game title, of course, is important. But I just want to highlight the fact that KRAFTON, as a company now has a resilient system in place, so that we could attempt at discovering the original creative that we desire. I do not know about other companies, but I can tell you that within KRAFTON, we put in huge immense amount of effort in discovering and identifying that creative content. We have a creative discovery team that meets up with hundreds of other companies in order to find that original creativity. So I just wanted to flag this point.

[Unknown Executive]

[Interpreted] So thank you very much. This brings us to the end of the Q4 and FY '23 earnings presentation of KRAFTON. Thank you, everyone, for joining.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]