Nexon Aktie

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Information on some of these risks and uncertainties can be found in our earnings-related charter document. We assume no obligation to update or alter any forward-looking statements. Please note, net income refers to net income attributable to owners of the parent stated in Nexon's consolidated financial results. Furthermore, this presentation is intended to provide investors and analysts with financial and operational information about Nexon not to solicit or recommend any sale or purchase of stock or other securities of Nexon. A recording of this presentation will be available on our Investor Relations website following this presentation. Unauthorized recording of this presentation is not permitted.

With that, I'll now pass to Junghun.

Good afternoon, everyone. We appreciate you taking time to join. Earlier today, Nexon posted slide deck and press release detailing our Q1 2026 performance and Q2 outlook. On today's call, we will offer insights on our recent performance and an outlook on the second quarter, which is tracking to be the softest quarter of this year. Due to challenges in our Dungeon&Fighter franchise, our top count for MABINOGI MOBILE against last year's successful launch and the Level Cap strategy for through monetization in our FC franchise in favor of attracting new and returning players for long-term retention and growth.

Beyond Q2, we envision a second half that includes a pipeline of catalysts that add portfolio diversity and growth into our business. Today's report will also offer a level of online progress on the transformation initiative outlined at our March 31 CMD. As you may recall, the initiative includes plans to improve cost management, evolve our creative process, establish margin expectation for each project, expand our business with partnership and leverage the strategic advantages that come with Nexon's large and loyal global player community. The reason is to provide a great experience for our players, create new revenue streams and to improve our margin structure.

And while we are only 3 months into the multiyear plan, we are making material progress that includes pipeline review and process improvements, which we expect to have positive impact on our results in the quarters ahead. Moving to the Q1 performance. we are pleased to report liquid high quarterly revenue and operating income of JPY 152.2 billion and JPY 58.2 billion, up 34% and 40% year-over-year, respectively. And the high point in our Q1 story is the ongoing success of ARC Raiders, which finished 2025 with more than 10 million units sold and recently, sold more than 16 billion units.

Notably, more than half hold of active players have spent over 100 hours in the game, totaling more than 1.5 billion hours commit to the game, statistics that reflect the enthusiasm keep ARC Raiders in the upper tier of the most played games on Steam. ARC Raiders new updates, Riven Tides was released on April 28. And the team at Embark Studios is now working on the highly anticipated October release of the Frozen Trail update, the biggest ARC Raiders update since launch. Frozen Trail will include both free content with a large new map plus new weapons, gadgets and pass. There will also be a paid premium reward pass.

Similar to a season pass that will improve the exclusive content in the form of character outfits, new cosmetic types to expand the customization in the game. The update is designed to reactivate dormant players who finished the game and attract all new users. Embark believes Frozen Trail will add a multitude of hours of new game play and reshape how the game is played. We are extremely excited about October release. As pleased as we are with the ongoing commercial success, ARC Raiders offers a much larger more valuable and strategic capability for Nexon. We now have an engine for developing true global games at scale.

As kris said, we did not have and we plan to make full use of it in the years ahead. Another solid popular in Q1 was the MapleStory franchise, which was up 42% year-over-year on the strength of the newly introduced experience, MapleStory either RPG and MapleStory Worlds. This performance add confidence to our disc system, the introduction of a new experience can deliver vertical growth in the established franchises. And then -- sorry, offers blueprint for enormous growth in Dungeon&Fighter and other Nexon IP.

Moving to the Dungeon&Fighter franchise. On Page 3, Dungeon&Fighter began 2026 with a large new year update, which contribute to solid Q1 year-over-year growth. However, due to the offsetting decline in the mobile game, franchise revenue was down year-over-year. Changing the trajectory of the mobile game is our top priority. And following a recent franchise review, we have decided to move development of the Chinese service to our partners at Tencent. Nexon's neo per studio will maintain creative control of the game, but we believe Tencent's deep understanding of local player preprints will produce the best possible performance in the game.

Moving now to Q2. Our outlook reflects challenge for both PC and mobile Dungeon&Fighter, which make this what we expect to be our weakest quarter of the year. In addition to the ongoing weakness in the mobile game, the recent updates for the PC version have not delivered the anticipated outcome. Our broader outlook on the year includes multiple initiatives designed to reverse the trajectory of this franchise in China. The first is Dungeon&Fighter Mobile anniversary scheduled this month, followed by newer co-developed content from Tencent this summer.

Next is the June anniversary and a major update for the PC game timed with October National Day holiday plus our new rate and closer to the end of this year, our promising new product extension designed to inspire the core and attract new players Dungeon&Fighter: Idle RPG. Looking ahead to 2027 and beyond, we are seeing good progress on Dungeon&Fighter Classic, Dungeon&Fighter: ARAD and OVERKILL, games extending the Dungeon&Fighter IP. For the apps franchise, our strategy for leveraging all the competes is to place the highest priority on inspiring the core and on boarding new and returning players on outstanding service and reliable operations part. We believe this approach will help to drive long-term retention and establish higher traffic baseline after the event. Other releases is expected to drive our performance in our second half include Mymove in Taiwan in Q3 and in Japan in Q4. the publishing of Overwatch on Kishin Korea later this year. And of course, the launch of the upgrade Frozen Trail update with free and premium content in Q4.

Looking beyond the 2026, our pipeline includes several new games with strong commercial potential starting with NAKWON: LAST PARADISE. NAKWON is a multiplayer survival in a postapocalyptic city which recently completed a closed beta test with more than 37,000 concurrent players, a significant achievement for all new game with no market team. Our Korean studios have multiple projects in development, including MABINOGI Eternity, Project RX and Vindictus: Defying Fate. We are also planning 2 publishing projects for the list late this year. The first is -- our fantasy world RPG and Project team, an MMORPG based on the hugely popular webtune overgeared IP with service for launch in Korea, Taiwan, Hong Kong and Macau.

And finally, Embark Studios, the creators of ARC Raiders and THE FINALS have 2 new games in the early stage of development. Now I will offer on updates on progress made on our transformation initiative, which is expected to dramatically involve how we create and service games in the years ahead. Following the review of our every game and processing in our pipeline, we canceled 3 titles did not test our filter for quality and commercial viability, allowing us to allocate additional resources to 2 projects that offer greater quality as well as potential for revenue and margin, NAKWON and Uchida wafer.

On to training costs, these steps allow us to deploy top creative talent to projects with greater potential to attract and sustain our large number of players. These are the efforts concrete steps in our multiyear transformation. We look forward to sharing more on our progress along with the expectation that you will see the impact in our financial results.

With that, I will finish with an update on some news of our recently announced partnerships that provides long-term stability and growth to our business. In March, we announced publishing agreements with Blizzard Entertainment for Overwatch on PC in Korea later this year. Under the government, Nexon will assume a publishing responsibility in Korea and provide live service, marketing, internet game room support plus hyper localization to align the game with a unique taste and preference of Korean players.

For the Nexon franchise, Today, Nexon and EA announced our long-term agreement to our publishing partnership, which secured the future of our most successful franchises. Under the agreements, we will expand upon investments in growing the EA Sports FC fan base and collaborate to continually deliver authentic experiences on the game. And finally, Nexon and Tencent have assigned a 10-year extension of our long-standing publishing agreement for Dungeon&Fighter in China. The agreement provides continuity of service for millions of Dungeon&Fighter players in China. And the stable future for our mutually beneficial relationship between our 2 companies.

Beyond today's agreements, our partnership with Tencent now includes adaptation and publishing of multiple next-gen titles in China, including THE FINALS, which is now in service, ARC Raiders, which recently obtained by ESPN and is scheduled for multiple beta tests in 2026 plus The First Berserker: Khazan and of course, Dungeon&Fighter Mobile. In summary, Nexon delivered a strong first quarter with sustained engagement in our nuclear blockbuster ARC Raiders and a solid growth in our MapleStory franchise. Under the transformation initiative, we are conducting a deep review of the Dungeon&Fighter franchise, which is expected to result in process optimization, improved performance and multiple new experience aimed at reigniting growth.

The softness in our second quarter results will be countered by multiple catalyst, the launch of MABINOGI MOBILE in Taiwan in Q3 and in Japan in Q4, the publishing of Overwatch on PC in Korea later this year. The National Day update for the Dungeon&Fighter PC in China, ARC Raiders Frozen Trail expansion in October and the release of the Dungeon&Fighter Idle RPG before the end of the year. Our pipeline of new games is strong and renewed partnership provides stability and scale to our long-term results.

With that, I will hand the call over to Uemura-san.

In Q1, revenue was JPY 152.2 billion, and operating revenue was JPY 58.2 billion. Both were within the expected range as we achieved record high quarterly revenue and operating income. Year-over-year revenue and operating income increased by 34% and 40%, respectively, driven by the strong performance of ARC Raiders and sustained growth of the MapleStory franchise led by MapleStory: Idle RPG and MapleStory Worlds. With regard to expenses, HR costs and marketing expenses were below our plan. Q1 income was JPY 57.2 billion, which exceeded our outlook and grew 118% year-over-year. This was driven by a JPY 14.5 billion FX gain on cash deposits in Q1 2026 compared to JPY 4.2 billion FX loss in the year ago quarter.

Shifting to franchise performance. In Q1, the collective revenue of our 3 major franchises were roughly flat year-over-year at JPY 92.9 billion. While Dungeon&Fighter March revenue defined the MapleStory franchise delivered exceptional results and the FC franchise revenue grew modestly year-over-year. Horizontal revenue, which includes new titles, was up 188% year-over-year to JPY 59.3 billion led by ARC Raiders, we sold an additional 4.6 million units during the first quarter. The Dungeon&Fighter franchise revenue decreased by 26% year-over-year due to a decline in Dungeon&Fighter Mobile. PC Dungeon&Fighter in China posted double-digit year-over-year growth driven by the new year update.

In Korea, revenue decreased year-over-year, in addition to a typical comparison with Q1 2025 in which the games revenue nearly doubled versus the prior year, recent updates, including the March new season have not resonated as we had anticipated. The MapleStory franchise revenue grew an outstanding 42% year-over-year, driven by the renewed MapleStory: Idle RPG and growth in MapleStory Worlds. In Korea, MapleStory exceeded our outlook due to the New Year update as well as anniversary updates, which began in March. However, revenue declined 8% year-over-year, owing to a difficult comparison with the same quarter last year. Global MapleStory grew 8% year-over-year and exceeded our expectations, fueled by a major winter date.

Revenue from MapleStory Worlds exceeded our expectations driven by a successful New Year update in Taiwan. Year-over-year, it grew 79%. And MapleStory: Idle RPG exceeded our expectations driven by a successful major update, which led to a strong influx of new players, particularly in Korea and the United States. Refunds related to the coding issue were completed in March, resulting in a reduction of JPY 6.7 billion in revenue and JPY 0.5 billion in operating income in Q1. The FC franchise revenue exceeded our outlook driven by New Year and team of the year updates and increased slightly year-over-year.

Revenue from MABINOGI MOBILE grew compared with a year ago when the game was released in March. A series of major updates during the first quarter helped stabilize the game's user networks. And finally, ARC Raiders sold an additional 4.6 million units, reaching cumulative unit sales of 15.5 million in Q1. More recently, the game surpassed an incredible 16 million units sold.

Moving on to our Q2 outlook. Revenue is expected to be in the range of JPY 107 billion to JPY 119.7 billion, representing a 10% decrease to a 1% increase on an as-reported basis, a 16% to 6% decrease on a constant currency basis year-over-year. Our outlook reflects the decline in the Dungeon&Fighter franchise and MABINOGI MOBILE, which faces a tough comp with last year's successful launch while expecting ongoing growth in the MapleStory franchise and contribution from ARC Raiders. For the PC version of Dungeon&Fighter, we anticipate year-over-year revenue decline. The April new season update in China contributed to an uplift in DAUs. However, monetization initiatives tied to the update did not meet our expectations.

Our plan is to leverage the anniversary event in June to build momentum ahead of the major update aligned with the October National Day holiday and a new rate content. We also expect a year-over-year decline in Korea. We aim to increase engagement and drive performance by introducing new content, including a new rate in the latter half of the year. The Dungeon&Fighter Mobile, we expect year-over-year revenue to decline as the March level cap update did not sustain the rise in user level. We plan to acquire new and lapsed players through the anniversary update in May and accelerate the deployment of co-developed content updates with Tencent from this summer. We expect Q2 revenue from the Dungeon&Fighter franchise to decline year-over-year.

Moving to MapleStory franchise, we expect Q2 revenue to increase approximately 20% year-over-year, driven by the continued contribution from MapleStory: Idle RPG. For PC, MapleStory in Korea, active users have grown year-over-year since the March anniversary update, which we expect to contribute to solid player engagement leading into the summer update in June. However, we expect revenue to decline due to a difficult year-over-year comparison. For global MapleStory, we expect the performance to remain stable, supported by dedicated hyper-localized content. We expect the year-over-year revenue decline for MapleStory Worlds due to the comparison with the exceptionally strong performance of its Taiwan launch in Q2 2025. for MapleStory: Idle RPG, we anticipate the gain will maintain engagement supported by a major event tied to the half anniversary in April.

As per the franchise, our Q2 focus is on large-scale acquisition through the FC Online anniversary update and the work up, which starts in June. Our collaboration with nable collaboration with, the #1 travel portal in Korea puts us in contact with a large spectrum of soccer fans during the event. Our strategy in leveraging the World Cup enthusiasm is to deliver high-quality service and growth monetization for long-term engagement and growth following the event.

For MABINOGI MOBILE, beginning in Q2, the game will be up against difficult comparisons against the post-launch quarters. As such, we anticipate revenue to decrease year-over-year compared to its exceptionally strong launch in Q2 2025, while expecting it to be slightly down quarter-over-quarter. We're scheduled to launch a game in Taiwan in Q3 and in Japan in Q4. ARC Raiders has maintained player engagement with a steady pace of content updates in the first half. However, we expect quarterly unit sales to continue to normalize in line with the floated nature of premium games.

Embark Studios is now working on a large and highly anticipated update in October, which will include free content as well as a premium reward pass. Moving to the operating income outlook. We expect Q2 operating income to be in the range of JPY 16.1 billion to JPY 25.3 billion, representing a 57% to 33% decrease on an as-reported basis or 66% to 43% decrease year-over-year on a constant currency basis. The operating income decline is based on the revenue decrease, primarily in the high-margin China business as well as increased customer acquisition costs related to performance-based marketing for MapleStory: Idle RPG and increased HR costs.

While our full year plan reflects head count and HR costs to remain flat year-over-year in 2026. In the Meantime, we expect net income to be in the range of JPY 16.1 billion to JPY 23.2 billion, which represents a 4% decrease to a 38% increase on an as-reported basis or a 22% decrease to a 16% increase on a constant current currency basis year-over-year compared with Q2 2025, in which we recorded an FX loss of JPY 17.5 billion.

Finally, I would like to offer some perspective on shareholder returns. In addition to the long-term value produced by growing our existing franchises with new experiences and releasing new games with global appeal, like ARC Raiders, we expect that cost management initiatives and renewed focus on commercial viability in our product portfolio will deliver greater profitability and returns for our shareholders. Reflecting our expectation of continued strong cash generation and improved efficiency, in 2026, we plan an annual dividend of JPY 60 per share. Additionally, today, Nexon's Board of Directors approved the execution of the repurchase for JPY 30 billion worth of shares scheduled from May 15 to July 31, 2026.

Now I'll hand the call back to Junghun.

Thank you, Uemura-san. Before we take your questions, I would like to offer a quick summary of how Nexon's recent result fit into our vision for the full year. We are pleased with the first quarter results, including ongoing engagement in ARC Raiders and sustained strength of the MapleStory franchise. We are also acutely aware of challenges to our Dungeon&Fighter franchise, and the implications that will have on our full year results. Addressing the challenges is our top priority. The decisive actions we have taken to development of the mobile game closer to the large player base in China marked a start of multiple process forms designed to improve the quality and frequency of content updates that engage the core players and attract new ones.

Following the close of Q2, our softest quarter this year, the second half of our year will be defined by multiple list, the launch of MABINOGI MOBILE in Taiwan and Japan, Overwatch on Kinshin in Korea, the National Day update and newly for PC Dungeon&Fighter in China. The big ARC Raiders Frozen Trail update with free and premium content and a highly promising release of Dungeon&Fighter Idle RPG. All of this happening in parallel with our exploration initiative aimed at fundamentally involving how we make and service games to improve product quality and profitability.

Well managed to change doesn't happen overnight. Our transformation is moving steadily, and you can expect to see the impact on our results in the months ahead. The new share repurchase plan reflects our competence in this vision.

With that, operator, we are ready to take questions from our guests.

[Operator Instructions] The first question is from Morgan Stanley, Seyon Park.

I have a few questions. I'll go one by one. The first question is relating to the monetization of ARC Raiders. You mentioned a major content update in October, the Frozen Trail update. And it seems like it will be a mix of free content, but also premium passes. So is it fair to expect a meaningful rebound in monetization following this update is my first question. .

Thank you, Seyon. This is Junghun. I would like to answer this question from my end. So first off, I would like to start by saying that this is the biggest update ever since the launch of ARC Raiders and thus, either both in terms of how the users are anticipating about this and any other aspects of the game, we also have high anticipation towards this. So ever since the launch of the game, we have been closely observing how our community reacts and how they play our games very closely and listening to their feedback. So our conclusion was that players do not just want more content piled on the game. But what they really want is for us to go deeper, delivering a much bigger content experience in publishing the core systems of the game. So that is what this October update is really about.

We are rolling out a big new map and new goals for our Endgame players. And when it comes to the lower side of the game, we plan to introduce story content that digs to the origins of Arc. So all of them in October update. Basically, you'll be able to see some pretty significant changes in the second half of this year. When it comes to the monetization side, perhaps the biggest thing that we are focusing on right now with this large update that is offered for free, we expect it to bring lapsed players back and also drive sales as new players come in, thanks to this update.

And at the same time, alongside that, as mentioned, we are planning a paid premium reward pass with exclusive content, which we believe will expand customization, things like character outfits, cosmetic items and new types of cosmetic items that expands customization. Lastly, ARC Raiders has recently announced to its community that it will now be shifting its focus on its live service to launch greater and bigger updates in 6 months or longer period of time cadence. So since we have prepared so many things for this upcoming October update, we would highly appreciate your continued interest in this. And that concludes my answer. Thank you.

My second question, I apologize, I have decided to ask another question on the second question. But the second question is relating to the Dungeon&Fighter franchise in China, which I'm well aware that the company is aiming to recoup. We're seeing, I think, many years where the revenues are lower than what it was, let's say, 4, 5 years ago. And I'm just kind of wondering as time passes, as the players age and as new games and new content become more in fashion, is there the view that the franchise could be aging. And as a result, it becomes increasingly more difficult to maintain revenues. Is that maybe something that as investors, you should be worried about? That would be my second question. .

Thank you, Seyon, for your question. This is Junghun again, I'll be able to answer to that piece as well. So the question that you have just raised, I believe, is the biggest and most foundational and most essential question that any game developers around the world who are servicing long-standing live games must be considering and pondering about.

So I would say that an online game, it's just like a living creature. Basically, every single moment of your game, you will see an inflow of new users and churning of existing users. So what I would like to highlight here is that this different kind of behaviors or patterns that people show as they age when they play and enjoy long-standing and old games is something that can be actually demonstrated through data. And this was what I was able to learn from my experiences as well.

So if we take a look at like a long-standing live services and live franchises that has been there for more than 15 years, just Dungeon&Fighter and MapleStory, obviously, if you look at the daily number of new users coming into the game, it may look not too significant. However, if you kind of your view to the annual basis landscape, the amount of new users in flowing to our games are really truly astronomical. So even at this point, I would like to highlight how the user base is circulating. And I would say that it might not be too much of a price view if you say that with user aging, the game metrics will decline.

So basically for the Dungeon&Fighter franchise as well as the short-term mission that we'll have to address. I think one of the big things here is the fact that in this action RPG, this update directions has been kind of deep rooted right now so that it is kind of easy to expect what to come. Basically, there will be some similar patterns of dungeons and max level increase and everything. Basically, we are thinking that we will need some freshness in terms of how the game is designed. I would say that this is more about the quality or the direction of the content itself, rather than the structural layers of people or user cohorts aging and the time passes by. So we believe there are different layers of challenges here.

So 2 things I would like to highlight in terms of providing this freshness to the game. This has been a topic that Nexon, Neople and our partner, Tencent, have been kind of contemplating quite deeply for many years already. We have been exploring many exciting new ideas in order to provide more freshness. And when it comes to the Mobile Dungeon&Fighter China service, we believe that such consideration and contemplation will come to fruition starting from the second half of this year in our game and also for the PC Dungeon&Fighter.

And also second part that I would like to address is, as we have mentioned at the CMD, basically, we are now demonstrating some segment diversification portfolio diversification as we did with the MapleStory franchise. And we believe that is kind of a fundamental solution to it. So as we have seen with the MapleStory franchise, we believe this expansion strategy is working and start -- and throughout next year as well as years to follow under concrete plan, we are now making necessary preparations to apply this MapleStory playbook to Dungeon & Fighter franchise. Thank you. That would conclude my answer.

The next question will come from Yijia Zhai from UBS Securities. .

I have 3 questions, and I would like to start by starting on the first question. You have mentioned that the D&F franchise in China, going back to the regional guidance from the previous quarter, the expectation was to stay flat. So I would like to get some more details on what exactly is leading to this. What is your analysis on the case? Also, related topic to the Level Cap. Previous understanding is the PC version had some level of effect. However, that does not seem to be the case anymore. So how am I supposed to look at this? What is the understanding we should have on that status? Also on your collaboration with Tencent, you are talking about transferring some of the development capabilities to Tencent for the Chinese version. Does that mean that you're going to be shrinking your development capabilities in Korea? And also if that is the case, is there going to be a change in your cost structure? This will be the first question.

Thank you very much for your question. So I think the question that you have raised has also some correlations our PC Dungeon&Fighter service in China. So I would like to offer a take on -- regarding the Dungeon&Fighter franchise itself for this question.

So looking at our -- the major Q2 updates for the Dungeon&Fighter franchise and how it played out. the indicators surrounding traffic and user engagement did come in at a meaningful level. That said, however, the revenue side numbers were a little bit softer than we had hoped for. And what I would like to emphasize is that Dungeon&Fighter franchise traffic volume is holding up solidly thanks to this update.

To touch upon the revenue side, we expect the PC service to land at roughly last year's level, and the mobile service is likely to have a tougher time compared to last year. So for me to touch briefly upon how we are approaching each platform of PC and mobile. First off, on the PC side, we will push to maximize our user engagement through 2 main big momentums, first of which is the June anniversary event that historically gives us the biggest traffic boost -- traffic spike of the year and also a major update timed to the October National Day holiday. So following that, we will carry those momentums on retention and engagement all the way through a big update in the coming year.

So moving on to the mobile side. As we have laid out capital markets briefing, this still remains the single highest priority what we need to address. So on mobile, the update that we have released in March brought in some meaningful amounts of increase in traffic, but the durability of that traffic didn't quite live up to our expectations.

So basically, an RPG experience is about growing the power of your character and progressing throughout the game. Basically, users are not finding motivation in the entrenched patterns of the character progression system in our game, and that is our analysis. So what they truly want is fresh content updates, the kind of experience you have not had before in Dungeon&Fighter. So that is the essence of the problem that we need to solve.

We recently announced that the development of Dungeon&Fighter Mobile China is moving over Tencent. However, it would be a mistake to read that as us shrinking our Korean development team. So Tencent's team in China will basically be leaning more towards content that is better aligned with Chinese mobile players taste. And our Korean team with, obviously, their deep understanding of the IP will keep the overall creative controls. So this year, the 2 teams will be working side-by-side closely to build a new meta for Dungeon&Fighter mobile and a progression ladder that players actually would desire to climb, including different content like modes, systems and everything.

So we do expect content under such codevelopment setup to start rolling out in earnest from the second half of this year. However, rather than driving excessive monetization push, what we truly focus on is the -- is to grow total traffic across the broader Dungeon&Fighter franchise ecosystem. And through that to make this an IP franchise that stays in the heart of our community for an even longer period of time. In parallel, we are also working on AI-based changes to our workflow so that we can speed up our iterations. So far, our kind of running symbolic motto in doing so has been doubling our content output and getting our production speed to the point where we can ship as many as 2 major rates per year. So we have consistently backed such objectives with investment in people, resources and R&D.

So we are confident that the AI-based workflow changes we're currently doing R&D efforts on will give that production speed another true acceleration, and of course, to be clear, speeding up the content update cadence on a nearly 20-year-old truly pixel-based live game, this is a genuinely challenging task. However, we believe we are making real progress on building an environment where our developers can actually focus on the creative part of the job.

So basically, our aim is to kind of automate away the production grinds that is just simple, repetitive and so that we can ultimately push content supply to many times what it is today. So last thing that I want to add is that for both PC and mobile Dungeon&Fighter services in China, our goal is not about recovery. It is about growth. And we are under that goal putting so much efforts and investment even today. So I believe it was today -- it is today, but we have announced this 10-year contract renewal for Dungeon&Fighter PC service. And we believe this has laid out a stable -- even more stable foundation for us to achieve this growth. That's all from my end.

I do have high expectations for how the AI capabilities are going to have in your development flow. Now I would like to ask a follow-up question on what has been explained. So with the development being transferred to Tencent for China, does it also going to change the take rate. And also in the guidance, you have shared the revenue targets. Now is that in growth? Or is that also considering the take rate? I would like to hear on that.

Regarding the revenue, take rate is not included.

My second question was going to be on the PC version of the D&F franchise, but you have already included in your previous answer to what I wanted to hear. So I would like to skip that and move on to the third question. Now the next question is on HR costs. In the original guidance, previous quarter, you have mentioned that there's going to be a JPY 9 billion worth increase. However, currently, there doesn't seem to be the same level of increase. And you have also mentioned that the D&F is performing quite well, better than expected, in fact, which I imagine would mean that you will be paying some performance-linked bonuses payment for the ARC Raiders. Now so -- but are there any other potential reasons, causes that might bring down the HR costs. If you could clarify that, I'd really appreciate.

Thank you. I would like to first answer and to explain on ARC Raiders. I would like to mention that the performance is not actually overshooting what we have expected. It is in line with our expectations. As we explained previously, there has been a deferred profit -- deferred revenue. And that is why that it may appear to be greater than what we had previously announced. So what could be the contributing cost for bringing down the HR cost. We have been controlling our hiring. This is the one contributing factor. And the second is that for those performance, those titles that are underperforming, there has been a reversal of bonus allowance.

And as for the future outlook for HR costs, as we have announced at the previous CMD for the full year, our expectation is to land at the level similar to the previous year.

The next question is from Taishan from Nikkei.

Two questions. First question is related to your performance. I understand that you forecast Q2 to be the lowest quarter of the fiscal year. But you also mentioned that there will be catalysts that will revamp the situation. So I would like you to share with us what is your full year view? Is it correct to understand that we are heading towards the improvement in the performance? Or are there any other pullback factors such as the ARC Raiders.

Thank you very much your question. We only give the outlook/guidance for the upcoming quarter, so we cannot give you any full year guidance. So I would like to speak in qualitative terms. Regarding the 3 major franchises, let me walk you through each title. Firstly, Dungeon&Fighter, the issues are very clear. So heading towards the second half of the year, we were going to prepare ourselves for National Day event and also prepare for the annual anniversary which will be celebrated in June. Secondly, about MapleStory franchise, we are seeing a very favorable trend, and we would like to continue this momentum.

Thirdly, FC World Cup is a tailwind, and we will like to fully leverage on that and try to increase the engagement from the new to long perspective. About horizontal growth, I believe that ARC Raiders is a very good example. We are preparing ourselves for a major update scheduled in October. And we hope that, that will yet provide another propellent impact given the current momentum. So talking about the new pipeline, there are multiple titles that we are preparing. Firstly, MABINOGI is scheduled to be launched in Taiwan as well as in Japan. And we have Overwatch and also we have Project t. And also, we have Dungeon&Fighter Idle RPG, and all of these are in the pipeline heading toward the second half. And of course, I should not miss Azur Promilia as well. So you can understand from all the names that I have listed right now that there are many catalysts heading towards the second half.

Listening to your answer, I have a follow-up question. It seems that are many positive elements starting from Q3. So is it correct to understand that the dip in Q2 is only a temporary dip.

It is true that China business is in a challenging situation and we need some time in order to rebuild the business in China. So it's very important to decide how we are going to rebuild our business in China. But other than that aspect, as I have mentioned, there are multiple catalysts that we can count on. So it all depends on what kind of countermeasures that we can take and overcoming the challenges that we have in China and continue our growth trajectory.

Let's move on to the second question, which is about FX forecast. I want to know what is your sensitivity to FX fluctuations and what will be the full year impact? And please share with me as much as you can.

We do not actually "forecast" what will be the FX, but if you can kindly turn to Page 10, which elaborates on our FX sensitivity, as you can see for now for Q2, we are assuming JPY 159.33 to a dollar.

Excuse me, I would like to correct myself. If you can turn to Page 19. This is a slide that shows FX sensitivity. And regarding the revenue, assuming that, that is a JPY 1 change in FX between yen to dollar for revenue, there will be the impact of JPY 750 million. And for the operating income, there will be an impact of JPY 140 million.

[Operator Instructions] Ms. Ara, I would like to turn the call over to you for any closing remarks.

Thank you. If there are no further questions, I would like to take this opportunity to thank you for your participation in this online earnings presentation. Please feel free to contact the NEXON Investor Relations at [email protected] should you have any further questions. We appreciate your interest in Nexon.

That leads us to the end of the meeting. Thank you for your participation.

Thank you for joining us today for the NEXON Capital Markets briefing 2026. My name is Maiko Ara, Head of Investor Relations and Corporate Communications at NEXON, and I will be your moderator today. Now I would like to show you the agenda for today. First, Patrick Soderlund, Founder and CEO of Embark Studios, who assumed the role of Chairman of NEXON in February, will share our vision and discuss our initiatives to accelerate growth in global markets and transform our development processes.

Next, Junghun Lee, President and CEO, will review our performance over the past few years, outline our growth strategy and introduce several highly anticipated new titles. After that, Shiro Uemura, Representative Director and CFO, will walk you through our 2026 overview and our shareholder return plans. Finally, Patrick Soderlund will deliver closing remarks.

The presentation is scheduled to last 1 hour. After a short break, we will move to a Q&A session until 6:00 p.m. Following the Q&A, we will host a small reception. We hope you will take this opportunity to connect with our management team in a relaxed setting.

With that, I will turn the program over to NEXON's Executive Chairman, Patrick Soderlund.

Good afternoon. I am Patrick Soderlund. And like many of you in this room, I'm an NEXON shareholder. I've spent my entire career making games and leading creative teams. I began at DICE, the Stockholm studio, which created the Battlefield franchise before being acquired by Electronic Arts. At EA, I oversaw more than 20 studios before leaving to start an all-new creative venture, which you know as Embark Studios. And shortly after NEXON invested in Embark in 2019, I joined the Board of Directors. That's me, 25 years, 2 start-ups and 2 tours of duty leading large creative organizations responsible for successful game franchises.

Last month, I agreed to serve as NEXON's Executive Chairman, a newly created role responsible for strategy and creative direction. The reason I accepted this role is to provide NEXON with a clear strategy. Junghun will continue to run day-to-day operations. My job is to set the vision, instill cost discipline, evolve the creative process and push hard to achieve growth and profitability. That is all possible because NEXON has assets that nobody else does.

MapleStory, Dungeon&Fighter and FC have something that is extraordinarily rare in this industry, decades-long relationships with players. These aren't games that people play once and move on. They're woven into people's lives, real communities, real friendships, memories that go back decades. You cannot buy that, you have to build it. It takes years and years, and most companies never get close. NEXON has done this with multiple franchises.

But before we get into the details, I want to be clear about something. This is not a turnaround story. In 2025, NEXON posted record revenue of JPY 475 billion, operating income of JPY 124 billion. For 8 consecutive years, we have generated more than JPY 100 billion in operating cash flow. The MapleStory franchise just delivered the best performance in its 22-year history, up 43%. And ARC Raiders delivered the most successful launch in company history with more than 14 million units sold in 15 weeks. We ended the year with more than JPY 800 billion in cash and cash equivalents. And for our investors, we doubled the dividend and bought back JPY 97 billion worth of shares.

Now that seems like a solid profile. So what does the market not understand about NEXON? I think the market isn't questioning what NEXON has. It's questioning what we're doing with it. And as a large shareholder, I'd say that's a fair question. As a veteran industry executive, I'll offer some answers. The product portfolio NEXON supports is too wide, too many projects running with a practical business case. Development costs have climbed and new games slipped their schedules, 2 dynamics which compound margin pressure.

After a promising start, Dungeon&Fighter Mobile is moving in the wrong direction. Margins are shrinking and the pop we get from launching new titles doesn't stick. We have to figure out why. And then there's something bigger that has to change. NEXON has been too slow to make tough calls in an industry where the cost of indecision can be enormous.

I also want to address another recent issue, a governance problem we moved very quickly to address. In January, we discovered a coding error in MapleStory idle RPG had been fixed but not reported to management or disclosed to players. The financial cost of our refund offer was significant. The reputational cost even worse. It actually exposed an operational breakdown we addressed with structural reforms, including a new Chief Risk Officer, mandatory dual track reporting and Board level oversight. This should never have happened, and we've taken the steps to assure it won't happen again.

Today, the executive team who leads this company sit in the same room once a week and make all the decisions. We've been through the entire portfolio of both live games and new projects to determine which can meet or outperform our new floor for contributing margins -- contribution margins. Revenue assumptions are being stress tested based on realistic assumptions, not what we hope for. Costs are being scrutinized. Some projects will get more funding, some will be restructured and some will be canceled.

We are also applying extra scrutiny to anything that is indirectly related to making or running games, including corporate G&A, shared services, infrastructure, management layers, support functions, contractors, everything. So in summary, fewer bets, more conviction behind each. Cost management and process improvements will be ongoing, but we're taking immediate action.

One more glaring issue. NEXON has delivered an unfortunate set of surprises recently that damage investor trust, missed guidance, write-offs, operational failure. These reforms and new processes we're adopting is aimed at restoring your trust. And in that spirit, I want to address the 2027 revenue and operating income targets that were set at our capital markets briefing in 2024.

As you may already suspect, those targets will not be met on our original time line. At the time, the logic was based on strong franchise momentum, a growing pipeline of new games and a real belief that scale would improve the economics. I was a part of that conversation, and I understood the case. However, those assumptions did not hold. On the revenue side, Dungeon&Fighter Mobile underperformed structurally rather than cyclically. New title time lines slipped and the revenue we expected for margin recovery didn't come through on schedule.

Costs outpaced revenue as we expected a portfolio -- expanded the portfolio, sorry. HR platform fees, infrastructure, development, overhead, individually each felt justified. Collectively, they compressed our margins even as revenue hit record levels. That's a discipline problem. So the 2027 targets are not attainable on the original schedule. We recognize investors would like to see a restatement. However, today, just 1 month into the reforms I've outlined, we don't have the degree of certainty needed to guide 18 months from now. So I'm not going to ask you to believe in a number that the math doesn't support. What I'm going to tell you is that we have delivered a solid foundation for growth, JPY 800 billion in cash, 8 consecutive years of operating cash flow above JPY 100 billion.

Since 2019, NEXON has retired approximately 150 million shares with the repurchase initiatives that have returned roughly JPY 380 billion to our shareholders. Franchises with 22-year player relationships that you cannot replicate regardless of how much money you throw at it. ARC Raiders finally proving that we can build something that lands with a western audience.

On costs, we are resetting, not trimming, resetting every function being reviewed against one question. Does this directly contribute to making or running great games? If the answer isn't a clear yes, we cut. And any headcount requests that don't tie directly to that work are rejected. And to be clear, this is not about cutting everything to achieve a better margin. Some titles deserve more investment, not less. And we do plan to invest in all new opportunities, deploying capital toward acquisitions that meet one test.

Can this become something that players build their lives around? The revenue growth is coming. The difference going forward is that it stays and it won't be erased by growing costs. Going forward, what we're asking you to track is straightforward. Margins that improve with scale, a product portfolio with every title earning its place and capital returns that reflect what this business actually generates. That's what we're building.

It's probably a hard story to tell in a few slides, but it's a better business to be invested in. Now let me offer you some perspective on a topic you've heard from every company this year, AI. Every company has a plan. Most companies will probably get it wrong. They're committing big investments in tools, but tools won't help because they misread the challenge. AI may be a race, but the winners won't be the first movers. The winners will be the ones who understood the challenge.

Think of game development as auto mechanics. The tools are available to everyone, but not everyone has the knowledge and experience to use them. That's where NEXON is different. We have spent 3 decades building a foundation that can't be bought, a foundation that can't be replicated without a lot of time. NEXON has deep franchise intelligence built on billions of player sessions across some of the world's longest running games. That's not a database. It's context. Context is decades of design decisions, the ones that worked and the ones that didn't.

What retain a MapleStory player at year 5 versus year 15. Context is how the Dungeon&Fighter economy responds to a monetization tweak. That context, tens of billions of data points exist in our company. AI makes it usable at speed and at scale.

Today, Junghun is going to tell you about Monolake. It's not a pilot program. It's a functional initiative that provides access to intelligence across every step of our development processes and live services. This obviously begs the question, how did a new studio like Embark succeed without all that context. At Embark, we started with a blank slate, questioning everything from how do you get from an idea to a green light to what needs to be done by hand versus what can machine do, and will do it more efficiently.

Yes, some of that does involve AI, but it's really about encouraging people to use smarter processes, better tools and to let go of habits that no longer serve them. The initial outcome of that process is 2 games, THE FINALS and then ARC Raiders. 2 games built with significantly fewer people at a fraction of the cost you expect for a AAA game.

Now our success wasn't an accident. It was deliberate. And now we're bringing the same thinking to the rest of NEXON. But let's be realistic. You don't take the playbook from a new studio and stamp it on to an established organization like NEXON, a 50, 60-person team building a new IP and a 300 to 400-person team running a live service and been running for 20 years do not work the same way. The point here isn't uniformity. It's that every leader team and individual in this company has to start asking how they can get more done with better tools, smarter workflows and less time on things that don't move the needle.

This is an initiative that big companies rarely attempt. NEXON developers are meeting Embark colleagues to understand our process. They're taking a step back and look at how they work, not just what they're building, but how they're building. And when they open that door, surprising things can happen. People who have been sitting on an idea for years tend to speak up. Rather than waiting for orders from the top, team starts taking initiatives. We just needed to make it clear that, that's welcome.

Now you don't transform a culture overnight. This will play out over years, but it starts now, and we expect you to see it soon. Before we finish talking about creative output, I want to take a moment to offer some context on what the success of ARC Raiders means to NEXON's business and our future. NEXON generates almost all of its revenue in Asia, specifically Korea and China. That's an incredible base, but at some point, it becomes a ceiling if you don't address it. ARC Raiders is the first real proof that NEXON can build something that lands with a global audience. That's not a small thing. It changes how the market should think about what this company can become. And the game is still early. It's live and the user base is growing. And what's ahead of it, it's probably bigger than what's behind it.

Now some perspective on our approach to M&A. Beyond organic growth, M&A represents an opportunity if approached responsibly. We've all seen it go bad too many times in our industry. I watched it happen up close more times than I want to count. Yes, NEXON is watching for opportunities. But we're being smart about how we do it. We carefully evaluate deal structure, integration scenarios and whether the people who actually run the operation will stay to make it work.

Every deal we evaluate runs through a filter. Will this result in a game or portfolio of games? Can the game build a loyal player community that lasts for years? Will the leadership team stay on? And it has to meet our margin requirements. If it doesn't pass through those filters, we walk away. We are looking, but we're patient and we are picky.

I want to close on an important point and one that has become a particular strength for NEXON, the value of sustaining player communities. Now when you ask people how they relax and have fun, many will say, "I like football, I like baseball. I like basketball." And many people say, "I play video games." But there's a particularly passionate group who say, "I like Real Madrid. I like the Dodgers. I like the Boston Celtics." That affiliation, that community is foundational in the business model of professional sports. NEXON is unique in our industry.

We are one of the few game companies that operates on that sports franchise model. For decades, millions of people have been saying, I play Dungeon&Fighter. I play MapleStory. I play FC. Building, sustaining, growing communities. It's not easy, and it takes investment and time. But communities are what makes Real Madrid, the Dodgers and the Celtics and NEXON so lucrative and so valuable for our investors.

NEXON's best franchises already have that, players who never left, communities that sustain themselves, content and conversation happening way beyond the app. What we haven't done is to build on it with real intent, and that changes. We make the worlds inside our games deeper. We create more ways for people to experience our franchises no matter where they are and how much time they have or what stage of life they're in. We take the community and the content and the conversation happening around our games seriously, not as a side effect, but as a part of the product.

And then we do it again, not with 2 franchises, with 3, 4, 5. That becomes the test for everything, portfolio calls, new investments, M&A. Can this become a lifelong passion for someone? Can we build a world around it that people don't want to leave? If the answer is yes, we go all in. If it's not, we spend our time and money somewhere else.

Now I didn't take this job to tinker around the edges. I took it because I think NEXON can be one of the most valuable game companies on the planet. The franchises are already here. The players are here. The people are here. JPY 800 billion in cash is here. It's a solid foundation built over many years by a team of very visionary leaders. What was missing in recent years was the willingness to move fast and make tough decisions. That's changed now, and we're just getting started.

Thank you, Patrick. Our next speaker, NEXON's CEO, Junghun Lee, is a 23-year company veteran who spent much of that time in the studio, refining how games are made and importantly sustained. Junghun has been a key leader in developing NEXON's live services capabilities, the teams that manage everything from important tactical elements like player matching and cheat detection, game and mechanics and community management. We're extremely fortunate to have such an experienced executive running our operations.

Here is the NEXON CEO, Junghun Lee.

Thank you very much, Ara-san. Good afternoon to our guests here in Tokyo, and welcome to others watching the webcast online. Patrick's candid assessment earlier captures where NEXON stands today. Now this afternoon, I am going to start with a straightforward assessment of our performance since our last CMB in 2024 with some recognition regarding what worked and what did not. Following that, I will review our blueprint for expanding established franchises and among our rich pipeline of new games, provide an update on 6 new games, which will provide growth in many years to come.

So what I would like to emphasize throughout my intro and closing parts of my presentation is that NEXON has a very unique ability to sustain relationships with players. And I truly hope you will keep this in mind throughout my presentation as you listen.

Now let me begin. Now I would like to start with a brief assessment of what did not work. Dungeon&Fighter Mobile launched with terrific momentum in 2024 then lost its way. The retention mechanics were not strong enough to hold players long term around the game. Same issue was there with The First Descendant. We have seen strong launch, but with no staying power. These are design issues that are not fixed with a quick patch. They rather require structural changes to game mechanics. There were also some delays in the development of new projects, and these resulted in shortage of top line growth.

So what did go right? Well, actually, a lot. To start, we again demonstrated the resilience of our core franchises. In 2025, the MapleStory franchise achieved 43% year-over-year growth, the best in its 22-year franchise history. Now this was mainly driven by a solid recovery on the PC in Korea regional expansion of MapleStory Worlds and an all-new experience MapleStory: Idle RPG.

Today, roughly 40% of MapleStory revenue is coming from outside of the core market in Korea, representing regional expansion. In the Dungeon&Fighter franchise, content updates contributed to a recovery on PC, delivering 30% Y-o-Y growth. Now this included double-digit revenue growth in China and more than 100% in Korea. Now that is a record in the game's 20th year in service.

When it comes to the MABINOGI MOBILE that was released in 2025 in Korea, it delivered 4x Y-o-Y growth for this established franchise and demonstrated our ability to nurture growth in existing franchises. ARC Raiders represents a breakthrough in our ability to create global IP. Now this success provides NEXON with a creative and operating model that delivers market expansion at scale. This is a game changer that transforms us into a more diversified, durable and globally competitive company.

Now, let us take a look at MapleStory in more details. It has now become the flagship IP in our strategy for unlocking growth with franchise expansions as well as a blueprint for company-wide IP growth. This blueprint actually began with a very simple question. In the past 22 years, tens of millions of players have touched the MapleStory franchise, but where are they now? Some never left the game, some got busy and their account went dormant. And then we have some users who drifted away, but still have fond memories of the game they grew up with, and then there are millions who heard about the game from their friends, but never played the game before.

In light of this, we have developed a matrix to deliver experiences that speak to different cohorts, energizing the core, bringing back dormant players and attracting new ones. This matrix on the screen includes 5 different categories. For one, core expansion strengthens the PC experience. Classic expansion combines nostalgia with new mechanics like the UGC feature in MapleStory Worlds.

Light expansion introduces a highly accessible casual experience and NEXON actually nailed that with MapleStory: Idle RPG. Frontier expansion experiments with all new concepts like the blockchain mechanics in MapleStory Universe. Definitive expansion offers a deeper, more refined experience for highly committed players.

Another very critical element of the MapleStory success is hyper localization. This is a process that goes far beyond simple translation to adapt content to local taste in big markets and importantly, cultivates a sense of community. Our MapleStory results in 2025 show how this strategy unlocked growth in a franchise that has operated for decades.

Let's now turn to the major services that make up the entire MapleStory franchise. First, I would like to talk about MapleStory PC. At the beginning of 2025, our priority was to restore the core MapleStory PC in Korea, that with content updates, live operations and community management to drive engagement and word-of-mouth trial. The great example of this was last summer's Assemble update. This update was highlighted by a major event in Seoul that attracted an audience of thousands. This update allowed us to build a meaningful tie with our users and confirmed how engaged our users are.

For our UGC platform, MapleStory Worlds, it began with a simple insight that long-time players actually have a favorite era of their own, and they would like to see more of them. MapleStory Worlds gives players the game creation tools and assets like maps, character art and music to build their own personalized experience in this MapleStory.

Now we believe this strategy is actually delivering. MapleStory World is now bringing lapsed players back into our franchise. In 2025, MapleStory Worlds achieved 7 million cumulative global users. In Korea, 81% of users are playing content inspired by earlier MapleStory gameplay. Among them, 91% previously played PC MapleStory and 61% first joined more than 15 years ago.

Now our long-term vision for MapleStory Worlds is to evolve into a living ecosystem built around the MapleStory IP driven not by the company but by the community. Another expansion experience is MapleStory: Idle RPG that launched in Korea last year. As a title that falls into the light expansion category, its key features are soft entry, clear character progression and less friction. Now I think this concept is like short-form videos. So basically, it breaks the core MapleStory experience into shorter and more accessible gameplay loops.

The impact of MapleStory: Idle RPG was both immediate and enduring. This chart on the game's demographic profile captures how it is attracting new audience. More than half of these users are new players with no prior experience of MapleStory PC or mobile, and they are generally younger. MapleStory: Idle RPG continues to demonstrate solid momentum and is proving to be a sustainable revenue contributor to the franchise.

In 2026, the franchise is expected to deliver additional growth. For one, the Korea PC service will sustain its growth. Global PC service is also expected to grow through hyper-localization. Lastly, expansions of MapleStory Worlds and MapleStory: Idle RPG across additional regions and formats are planned.

Let us look at how this MapleStory growth blueprint can be exported to energize another massive NEXON franchise of Dungeon&Fighter. In 2026, we have established 2 priorities for Dungeon&Fighter, improving the performance of Dungeon&Fighter Mobile and applying the MapleStory playbook with new games and experiences to energize core users and acquire new users and thereby expanding the entirety of our franchise.

I'll start with the mobile game. To give a clear statement on the challenge, the sharp decline that followed in the 2024 launch in China is not related to quality issues. It's a design problem, a weak motivational loop that drains out the excitement and causes players to drop out. This is not a quick fix. The very first step to address this is hyper localization. However, simply adding more content will not improve long-term engagement.

What we are doing at the same time is implementing structural refinement to the core combat structure and reward loops. So we are reinforcing this with a strengthened production framework through co-development with our Chinese [ polishing ] partner, Tencent, adding development resources with a deep understanding of local tastes.

On the franchise expansion for Dungeon&Fighter, I would like to begin with the core PC game. We have scheduled a major new season for China in April, and we're preparing fresh in-game experiences like Battle Royale mode. To attract new players, we're simplifying the onboarding and early game experience.

And like MapleStory, we are building a portfolio of franchise expansion. First up, we have Dungeon&Fighter Idle RPG. Like MapleStory: Idle RPG, this offers a big growth opportunity for the franchise with a casual and easily accessible experience. Dungeon&Fighter Idle RPG is scheduled for release this year.

Next is Dungeon&Fighter Classic. This is a reboot of the 2009 game, which is widely considered one of the most exciting eras for Dungeon&Fighter. The Classic restores the original action-based experience in the modern UX and is scheduled to debut in 2027. We also have a multiyear strategy for introducing the Dungeon&Fighter IP outside of our core markets in Asia.

The first game in this series is The First Berserker: Khazan. Released in 2025, it delivered a hardcore action experience tailored to Western audiences. Khazan demonstrated that the IP can travel globally. We are now preparing for its China launch, which will further validate its long-term potential. We also have Dungeon&Fighter Arad. This is a second initiative for expanding the franchise into new markets and platforms.

Now in development for PC, console and mobile, Arad reimagines Dungeon&Fighter experience to attract a younger, more casual global audience. Let's take a look at an early concept video for Arad.

[Presentation]

Next in the series is Project OVERKILL. This is an online action RPG for PC and console, which fully modernizes combat physics, visuals and overall presentation while reinterpreting Dungeon&Fighter's iconic raids, Dungeons and cooperative gameplay. Now early testing confirmed strong interest from the players.

Now let me summarize. Our strategy for unlocking growth in the Dungeon&Fighter franchise spans multiple vectors altogether. On the platform side, we are embracing PC, console and mobile. On genres, we are diversifying from classic size scrolling to hardcore action to open world RPG to Idle genre. On regions beyond Korea and China, we are envisioning growth in global markets.

Lastly, on player segments, we are widening our reach from core veterans to new and casual audiences. Let me move on to our next franchise. We have a similar plan actually for Mabinogi, a 21-year NEXON franchise experienced by more than 100 million people around the world. Actually, this franchise demonstrated its ability to scale with the launch of mobile game in Korea last year. Now watch for mobile -- MABINOGI MOBILE to release in Taiwan and Japan later this year and further ahead, all new experiences like Mabinogi Eternity that modernizes the core PC with a major engine update and Vindictus: Defying Fate, a modern PC and console action experience.

Let's now take a look at Vindictus: Defying Fate with a short trailer. This trailer includes footage from existing Mabinogi Heroes and Vindictus: Defying Fate, which is developed on Unreal Engine, allowing you to see how the overall graphics combat and gameplay experience have evolved from the past to present.

[Presentation]

Next is an update on our FC franchise. As you all know, 2026 is a World Cup year, which offers a solid opportunity to leverage the large and passionate community we've built around this franchise. Today, we are investing to create cross-platform synergies between PC, mobile and the Naver platform to maximize user contact point on top of the World Cup momentum. Naver is Korea's #1 portal and NEXON's partnership includes a new user acquisition initiative designed to link gameplay with other football content in a single unified flow, directing World Cup excitement back to our game.

We will also collaborate with streamers who will broadcast World Cup matches on Naver's CHZZK, a streaming service with roughly 30% of live game viewership in Korea and enable users to access our games directly through the platform.

Next will be some perspective on ARC Raiders. By now, you've seen the data and the fantastic launch and sustained momentum driven by frequent updates of new content. Recognizing the importance of sustained engagement, Embark launched the game with a full content plan, which has served to maintain player enthusiasm and drive further unit sales for the past 5 months. Looking ahead, there are multiple new projects in development at Embark Studios. While it's still too early to offer details, each has the benefit of the ARC Raiders playbook. This may include smaller, more nimble creative teams using new technology to simplify time-consuming, less creative work in order to focus on breakthrough innovation.

ARC Raiders provides us with a road map for success in Western markets on consoles and with alternative pricing models. Beyond established franchises, our pipeline includes new IP, each with global potential. A great example of this is NAKWON: LAST PARADISE, a multiplayer survival game set in a post-apocalyptic city. We recently completed a closed off test with more than 37,000 concurrent players, a significant achievement for an all-new game with no marketing. We believe NAKWON has strong potential to compete in the global market, and we are preparing for 2027 launch.

The NAKWON team in Korea has been meeting with colleagues in Embark. This exciting collaboration will help attract a global audience when the game releases in 2027.

[Presentation]

Our full pipeline is highly promising. And today, we want to highlight 6 new games in development for 2026 and beyond. Each has potential to deliver sustainable contributions to profitability. Dungeon&Fighter Idle RPG, Dungeon&Fighter Classic, OVERKILL, Dungeon&Fighter Arad, Vindictus: Defying Fate and NAKWON.

As a final note on the pipeline, I would like to touch on partnerships that grow our business. In addition to the EA partnership on FC, we manage multiple co-development and co-publishing agreements that expand our business. This has been particularly effective in China where NEXON's long-standing relationship with Tencent has supported Dungeon&Fighter for many years. And more recently, we have signed publishing agreements with Tencent to bring high potential NEXON games like THE FINALS, ARC Raiders and The First Berserker: Khazan to millions of new players in China.

And yesterday, we announced an agreement with Blizzard Entertainment Group to publish their blockbuster Overwatch in Korea later this year. So that is a summary of just some of the near-term titles in our development pipeline. We are excited to share our progress in more detail in the months ahead.

Before I finish, I would like to provide some detail on the AI strategy that Patrick mentioned, specifically our implementation of the Monolake initiative. This represents an end-to-end step change in how we create and support our games. NEXON has used AI tools for some time, and we are quickly moving fast to the tool level to apply context to everything we do. Monolake makes the intelligence available across everything we build and operate. Every developer, every live ops team, every product decision has access to the base of information we've accumulated over decades.

AI without contact is just speed, faster output of a generic outcome and tools that know nothing about design history, player behavior or innovation. Without context, AI is a race to the arithmetic middle where everyone's game look the same. That's not a competitive advantage, but that's noise at scale.

Then how do the lessons of ARC Raiders factor into this? Beyond the breakaway commercial success, ARC Raiders is a Trojan horse, a gift that contains a shift in the mindset about how technology frees developers and live service teams to spend more time thinking and less time typing, more time innovating and less time writing code. This changes how people work. The tools they use, how fast they can move and what they can accomplish. But what goes into our games, the creative content our players actually experience will remain the work of our developers.

Our methodology doesn't replace creative people, but it frees them to create with context. Today, our best people spend more time making creative decisions, decisions guided by context and context based on billions of player decisions, context that precious few companies can match. And we are now nearing the end of my presentation.

So I want to highlight my message once again at this point. Everything I've presented today, franchise expansion, hyper localization, platform diversity, a pipeline of new IP. This all adds up to the same thing. NEXON is building relationships with players that last far beyond the point of sale. People who left years ago are coming back and new players are finding their way in. We help players build and sustain communities.

And also, we help those communities to grow and expand. To enable this, the content that NEXON creates must answer this one question. Can this become a lifelong passion for someone? An IP portfolio anchored by enduring brands and 6 new titles in development. They are all part of pipeline built around this one question. And finally, the division of labor in our executive team is clear. Vision and strategy from Patrick and execution and results from me. And you'll see it in the numbers. Thank you very much.

Thank you, Junghun. Next, our CFO, Shiro Uemura, will walk you through how initiatives outlined by Junghun translate into our financial framework and priorities for 2026 and review shareholder returns.

Good afternoon, everyone. As Patrick and Junghun have outlined, we are entering the next phase of NEXON's evolution. Building on their remarks, I would like to review our recent financial performance and then outline how we are approaching 2026 under the new operating model.

I'll start with a look back at our recent performance. In 2025, we achieved record high full year revenue of JPY 475.1 billion. The growth was driven by renewed momentum in our flagship games, MapleStory and Dungeon&Fighter PC, along with the incredible success of ARC Raiders and meaningful contributions from new games, MABINOGI MOBILE and MapleStory: Idle RPG. However, operating income remained flat due to increased costs, royalty expenses, platform fees, cloud fee, marketing expense, HR costs and the impact of the large revenue deferral out of 2025.

Our growth initiatives have helped to diversify our portfolio in recent years, but operating income and margins haven't kept pace with higher HR and variable costs. As Patrick explained, we are doing a full review of our product portfolio and implementing cost discipline to ensure that each product meets minimum margin contribution levels.

Beyond incremental efficiencies, this exercise is expected to deliver structural profitability with a greater percentage of revenue translating directly into higher margins and profit. These initiatives and a renewed sense of discipline are expected to significantly strengthen our financial profile. While the initiatives will take time to unfold, we're moving fast. And in 2026, we expect year-over-year growth, both in revenue and operating income. We also expect improvement in operating income margin primarily due to the deferral of ARC Raiders' revenue from 2025 into 2026.

With that understanding, I'll walk you through our major franchises, combining a brief look back at performance in 2025 with our directional outlook for 2026. In 2025, MapleStory franchise delivered strong 43% year-over-year growth and achieved record high revenue in its 22nd year, driven by the solid recovery in PC and the successful franchise extensions of MapleStory World and MapleStory: Idle RPG.

Looking ahead to 2026, we expect the momentum to continue with solid double-digit year-over-year growth for the franchise to reach another record-setting full year revenue. Driven by content updates and hyper localization, we expect the PC version to grow modestly on top of the significant growth we achieved last year. We anticipate MapleStory Worlds will remain stable and MapleStory: Idle RPG to significantly contribute to the franchise's year-over-year growth.

Next is the Dungeon&Fighter franchise, which achieved strong growth in 2024 from a mobile launch in China, but a decline in 2025 despite a strong recovery in PC service. In 2026, we expect a mixed performance with a stable trajectory for the PC game and a rebuilding year for mobile, resulting in franchise revenue to slightly decline from 2025. We expect a new period of growth to begin in late 2026 with franchise extensions like Dungeon&Fighter Idle RPG game and continue into 2027 and beyond with Dungeon&Fighter Arad, OVERKILL and Dungeon&Fighter Classic.

The FC franchise tends to follow revenue cycles aligned with the World Cup, such as the tailwind from the 2022 Cup that drove record-setting revenue in 2023, followed by declines in 2024 and 2025. This year, we expect the World Cup to drive single-digit year-over-year revenue growth. prioritizing expansion and enthusiasm in the player base over short-term monetization is expected to help sustain these gains beyond 2026.

Taken together, we expect revenues from our 3 major franchises to deliver single-digit growth collectively in 2026 from the JPY 331.5 billion base in 2025, driven by continued MapleStory momentum and World Cup tailwinds for FC.

Moving to emerging franchises and new games. 2025 revenue grew 25% collectively driven by the launch of MABINOGI MOBILE and the global smash hit ARC Raiders. Looking ahead in 2026, we expect the collective revenue to grow in the strong double digits. We expect the Mabinogi franchise to show revenue decline in 2026 with a stable performance in the PC game and normalization of the mobile game following a strong launch in Korea in 2026. Later in the year, we will introduce the mobile game in Japan and Taiwan.

For ARC Raiders, the premium price model concentrates revenue close to launch. However, driven by content updates, the game has shown great durability in sustained sales. Although the game faces tough comps from the launch in 2025, cumulative unit sales will continue to scale, providing a larger base for in-game sales.

Now let me turn to cost structure, which is central to our transformation. I'll start with fixed costs. With strict oversight and reallocation of resources, we will ensure disciplined hiring and management of HR costs. Our outlook for HR costs in 2026 is roughly flat year-over-year. This implies a decline in HR costs as a percentage of revenue and will contribute to improved profitability.

Also, we expect marketing costs to remain in line with last year. Our approach to managing variable costs begins with a structural change that reflects the globalization of our business. Historically, a significant portion of our revenue came from China and Korea, expanding our business with a greater percentage of products offered globally incurs additional costs for third-party distribution, particularly platform fees.

Similarly, costs related to cloud service are expected to rise, reflecting the global service of our live games and the growing amounts of data using games. These are industry-wide trends, which we will rigorously evaluate with our cost management lens, scale efficiencies and ROI discipline. And finally, royalty expenses are expected to increase in response to the revenue growth in the FC franchise and for third-party development of MapleStory: Idle RPG. Let me be clear, 2026 is the first year of our transformation, representing the first structural step toward margin expansion.

Our transformation priorities in 2026 include, one, restore Dungeon&Fighter Mobile. Two, sustain MapleStory franchise growth. Third, leverage World Cup enthusiasm with our FC community in Korea. Fourth, cost discipline for structural profitability and a stronger financial profile. Fifth, to build a stronger organization with the implementation of a strict ROI-based review into game development.

By doing so, we aim to create a structurally stronger earnings model, one that enables sustainable growth. Next, I'd like to discuss our approach to shareholder returns. Since 2019, NEXON has returned approximately JPY 380 billion to shareholders through share repurchases and retired roughly 150 million shares. Our formal shareholder return policy has been to return to shareholders at least 33% of the previous year's normalized operating income. In practice, we have consistently exceeded that commitment, returning JPY 85.9 billion, 79% of the previous year's operating income in 2023, JPY 70 billion, which is 50% of the previous years in operating income and in 2024 and JPY 132.6 billion, which is 95% of the previous year's operating income in 2025, each of these much higher than our stated policy.

Importantly, this includes both increased dividends and large-scale share buybacks. And in 2025, we doubled our dividend from JPY 20.5 to JPY 45 per share and executed nearly JPY 100 billion in share buybacks. For 2026, we plan an annual per share dividend of JPY 60. Beyond the dividend, we believe in NEXON's current share price does not fully reflect the fundamental value of this business. We're actively evaluating the appropriate scale and timing of additional capital returns, therefore, and we expect to have more to say in the near term.

Also, we maintain our ROE target of at least 10% and aim for 15% or higher over the medium to long term. Through disciplined investment and consistent capital returns, we're committed to improving capital efficiency and enhancing its shareholder value over time.

Let me close with a brief summary of what I presented today. we consider 2026 to be year 1 in a dramatic transformation, a year of a focus and a discipline on our core assets, our creative process and our costs. And for our shareholders, we plan an annual dividend of JPY 60 per share and remain committed to meaningful capital returns that reflect both our cash generation capability and our conviction in the value of our business.

This concludes my presentation. Thank you.

I want to close with some context that goes beyond what we've shown today. The games industry is in the middle of a shift unlike anything we've seen in 25 years. How games are built, how they run, how they connect with players. It's changing faster than most companies can adapt. And history is pretty clear on what happens in moments like this. The breakthroughs come from the companies that see the change early and have built a business that captures the change and delivers something real.

NEXON is in position to do exactly that. We have the resources, JPY 800 billion in cash, 8 consecutive years of operating cash flow above JPY 100 billion. We have 3 decades of context, franchise intelligence, player relationships, design decisions that worked and that didn't work across some of the longest running games in history. That's not a database. That's institutional knowledge that can't be replicated regardless of how much capital is deployed against it.

I can tell you that we have the hunger. This leadership team knows exactly what's at stake, and we're moving with a sense of urgency this company hasn't had in a while. Resources, context and hunger right now at exactly the moment when the industry is shifting, that's a rare and valuable combination. What you've heard today is the beginning of that story, not a cleanup operation, a company that has decided to move with more conviction, more speed and more discipline.

Now I've spent a large part of my career starting things, DICE before Battlefield, Embark before ARC Raiders. I know what it looks like when a team decides to stop defending and start building. That's where NEXON is today, and we're just getting started. Thank you.

Thank you very much, Patrick. We will now take a short break until 5:15 p.m. The Q&A session will begin at 5.20. So please return to your seats by then. Apologies, so the break will be until 5:20. We hope you enjoy the short break. Thank you.

[Break]

We will begin the Q&A session.

[Operator Instructions] We will try to get to everyone's questions, but we need to finish promptly at 6:00 p.m. And finally, please note that we are not providing any updates on NEXON's first quarter performance. So thank you for understanding, we cannot answer any related questions. Let's get started with the first question. So I'd like to ask that the person at the back of the room, please.

I would like to ask question in Korean. So great work, everyone for '25 and '26. And I would like to take a brief look back on 2025. So last year, what was kind of an overarching theme or direction that penetrated everything NEXON did last year. And then I wonder what kind of results you were able to gain. And was there any kind of lesson learned from it? How is that applied to 2026 objectives?

Sure. I think I will be able to answer this question. So some of the lessons learned, takeaways from our 2025 and how it can be applied to '26 and beyond, I believe that was the intention of your question. So first off, even at this point, some of the key focal points remain, which includes sustaining our key franchises and how we can turn those into evergreen franchises.

We have been putting much thoughts into it. We are putting strategies for it, and we are executing them. And for that, we have spent much of our time. Actually, I believe those efforts have been translated into the MapleStory playbook, which is a representative and the best case scenario for our IP franchise expansion initiative rather than a single title sustainability. Going forward, we will focus on our franchises so that those durable and enduring evergreen franchises exist in a multiple manner throughout our portfolio.

So for 2025, through MapleStory franchise, I believe we have learned a lot, validated a lot and executed a lot for this initiative. And that concludes my answer. Thank you very much for your question.

I would like to go to the gentleman at the center.

It's Seyon Park from Morgan Stanley. I have 2 questions. The first question is just on the longer-term guidance, which I think the CEO had presented 2 years ago, where at the time, it seemed quite aggressive in terms of your targets for revenue. And I think the message was that the company would be spending more of the resources to expand IP development capacity and the like.

Is the message today that we should be now basically ignoring that target and that the company is pivoting to be more focused on cost and efficiency and less so on a wider capacity, I think, is the first question. While I have -- I guess just a second question that's more for Patrick. And it's really to AI. You talked about how every company is talking about using AI, but not many companies will get it right. I think, unfortunately, for many investors who are not familiar with games or game development and coding, we have maybe even just a fear that AI will disrupt everything. So it's not just people and talent and creators using AI, but just AI disrupting even the creators is, I think, a bit of an excessive concern that investors may have.

So I kind of wanted to get your thoughts on how we should be thinking about this and whether this is something that is really a threat to the game industry.

I will be able to answer your first question. For any complementary comments, I would invite Patrick and Uemura-san to add their takes on it. So 2 years ago, in 2024 Capital Markets Briefing, it is true that I have laid out some aggressive and ambitious goals. So ever since our establishment, that was our very first Capital Markets Briefing. And now I recall the intro that I gave back then. So I asked investors to focus on the sustainability, the transparent communication and long-term communication, and that is the intention of doing CMB.

Same goes for this year's CMB, bringing candor to where we are standing right now, I believe that is the beginning of transparent communication. Of course, there have been some things that went off from what we have anticipated. Despite the successful launch of some titles like Dungeon&Fighter Mobile and The First Descendant, the profit and revenue did not last. And there were some delays in some new title development. Those factors combined, today, we are transparently saying that we are resetting those targets.

So however, in 2024 and 2025, we have achieved a lot as well, and I'd like to draw your attention to it. MapleStory franchise is continuing its growth. And then we have an all-new IP, ARC Raiders, and this has gained a huge success in Western, which is pretty new for NEXON, to be honest.

I think we can grow further. I think that is a good statement to make. But we haven't achieved the intended amount of growth within the set time line that we laid out. Rather, I would like to highlight that our IP growth initiative has advanced. It has been more detailed out. And based on some of the failures that we have done, we are applying those lessons learned through postmortems so that our new titles can bring more sustainability going forward. So all those cost reviews and those efforts are being done. But instead of setting that as our focal point, please consider this year as a year for reconsideration. And including Patrick and myself and all the executive team, we are confident about our long-term growth.

And I'll try and answer the AI question as best I can. Artificial intelligence, I think, is affecting all of us in some shape or form today, independent of what job you're in or my kids use it every day for school, I guess. I'll try and give you some perspective on the games industry and how I think -- how we think about it in 2 ways.

The first one is the implication of artificial intelligence in how we work. I think it's important to make it very clear that it's not about replacing headcount or people. It's not about automating video game development. I think AI is good at certain things. Yes, it's true that something like coding is changing. A coder today can probably do 3, 4, 5 different things at the same time. And when he goes home at night, there's still coding going on. There's nothing wrong with that. That's an efficiency gain and improvement for us being able to be focusing on the things that I think have a better player-facing kind of point.

I think being able to do the things that matter more to players gives us a creative freedom to build better products. So it's going to come in many shapes and forms depending on which role you have inside the company. If you make art, there are also instances where AI will help make art faster, better. It doesn't remove the need for a great artist or a stunning programmer or a good designer. Those people are still needed. But it changes how we work. So that's number one.

Number two, I think, is going to be maybe even more fundamental. A company like NEXON need to think about what artificial can do to our games. And that's where I think scale matters. It's true that artificial intelligence will make it possible for smaller game teams to build bigger games. I think that's clear. Our edge is the size, the context we spoke about, the amount of data we have and the games, the types of games that we can build that others can't build.

What does a world look like where the story is player evolving, where artificial intelligence helps guide the players into new directions. What does a world look like where player choices determine how economy unfolds or if a war breaks out inside the video game. It starts to become pretty exciting. So I'm not scared of AI. I'm excited about what it can do for us as a company. And to navigate this is what I mean, many people will probably get it wrong. We intend to get it right.

Person sitting in the middle, please.

A question for Patrick. So given the success of Embark Studios, so do you have plan to further increase the capacity of Embark Studios to further increase NEXON's exposure in Western countries? And I noticed that you mentioned you are not going to increase HR cost for 2026. So I believe it's probably not in the short term, but I would like to know your longer-term plan. And you also mentioned that you are going to use Monolake, so I'm wondering if like through the use of those kind of AI tool, you can further increase your capacity without increasing the number of employees you're hiring?

I think that's a thesis that we think holds that, yes, one thing that artificial intelligence and other ways of working can do is to get more out of the capacity we have. I think that's fair. I think that's our assumption. When it comes to Embark growing, there is some addition to have headcount in Embark, but not that many. Even a studio like Embark are now questioning how we work and if we can do things smarter and quicker and what we can do.

There's also 2 new games in development at Embark today. They're very early, and we're not ready to talk about, but there's more coming from Embark.

Do you want to add something, Junghun?

Yes, of course. So we are hearing many questions regarding artificial intelligence, and I believe Patrick has given some great answers regarding our philosophy or our direction. I would like to speak more of some of the practical perspectives into it.

So when it comes to games generating -- using Pixel art, generating massive amount of profit, I think NEXON is unmatched in that. As many games do, many games are now tilted towards 3-dimensional art. And of course, the demand for Pixel art naturally declines. However, when it comes to introducing AI to how it work, we are actually seeing some breakthrough in time spent in producing Pixel arts.

But one thing to be clear is that reduced workload of -- manual workload of Pixel art is not translated to the reduction of workforce. So what we are focusing on right now is to make sure that our quality of Pixel production is heightened so that the way our artists work is changing. So practically speaking, from this year, we are actually producing art assets for Pixel arts using that. And in this new environment, our artists can now focus on more creative tests, and I would like to draw your attention to that fact.

So let's go to the gentleman at the back.

Hello. I would like to ask a question in Korean. My name is [ Du Jon lee ] from Inven. So I would like to hear from Junghun and Patrick. From management's perspective, what do you see as the most critical challenges currently NEXON is facing right now? In particular, I would appreciate it if you could maybe divide them down to external market factors and internal structural factors. And I also would like to hear how you would define short-term issues and mid- to long-term missions.

Of course, I will be able to answer first, and we will be able to hear from Patrick as well regarding challenges, the external market circumstance and internal structural challenges, I believe those have been the key kind of content or ideas behind your question.

So let me first begin with some of the challenges that we are facing. As we did in the past, right now, we believe globalization is a key mission for us. Building IP franchises, discovering them, nurturing them and making sure that they are beloved by all the users around the world is one of our most important long-term missions.

For the external kind of circumstance, I would like to take a higher-level take. So basically, game business is about -- games business is about taking more share of users' time. So from a competition standpoint, our competition may be short-form videos, OTT streaming films even. So basically, I think games should be fun. That is the core essence of what games are. And of course, including myself, the entire company is spending much time making sure that the games that we build are fun.

So when it comes to some challenges that arises from internal structural aspects, I think the IP franchise expansion playbook proven through MapleStory should be applied to other franchises, including Dungeon&Fighter, ARC Raiders and Mabinogi. So I think making sure that, that is transferred to other franchises is the most important short-term mission.

I would agree. I think the -- to me, it's relatively straightforward. NEXON is a company with incredible products. When I saw the number, 43% up year-on-year on MapleStory after 22 years, I can't think of a single company in the world that makes video games that have had something like that happen. That is an extraordinary achievement.

Our goal is to make sure that all our live games are operated at the right type of efficiency and that they're bringing joys to players out in the world. That's number one. We're been very honest with the fact that our new games, we've been better lately. But in the past, we have struggled sometimes to get new games to work in the market. You have to look at why that is and get better at doing that. We've become a lot better, but we need to be even better.

And then thirdly, it's about the expansion strategy that Junghun pointed to. That is if that works, and we think it can on other franchises, that's a growth generator for us. That's going to be substantial.

The woman sitting in the back, please.

I have 2 questions altogether. I am from Morgan. And I have questions to Patrick related to AI. I understand that Embark Studios is using AI, and I want to ask about that.

So based on the AI text, efficiency improvement and also you can maximize on creativity. So those are the 2 points that can be attained by AI. And we tend to focus on the efficiency improvement because that's easier to understand. And I remember the first video I saw related to Embark Studio, and you mentioned that using AI, you can reduce the development time by 1/3, and that was so impressive. And however, it took some time for you to launch a new title. And in terms of ARC Raiders, actually, the actual development fee was more than JPY 10 billion. And I know that you are going through the development of new titles. And I guess the time is right for you to come up with AI-based new titles.

But then listening to creators talk about it, they said that they are using less time for the development. And -- but then they end up actually using the leeway time for other processes that are already in existence. And so it does not really lead to the new creativity. That's what I hear. But then is your final goal, the improvement of creativity or the improvement of efficiency? That's my first question. Do you mind if I move on to the second question?

Yes. Maybe we should tackle one question at a time.

The beauty of what we do is that it's not digital. It's not -- it is, but it isn't. You can't necessarily put a number on creativity. And that's why I love making games. That's why I've been doing this for such a long time. To me, it becomes a question of -- and yes, did ARC Raiders take longer than we wanted to? I agree with that. And we're not going to go into the reasons why. But is it a fair point you make that we should be able to build games quicker? To some extent, I think you're right. But it's going to be about the creative aspect of where games are going is going to be a bigger one.

We can make games that players don't know they need, if that makes sense, but we think they need. We can make games that are very different than what you'll see today. That evolution and innovation in our industry, it's what's going to generate the big growth. Yes, there will be efficiency gains. Yes, there will be other types of aspects to maybe we can make the game slightly quicker. But making games is an inherently creative process. We cannot forget that. That's what I meant about it. You can't put numbers on everything. I know maybe you guys want to, but we can't. We're bound by the fact that it's a creative place we work in and that we have to make games that people love to play for 22 years. That's where I think we'll see the biggest change in output from us.

Next question.

Okay, understood. So the second question, I would like one of you to answer. So you said that the cost strategy has changed. So you're going to increase the scale, but then you don't want the cost to increase in tandem to the scale. So Dungeon&Fighter and ARC Raiders, it seems that when the scale of revenue goes up, then HR cost goes up in tandem. And in terms of Korean game industry, is that the norm? Is that the culture? And is that the way the thing is, so that is the only equation you can go by in order to gather more players.

So I want to know how you're going to separate the scale growth with the cost increase. And maybe that is related to AI. So I guess in the past, you tended to conduct upfront investment that does not directly link to the profit shortly or in the short period of time. So can you talk about that?

So talking about the cost, I mentioned in my presentation that going forward, I believe that we can make ourselves more efficient, as mentioned by Junghun as well as Patrick. When you look at the current resources, we have not fully maximized on what we have now.

A second point, which is related to our pipeline, it is too wide and broad currently. So even though we have already started it, we are going to review what we have in our pipeline. So we are going to reallocate the resources so we can improve our efficiency.

We're not saying that we're going to restructure or conduct layoff, but rather, we are talking about reviewing the asset that we have so that we can operate it more efficiently. By doing so, we can enhance our profit.

I will be able to add my taste on it. Speaking only from the numerical perspective, NEXON has continuously achieved top line growth, but our margin has remained not as -- remains in a smaller scale, but not growing not as much. So when it comes to in the 2026, the overall cost review that we'll be doing, including HR costs, marketing costs, infrastructure and distribution fee. Actually, as we are diversifying our portfolio and we are going more globally, we did see some increase in some of the cost items that we did not see in the past.

So what we are trying to consider is if there is any room in our cost base that we can streamline and bring more efficiency for. And for HR aspect, I would like to clarify 2 things here. Giving out bonuses and incentives to what was done well is directly targeted to the people who have contributed to the projects that have generated profit. We are not giving bonuses or incentives undermining our profit.

So the key goal is to make sure that our creative top talent want to work for NEXON. I think that is the key motivation of making those people think so, and that is what we are trying to keep going forward. But what is aligned internally in terms of our HR cost is this discipline and principle that sharper -- the sharper it is, the stronger it is. So for new titles and new live services that we want to focus on, we will be able to expect more profit and maximize profit going forward. How that will be done -- how that will be executed in details, we'll be able to share more details in our future earnings calls and quarters.

So another question from another person at the center, please.

I would like to ask a question in Korean, from Daiwa Securities. As you have mentioned the financial targets that you have laid out 2 years ago do not seem valid anymore. And the growth in 2026 and those details that Uemura-san has laid out, I would like to confirm once again if that will be kind of a new basis for the company?

And my second question is directed to Patrick. So in order to achieve growth, I wonder what kind of priorities you will hold for allocating the resources that you have. Perhaps it could be by region, perhaps it could be by IP or by genres or perhaps you might want to focus more on inorganic growth. So any takes on those priorities would be appreciated.

So like the CMB 2 years ago, I talked about this in '27 target. And regarding that. So ultimately, for us to become a global #1 entertainment company, we definitely need to hit those targets. But as we speak, we have had some successes and failures in what we try to achieve. And with the current time line, we are seeing that achieving those targets by '27 to be challenging. So we would like to revisit our plans with this '26 being the restarting point so that we can achieve these numbers at the earliest possible timing.

So I know that these numbers are ambitious, but we'd like to bring ourselves to that level at the earliest possible timing as quick as possible. So we're not really thinking that those numbers are possible. It's just that we are not likely to hit them by the end of '27.

Organic growth and where the growth will come from. I think it's obvious that this -- NEXON is an Asia-first company. That's where the most people are. That's where the history sits, and it will remain so. We have quite a few new games in development in Korea. You saw NAKWON today is one of them, that we expect will generate growth for us as a company. Our job is to make sure that the games are as good as they possibly can be. So when they come out, players enjoy them and spend more time in them.

Then the question of M&A, we spoke about that earlier. Of course, if we want to expand regionally, we can do that through organic growth, but that takes time and maybe it's difficult. Acquisitions and M&A is on the agenda. We just, as I said, have to be very disciplined about where to go and what to buy. And there will be -- we don't have anything to say specifically about that today, but we can more talk about our approach to it rather than anything specific at this point.

But as I said, I'm confident in our ability to grow this company. I'm confident in the people that work here and the games we're building. And I think when we get that right, that should accelerate the company quite a lot.

Then a person sitting in the front, please.

I am Marisa of Okasan Shoken. I have 2 questions altogether. The first question is to Patrick. It's about Western studios. I know that you have much experience working for Western studios. But when you think about the Korean development team, what is the difference between them and Western studios? And what is the point that you evaluate? And I know that you are working together in collaboration to develop new titles. And what is happening right now?

I know that globally speaking, you have a very rare development structure. So what is the excitement that you are feeling out in the side of the studio?

A big difference in how a studio like Embark works and how the Korean team works. One of the most exciting things that happened to Embark when we joined the NEXON family was that we got to learn a lot about what it means to run a live service. We had some ideas, but we didn't have the knowledge and the understanding of what it takes to build a long-term franchise.

NEXON has been instrumental in helping Embark understand what it means to run a live service. At the same time, I think Embark's approach to game development, very design-driven, very player fun-focused and a slightly different approach, hopefully can bear some fruit at NEXON. So I think it's not a one-way collaboration. It's a 2-way collaboration that I think is very powerful if done right. sorry, there was something more that you asked me that I forgot.

Well, you mentioned about your strength, which is you have the context, which is being accumulated. And by merging your context and AI, what will happen? So if you can shed some color to what you're talking about, I will appreciate it.

Well, I think context, right? Context is 20-plus years of information that sits that we have, how players behave, what they do at certain points, what happens when we do certain things to games. And that's going to create patterns, patterns that we can act upon. When something happens, we can rely on our context and our AI systems to help us -- this has happened before, here's what you did then and what happened when you did this. So it becomes kind of a pattern recognition system that will help us make better decisions so that we make fewer mistakes and hopefully do things that are more fun for players to enjoy.

That's the whole idea behind the context database or AI layer that we're building.

So let's go to the gentleman in the third row, please.

I'm from Samsung Securities. So I really enjoyed NAKWON's footage earlier in your presentation. I wonder what would be -- what is -- what you're most excited about in terms of the financial performance among the new titles that you have introduced. I think it is tied to resource allocation. So I'm asking this question. And then I don't think you have laid out some launch time line for Arad, Vindictus or other titles. If you could give us some details on that, that would be appreciated.

And then for [ Uchi ] and DX, some of the non-mentioned games, what is the progress on that?

Yes, of course, this is Junghun. I would like to answer that question from my end. So preparing for the CMB, I really have been putting a lot of thoughts into what titles we really want to highlight in this event. But one kind of principle in terms of introducing our new titles is that the titles that we introduced and title that we highlight are those that will be coming up in the near future. So of course, there are abundant number of new titles that we're preparing.

And for certain markets and for certain user cohort and user segments, how we can make better appeal, we are making everyday efforts in trying to figure out answers with Patrick and with the whole team. But basically, that is kind of the principle or criteria of selecting the new titles that we are showing.

For financial potentials, I think they are all good, honestly. So pinpointing any specific title to have kind of greater potential, I think that would be inappropriate. However, when it comes to NAKWON, if we think about this testing that we have done recently, we didn't done too much marketing. But when it comes to key metrics, it has grown significantly versus the last testing that it has done.

And then also, we -- in line with this global launch of NAKWON, we are working -- the Korea team is working closely with Embark team. And if we can see some meaningful synergies from it, it will be translated into significant accomplishments. So recognizing that potential, we are working closely with Embark team, and we are making our best efforts so that it can launch in a good manner.

And we'd like to take one question from the online platform. So [ Fuyama ] from Miyatsimi. So NEXON's IP is to be received by greater audience. I think the media mix is one of the very urgent matter, but we are not seeing any progress in that regard in the last few years. So Dungeon&Fighter and how do you think that you can actually grow these titles to evergreen?

Of course, I think I can answer this, but we may be able to hear further takes from Patrick on ARC Raiders. So the franchise strategy framework that we have introduced in our presentation earlier is a critical point when it comes to laying out the strategies for our games. For many different markets, many different age cohorts, there are a lot of different segments to it. Of course, having a single title satisfying everything would be ideal.

However, we have confirmed through MapleStory case that diversifying through many different experiences to satisfy them is actually working, and it is a working strategy. So for our IP and our franchises, laying out different experiences will help us making them evergreen.

And then one more question by MST Financial Service, David Gibson, question. So Monolake, when are you going to be able to implement that in NEXON?

Regarding this direction, actually, this was being planned from a long time ago already when it comes to the actual execution. Actually, I will say that Monolake is kind of an overarching concept. It's an overarching project. If you look into some further details inside it, there are thousands and tens of thousands of different changes and different tools that we are executing. And we have seen some meaningful progress on some initiatives among them that can be delivering some meaningful fruitions in 2026. So it is already in progress, and we are already seeing fruitions.

And I guess we're coming close to the ending time. So 2 more questions from the venue, and then we would like to close. So let's go from that gentleman in front.

This is Fukuda from Tokai Tokyo Intelligence Lab. So globalization was cited as your -- one of the challenges. So how are you going to expand in the Western world -- is the other one question. So in the presentation document, ARC Raiders has been the foundation, be what I found in the presentation. So how are you going to leverage ARC Raiders? Where would be the down road that you're going to be expanding? So how are you going to leverage ARC Raiders in the Western countries?

I think it's fair to say that ARC Raiders is a success in the West already. We are obviously continuing to invest in ARC Raiders, both the game itself and the franchise. So we hope to expand that. Then we haven't had -- we hope that we can also take some of the existing NEXON games in development and through collaborations with Embark to some extent, help them reach a wider audience outside of Asia than we've had able to in the past.

I think it goes the same way. ARC Raiders will -- is a part of our contract with Tencent. So we will get ARC Raiders out in China, hopefully, together with Tencent. And that's also a globalization expansion for that brand. So plus obviously, new games that we're developing both at NEXON and at Embark.

I would like to add one comment on to it. So not only for the Western region, NEXON up until now didn't have too much presence in Japan market. In order to expand our presence in Japan, we are preparing some titles that can bring strong appeal in Japan. So this kind of hyper localized Japanese version for Mabinogi Mobile is planning its launch in -- within this year. And then we have another title, Blue Archive, which is very strong in Japan. We have a new game that is being developed by the same creative team called Project RX.

We are making diligent effort into it. And then just like Blue Archive, we do believe this title can perform and can deliver in Japan. So in order to expand our share in Japan, we are making efforts with very detailed plans in place.

It is time. So we would like this to be the last question, the person sitting in the back.

I would like to ask my question to Patrick. So in Korea, there has been some news articles regarding potential hiring freeze after your assignment appointment. So do you have any plans for workforce reduction?

Good question. A layoff is not in our plan. We put enormous value on the people that work at NEXON that come to work every day to make amazing games and amazing experiences for people.

It is time. So we would like to close this session. Once again, thank you very much for joining us today for the NEXON Capital Markets Briefing in 2026. We will now host a reception on the fifth floor, one level below. We invite investors and analysts to take this opportunity to connect with our senior management in a relaxing setting.

There's no like opening remarks. So please reach out at your convenience, and we kindly invite you to proceed to the reception on the fifth floor and enjoy the refreshments and the cushions and the gift packages are for you to take home. Once again, thank you very much for all for joining us.

Good day, everyone, and welcome to Nexon's 2025 Fourth Quarter Online Earnings Presentation. Today's presentation is being recorded. [Operator Instructions] We will now hand over to Takanori Kawai, Team Leader of Investor Relations. Please go ahead, sir.

[interpreted] Hello, everyone, and welcome to Nexon's online earnings presentation. Thank you for joining us today.

With me are Junghun Lee, President and CEO of Nexon; Shiro Uemura, CFO.

Today's presentation will contain forward-looking statements, including statements about our results of operations and financial condition, such as revenues attributable to our key titles, growth prospects, including with respect to the online games industry, our ability to compete effectively, adapt to new technologies and address new technical challenges, our use of intellectual property and other statements that are not historical facts.

These statements represent our predictions, projections and expectations about future events, which we believe are reasonable or based on reasonable assumptions. However, numerous risks and uncertainties could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Information on some of these risks and uncertainties can be found in our earnings-related IR documents. We assume no obligation to update or alter any forward-looking statements.

Please note, net income refers to net income attributable to owners of the parent as stated in Nexon's consolidated financial results. Furthermore, this presentation is intended to provide investors and analysts with financial and operational information about Nexon, not to solicit or recommend any sale or purchase of stock or other securities of Nexon.

A recording of this presentation will be available on our Investor Relations website following this presentation. Unauthorized recording of this presentation is not permitted. Now I'll pass to Junghun.

[interpreted] Thank you, Kawai-san, and good afternoon, everyone. We appreciate you joining our call. Earlier today we have posted the letter, slide deck and press release detailing our Q4 and full year 2025 performance plus our Q1 2026 outlook.

We are pleased to report that 2025 marked significant progress in Nexon's [indiscernible] growth initiative. We renewed momentum in our core games, MapleStory and Dungeon & Fighter PC and delivered extremely popular new titles, including MABINOGI Mobile, MapleStory: Idle RPG and of course ARC Raiders. As a result, we achieved record high full year revenue of JPY 475.1 billion representing year-over-year growth of 6%.

Our first quarter was highlighted by the new launches of 2 significant titles MapleStory: Idle RPG and ARC Raiders, harnessing distinct and increasingly popular game genre, MapleStory: Idle RPG reimagines the core MapleStory experience in a highly accessible Idle RPG. Our game released on November 6 and quickly reached #1 in Taiwan and Singapore, charted well in North America and held a #1 position in Korea for more than 10 weeks. However, we later discovered a coding error which misapplied the stated value for a specific paid item. This had been corrected without notifying players or management. Recognizing the error, on January 25, the management acted quickly and processed the funds and disciplinary action and to reaffirm trust to the players made on [indiscernible] funds upon request or in-game purchase January 28.

The refund application is open from February 5 to February 15, which will be processed through app stores with completion expected by March 15, 2026. Uemura-san will walk you through the details of how this affects our results and outlook. Nexon has the case of history in sustaining and growing games for many years. Building and maintaining the trust of our player communities is a fundamental principle of how we operate. When we discovered our flaw, we quickly and company admit our mistakes, reforms and making things right for our players. This refund offer is a big commitment, but one we believe is critical to maintaining the trust in our games and our company.

Now turning to ARC Raiders, the largest and most successful new product launch in Nexon's history, sustaining engagement 15 weeks after the October 30 launch. ARC Raiders has outperformed our most optimistic projections. The game reached unit sales of 10 million in December and as of today an incredible 14 million. The true measure of our hit game is sustainability. And for ARC Raiders, 2 metrics demonstrate robust and sustained engagement.

First, in January, we reached a peak user milestone of 960,000 players two months after the launch. And second, we have increased and sustained approximately 6 million weekly active users to date, which means that millions of players around the world have integrated ARC Raiders into their weekly routine. Driven by a steady cadence of content updates from Embark Studios and supported by Nexon live operations. ARC Raiders defines the traditional trajectory of most games and driven by the ongoing full year content plan currently in development at Embark.

We strongly believe that ARC Raiders will continue to engage the core and attract new players into the foreseeable future, making the game a sustainable pillar in Nexon's portfolio of global game franchises. The enduring success of ARC Raiders stands as a clear proof point in our strategy for global expansion and the foundation for future new IP development. It's a success that demonstrates we have creative teams, the operating model and live operations capability to breakthrough and sustain games in the world's largest market.

In summary, 2025 was a year that Nexon demonstrated the constant rigor and resilience of core franchises. Our breakthrough in Western markets and our ability to add all new IP to appeal to global players and execute across regions, platforms and business models. On this foundation, we have entered a new year as a more diversified durable and globally competitive company.

With that, I will turn the call over to Uemura-san.

[interpreted] Q4 revenue increased 55% year-over-year to JPY 123.6 billion, and operating income turned positive to JPY 7.2 billion. These results include the deferral of JPY 27.7 billion of ARC Raiders revenue and operating income out of Q4. ARC Raiders is a game offered through upfront payment, providing multiplayer experience played on online servers and no single player mode. To better reflect these characteristics and in consultation with our auditors, we deferred a portion of the revenue from a certain sales channel.

More than half of the JPY 27.7 billion deferral out of Q4 will be recognized in Q1 of 2026. Our Q4 results also include the estimated impact of the refund for MapleStory: Idle RPG, which reduced revenue and operating income by approximately JPY 9 billion and JPY 4 billion, respectively.

Moving to expenses. Strong sales from our titles, including ARC Raiders resulted in a level of performance-based bonuses that was not incorporated in our guidance. Platform costs also exceeded our plan due to the strong performances of our new titles. Additionally, we recorded a onetime impairment loss of JPY 3 billion, primarily related to the service termination of our published game.

Net income was JPY 10.9 billion, down 66% year-over-year, primarily due to an FX gain of JPY 9.6 billion on cash deposits in Q4 2025 compared to an FX gain of JPY 31.7 billion in the year ago quarter.

Turning to the franchise revenue or rather review, we delivered solid progress on our IP growth strategy in Q4, including 13% aggregate year-over-year vertical growth in 3 major franchises plus horizontal growth from new titles like Mabinogi Mobile and ARC Raiders. PC Dungeon&Fighter achieved double-digit growth in both China and Korea, driven by sustained player engagement. On the other hand, revenue from the mobile version fell year-over-year, resulting in a 16% decline in franchise revenue.

The MapleStory franchise delivered exceptional results with revenues increasing 54% year-over-year, primarily driven by the highly significant launch of MapleStory: Idle RPG. In Korea MapleStory, the winter update drove 14% year-over-year revenue growth and achieved a record-breaking 45% share in PC cafes. Global MapleStory increased 24% year-over-year. In the West, the game achieved its highest ever quarterly revenue, fueled by a major winter update.

Revenues for MapleStory World approximately doubled year-over-year, driven by regional expansion. MapleStory: Idle RPG was well received for its approachable casual gameplay experience enjoy of leveling up, appealing to a broad audience. The game achieved the #1 spot in app stores in multiple markets. Despite recognizing an approximate JPY 9 billion revenue reversal in Q4, the game made a solid contribution in Q4.

FC Franchise revenue grew year-over-year, driven by holiday updates and sales promotions. Mabinogi Mobile made a significant revenue contribution to the franchise from the well-received Sanrio collaboration update released in late December. Following its launch on October 30, our creators sold over 10 million units by the end of December, significantly exceeding our expectations. The game was maintained or has maintained strong player engagement across multiple platforms with high levels of WAUs, peak concurrent users and retention.

Next, I will move on to the full year 2025 financial results. In 2025, we renewed momentum in our flagship titles, including Dungeon&Fighter and MapleStory as well as delivering the phenomenal success of new titles, including MABINOGI Mobile and ARC Raiders. As a result, we achieved record high full year revenue of JPY 475.1 billion, representing year-over-year growth of 6%, demonstrating the power and success of our IP growth initiative. Revenues from our 3 major franchises were flat year-over-year to JPY 331.5 billion. And horizontally, we grew 25% year-over-year to JPY 143.6 billion.

Operating income was JPY 124 billion, flat year-over-year. On the cost side, HR costs increased year-over-year due to proactive talent, investments for long-term growth. Additionally, marketing expenses and variable costs such as platform fees and royalties increased primarily due to launches of large-scale titles, including ARC Raiders, Mabinogi Mobile and MapleStory: Idle RPG.

Net income was JPY 92.1 billion, down 32% year-over-year. We recognized an FX loss of JPY 2.7 billion in 2025, while recording a gain of JPY 30.9 billion in 2024.

Moving on to our first quarter 2026 outlook. We anticipate continued strong momentum across our portfolio and expect record-breaking quarterly revenue driven by solid contributions from new games as well as year-over-year growth in PC, Dungeon & Fighter and MapleStory franchise.

Q1 group revenues are expected to be in the range of JPY 150.5 billion to JPY 164 billion, representing a 32% to 44% increase on an as-reported basis or 23% to 34% increase on a constant currency basis year-over-year. For the PC version of Dungeon & Fighter, we anticipate year-over-year revenue growth driven by a good start for the New Year update, which includes package item sales. For Dungeon&Fighter Mobile in China, we expect revenue to be roughly flat quarter-over-quarter while anticipating a year-over-year decline.

Overall, we expect Q1 Dungeon&Fighter franchise revenues to decline year-over-year. In 2026, we will prioritize getting Dungeon&Fighter Mobile back on track for growth and we will continue our collaboration with Tencent to release more hyper-localized content for players in China.

Moving to MapleStory. We expect Q1 franchise revenues to increase approximately 30% year-over-year, driven by a contribution from MapleStory: Idle RPG. For both MapleStory in Korea and Global MapleStory, we expect player engagement to remain solid, supported by the winter update that began last Q4. We also expect increased year-over-year revenues for MapleStory World.

For MapleStory: Idle RPG, in 2 weeks since announcing the coding issue, our player base has remained strong and active, highlighting the demand and interest that our players have for this new game. We expect ongoing contributions while incorporating a revenue reversal of approximately JPY 5 billion and an operating income reduction of approximately JPY 3 billion into our Q1 outlook. And throughout 2026, we plan to maintain the franchise positive momentum with further hyper localization and content updates.

FC franchise revenues are expected to be roughly flat year-over-year in Q1. We aim to build greater enthusiasm leading up to the World Cup, which begins in June. MABINOGI Mobile is expected to contribute to the franchise performance with new battle content, new year promotions and anniversary updates. ARC Raiders has already sold 14 million copies to date, and we expect to sustain strong player engagement and sales momentum in Q1, backed by monthly content drops and live events.

Moving to the operating income outlook. We expect Q1 operating income to be in the range of JPY 51.2 billion to JPY 61.1 billion, representing 23% to 47% increase on an as-reported basis or a 7% to 30% increase year-over-year on a constant currency basis. On the cost side, we expect an increase in platform and royalty fees in relation to sales from ARC Raiders, MapleStory: Idle RPG and MABINOGI Mobile.

HR costs are also expected to increase due to performance-based bonuses linked to ARC Raiders and higher headcount. Additionally, marketing costs are expected to increase due to promotions of new titles. We expect net income to be in the range of JPY 40.9 billion to JPY 48.4 billion, which represents 56% to 84% increase on an as-reported basis or 31% to 58% increase on a constant currency basis year-over-year.

Finally, I would like to offer some perspective on our shareholder returns. We continue to generate significant cash flows, which further strengthens our balance sheet. In 2025, we generated more than JPY 100 billion in operating cash for the eighth consecutive year with a cash balance exceeding JPY 800 billion at year-end. Nexon's strong balance sheet has allowed us to materially increase the dividend while also buying back our shares.

In 2025, we doubled the dividend payout from JPY 22.5 to JPY 45 per share and executed share buyback of JPY 96.9 billion. Additionally, on January 28, we completed the remaining JPY 25 billion buyback based on the JPY 100 billion share buyback policy outlined in February 2025. Today, the Board of Directors resolved to cancel all shares previously repurchased under this share repurchase program.

We remain committed to proactive shareholder returns as outlined by our commitment to return more than 33% of the previous year's operating income to shareholders. For 2026, we plan a semiannual dividend of JPY 30 per share or an annual total of JPY 60 per share, and we continue to actively consider share buybacks.

Looking ahead, we are committed to maintaining a robust balance sheet to support growth investment and capital allocation while enhancing capital efficiency.

With that, I will turn the call back to Junghun.

[interpreted] Thank you, Uemura-san. To close our prepared remarks today, I would like to offer some context on our recent success and what it means for the longer-term future of our company on the financial metrics and many success of the most recent quarter. We recognize that for the past 2 years Nexon has been progressing through a complex and highly promising transformation to become one of a small number of two global game companies. At the center of this transformation is the IP growth initiative outlined at our capital market briefing in 2024, calling for growth in established franchises and highly disciplined approach to launching new games and nurturing emerging IP.

We have strengthened our established blockbusters and launched several new games, not all but most of which achieved a degree of success in establishing foundations for additional growth with content updates and regional expansion. Most notably, the enduring success of ARC Raiders stands as a clear trigger point in our strategy and one that shows where we plan to take our company in the months and years ahead.

Nexon has developed a creative and operating model that can deliver linear and resilience in core franchises while introducing new games and experience that attracts players across all regions, platforms and business models at scale. Today, we are more diversified, durable and globally company. To hear more about our progress and plans for the future, investors are invited to Nexon's Capital Market briefing in Tokyo on March 31. The event will feature presentations from our executives and creative readers with detail on our strategy for achieving our midterm financial targets, including a preview of our content pipeline.

With that, operator, we are ready to take questions from our guests.

[Operator Instructions] The first question is from Seyon Park-san of Morgan Stanley.

Can you hear me?

[interpreted] Yes, we can.

I have 3 questions, and I'll ask them one by one. The first question is relating to the MapleStory: Idle RPG refunds. I think we have 3 days remaining for players to apply for the refund if they request so. The provisioning that you have booked already for the fourth quarter and the upcoming guidance, should we assume that it is conservative? And maybe can you provide some color given that you have 3 days remaining on the refund, whether you are expecting a meaningful exit of players or whether we can assume that most of the players will continue to play this game?

[interpreted] Thank you very much for your question. Regarding the refund, I would like to refrain from giving you the details, but please be aware of the fact that we have already given you tangible figures regarding what kind of impact we are foreseeing in Q4 as well as Q1. For Q4, we have mentioned the revenue impact of JPY 9 billion and the operating income impact of JPY 4 billion, whereas in Q1, we have factored in the impact of JPY 5 billion for the revenue and JPY 3 billion for the operating income.

Regarding the estimate figures that I have mentioned to you now, I believe that this is within the rational range that we have estimated. Therefore, I can say that the numbers are neither conservative nor aggressive. And I believe that these numbers are quite appropriate.

Regarding the issues related to Idle RPG, it was quite regrettable. But after the discovery, we believe that as a company, we had immediately taken appropriate measures. In terms of the user sentiment, it is neutral and some are slightly positive. So we believe that this is a very popular title, and we will put our effort in rebuilding the game.

[interpreted] Hello, this is Junghun Lee here. I would like to add a little bit on to that from my end as well. First of all, I would like to offer my deepest apologies to all of our shareholders and our friends of MapleStory: Idle RPG for the concern that we have caused as a CEO of the company.

So I would like to reiterate that building confidence and confidence from our user base is definitely the basic and fundamental principle of how we operate, and that has been on the background of our making this decision to offer full refunds to our users. So for this, I definitely feel both apologetic and grateful, but the player engagement has shown resilience following this incident.

So I believe we will be able to infer this from the current rank chart from the Google Play Store and Apple App Store. But with this -- after this incident, the revenue has stabilized at this moment and DAU is also remaining largely consistent from what we have seen before, showing only a modest decline.

So when it comes to the user sentiment lately, we are seeing some increasing interest once again on the actual content of the game, including game updates and events or game updates on the MapleStory: Idle RPG and we are now seeing active posting of experiences, playing on their newly created accounts. And lastly, I would like to mention that for MapleStory: Idle RPG, most of the users are newly acquired users. When it comes to -- for some, I would believe you might be concerned about cannibalization, but the kind of overlap between MapleStory: Idle RPG and the core game is only a single-digit percentage, which is pretty small. So we believe this is a very important point when it comes to vertical expansion of MapleStory franchise.

Going forward, we will do our best to fully and diligently wrap up the remaining refund procedure, and we will make our best efforts so that we can earn back the hearts of our fans and players with great content updates that we provide going forward.

If I can switch the subject to matters that are much more constructive. ARC Raiders has been a phenomenal success so far. It seems like even coming into 2026, you've sold now 4 million copies in 1.5 months. Can you maybe provide us a little bit more color as to whether this sales through is still continuing and whether we should expect ongoing sales of additional copies in the coming months?

[interpreted] This is Junghun Lee again. Let me answer your question. So when it comes to the success of our creators, it is definitely highly encouraging and meaningful for us since as a games company, there's nothing more important than equipping ourselves with multiple and solid IP pillars. And as you may understand already, ARC Raiders is a completely new IP, which means that it did not have any precedented level of brand awareness in the market. Nonetheless, it was able to sell over 10 million units in less than 2 months.

And even when we look at the latest number right before this earnings call, the numbers are pretty solid right now. The first metrics I would like to note is the peak concurrent user milestone of 960,000 players, which recorded -- which we recorded in January 2 months after the launch. And when it comes to weekly active user count or WAU, it is sustaining approximately 6 million right now. So we believe this really implies how millions of players around the world are now integrating ARC Raiders as part of their weekly routine. And even though we are unable to disclose specific numbers here, the retention is also very strong.

In addition to that, the recently announced monthly content road map of ARC Raiders was well received and welcomed by our users. When it comes to the objective of the Embark team for this year 2026, it is to provide monthly content updates and live operations so that they can continue to drive unit sales by keeping the game engaging for a long period of time. So we believe we will be able to deliver a steady cadence of updates that are both engaging and steady.

And lastly to comment a little bit about ARC Raiders' IP as a higher-level concept. We still believe it is still in its early stage as an IP, and we are now exploring many possibilities to expand the reach of ARC Raiders. So what we can disclose at this moment in regards to the IP expansion would be the launch of hyperlocalized version of ARC Raiders for Chinese players under the cooperation and partnership with Tencent.

I would like to say that the management team is putting our best effort in a macro level perspective so that in the longer term, this ARC Raiders' IP as well as Embark development team can become an enduring pillar of Nexon's entire portfolio. That concludes my answer. Thank you.

Just my last question is also a separate subject on the shareholder return policy. I noticed that there is no buyback policy program, which was announced this time around. I know you have a shareholder return policy of 1/3 of the previous year net income. But can we get maybe just a little bit of an update as to how you're thinking about share buybacks for this year and going forward?

[interpreted] Regarding the shareholders' return policy, we buy back 1/3 or rather more than 33% of the previous year's operating income. And even in the past, we did actually provide a return of more than 33%. Going forward, we will pursue two ends, one being investment in growth, and secondly, we would try to provide the shareholders' return and be flexible at the same time.

[interpreted] This is Zhai of UBS Securities. I have three questions. My first question is related to ARC Raiders. You have mentioned the deferral of the revenue. And in the previous briefing session, you have commented that this is upfront charging, so there is no deferral. However, this time around, you have explained that there will be revenue deferral and the amount seems to be quite large. So I would like to reconfirm the content of the revenue that will be deferred. Is it in-game charge? Or is it upfront payment? So what is the content of the revenue? That is my first point.

And also, please explain the rules of these deferrals to be recognized. You mentioned that more than half of the deferral will be recognized in the following quarter. But what about the quarters beyond that? And also, I would like to ask about the bonus linked to performance. On Q-on-Q basis, the personnel cost has been rising and in the following quarter as well, do you expect another increase in the personnel cost?

Also, when you look at the percentage on the revenue, it seems to have gone down. So could you elaborate in more details on these points? That was my first question.

[interpreted] With regards to the ARC Raiders, as you have pointed out, when we explained our guidance, at that time, we have consulted with the audit firm of the subsidiary. And at that point, it was deemed that the deferral was necessary. However, through the process of the consolidation, we consulted with the audit firm of our company and as a result, we received the view from the audit firm that the deferral will be necessary.

So let me correct at the audit firm of the subsidiary, they mentioned that the deferral was not necessary. Let me correct.

In such situation, after the repeated deliberation, given the characteristics of this game, we agreed to conduct a deferral as part of the adjustment of consolidation. To be specific, the revenue from the sales through Steam, we will defer for a certain period. Steam's sales make up roughly 60%. The 60% of the cash-based revenue in the fourth quarter will be deferred to FY '26. And as a result, the majority of the JPY 27.7 billion will be recognized in the first quarter of 2026.

Next is on your question on incentive bonus. As we do with other new titles regarding the profit generated from the game after we recoup, the bonus will be provided with a certain ratio. As you know, ARC Raiders made a major hit in the fourth quarter and the level of revenue was higher than our expectation. And related to that, incentive bonus was paid and that is booked in the fourth quarter.

ARC Raiders performance continued to be strong and part of the profit generated from the game will be distributed -- a portion of it will be distributed to the development team. Zhai-san, did I answer all your questions or do you have any other points?

[interpreted] I have a follow-up question. The 60% of the sales in the first quarter from January to March period, will that be further deferred to the following quarter?

[interpreted] You are right, the mechanism is all the same.

[interpreted] I understood. My second question is on Dungeon & Fighter Mobile in China. Usually, in January to March period, there is a new year, and there is usually a seasonality in the first quarter for PC. But for the Dungeon & Fighter Mobile, the guidance shows that the revenue will be more or less flat. So is seasonality of mobile different from PC?

And also, you are developing content jointly and the benefit of that, will that decline, as the impact of the previous co-developed content starting to decline? I'm referring to the co-development with Tencent. And could you also talk about the frequency of the release of content co-developed with Tencent for PC and mobile as well? What is your plan? And also the contract update timing will come up soon for the PC. And for the co-developed content, will that be an opportunity to negotiate the take rate?

[interpreted] Sure, I'll be able to answer to the question on the Dungeon & Fighter Mobile, which is now maintaining quite a stable DAU level up to the most recent period. But as time has passed by since the previous level kept increase, we have seen some decline in the monetization metrics. So from this, we believe it is not -- it is less about the seasonality, but it is more about the quality and the cadence of the content that we provide for our users that really affects how the user metrics move as a whole. So in regards to that, as we have mentioned in previous quarter calls, we are now taking a long-term approach so that we can improve the fundamentals of Dungeon & Fighter Mobile in the longer term.

So I would say that we haven't yet fully leveraging the increase in the productivity of the -- increase in the production volume of the content from these co-development initiatives just yet. What we are assessing internally is that through the full execution and the exploitation of this co-dev process with Tencent within the 2026 year, we believe we will be able to produce content to engage more and acquire more.

And I believe a piece to your question was whether we have any priorities or orders when it comes to applying this co-development procedure to PC or Mobile. For us, we are now focusing more on the mobile side to fully adopt this -- to actively adopt this co-development procedure. To explain a little bit about the background of this for the PC service, we believe it is now maintaining pretty stable rebound year-over-year basis. And we believe the content update speed as well as the quality is pretty decent right now. For the 2026, one of our key focal points of the entire Nexon Group is to achieve a recovery in Dungeon & Fighter Mobile. In that sense, we are putting or concentrating more of our resource on adopting or fully applying the co-development effort in mobile version.

And lastly, in order to talk a little bit about the PC contract renewal, even though we are unable to disclose too much details regarding the contracts, I would like to take a note how for the past 20 years, this partnership has been remaining very strong and solid. And both companies, Nexon and Tencent are very satisfied about it. So without [indiscernible] provide the Dungeon & Fighter service to our Chinese players stably. That concludes my answer. Thank you.

[interpreted] My third question is related to the overall MapleStory franchise. This time on RPG, there was an issue or event that happened, but the company reacted speedily. And I understand that there was no major impact to the sales. But when we look at the past, there were similar -- there was a similar incident related to MapleStory. This -- at that time also on the probability. And in the same franchise under the probability related area, the happening occurred twice. So will that impact the brand image going forward? And I also would like to ask about your corporate governance. Do you have a measure to prevent the recurrence of such happening?

[interpreted] I would first like to start off my response in acknowledging that going through the similar probability issue twice is definitely something we should feel very apologetic about. However, when it comes to how we have responded to this incident apart from this mistake or this wrongdoing that we have done, this choice or this decision to offer full refund or providing compensation to our users and giving that kind of option to our users was based off of the fact that we are putting -- we are putting the confidence of all users for all our Nexon games before anything when it comes to operating our company.

So if you could take a long-term perspective and see how our decision that was made out of our earnest and sincerity really plays out as well as how we -- all the measures that we take in order to prevent any recurrence from taking place, we believe we will be -- such hard effort will be acknowledged by our users as well in terms of the brand reputation or image.

Lastly, to add a little bit in terms of the governance, ever since our last probability-related incident, we have executed and implemented an automated infrastructure to validate probabilities of the product and all the outcomes of such validation is being disclosed to our users in real time. However, when it comes to this incident on MapleStory: Idle RPG, as you know, it was a product that was born from a partnership and co-worked with outside entity, and there has been some small hole in terms of executing such infrastructure to this title.

At the same time, it also had to do with misjudgments of an individual who did not disclose or notify to users regarding the correction of the error even though it had to be. Right now, immediately after this incident, we have established a task force to address this so that no similar issue happens throughout the entire company. So we do not believe that even this truly reflects any fundamental issue with our company culture, which emphasizes compliance and user trust and putting them before anything. However, the incident did highlight some areas where operational control and accountability frameworks has to be improved, and that is why we are taking such immediate actions.

[interpreted] The next question is from Munakata-san from Goldman Sachs Japan.

[interpreted] My name is Munakata of Goldman Sachs. I have 2 questions. So let's go one at a time. The first question is on ARC Raiders. I understand that weekly users being 6 million and I think this is a very strong figure. And I want to know going forward, what kind of user profile do you have on your mind regarding the new inflow? So you can talk by region or maybe you can tell me the attributes of the new inflow users.

[interpreted] Four months have passed since the launch of ARC Raiders, and it is trending very well. And Embark Studios have the plan to provide new monthly content update, and this energizes the players. As long as the users enjoy the in-game play, I believe that we will be able to secure robust new unit sales. So we believe that short-term wise, we want to provide further unit sales, which will lead to more user base, and we will be in the position to promote the next stage of this title.

[interpreted] This is Junghun Lee. I would like to add a little bit on to that by first stating that for ARC Raiders, the share from -- the user share from Western and European region is a little bit higher. Already, the team has announced regarding its annual content road map. And through that kind of very densely built update plan, we believe we are putting some plans in place so that the existing users can be better engaged with our games.

[Audio Gap] acknowledge from recent data is that the percentage or the share from console is gradually growing, and we believe this trend is definitely encouraging. Now adding on to this kind of solid traffic level that we are seeing in the Western and European region, we believe the Asian region also has more upside for us. So when it comes to such more upsides remaining in the Asian region, right now, we are seeing the most share -- the highest share of traffic from Japan. And even aside from Japan, for Korea and China as well [Audio Gap] place for 2026 so that we can earn more hearts of users through various service, marketing and events plans for operators.

[interpreted] Thank you very much for your very thorough explanation. I understood it very well. Let's move on to the second question, which pertains to FY 2026. And I want to know the overall direction in which you will be proceeding in the next 12 months. I know that as a company policy, you only provide quarterly guidance, having said that, I would like you to talk about which of the three segments that I'm going to mention now will be the driver to further increase the revenue in FY 2026. Three categories being, one the major titles that are Dungeon & Fighter, FC and MapleStory. And the second category is the new titles that you have launched last year, and the third category being the titles in the pipeline that you plan to launch in 2026.

[interpreted] First, I would like to start off by saying that we are entering this year of 2026 with a very solid and prosperous growth momentum from both existing franchises and new experiences for this first quarter. Our first quarter outlook represents quite a solid momentum here with both operating income and revenue growing roughly 30% to 40%. And regarding the growth driver -- potential growth driver for 2026, I believe there could be a couple of items, including 5 of them.

First off, for the MapleStory franchise, we believe we do expect around 30% year-over-year growth for the first quarter. And in 2026, from both Korea service and global service of MapleStory PC, we believe we will be able to maintain some solid momentum. Next is our Dungeon & Fighter PC service, which is expected to grow in the first quarter, and that would be based on the sustained momentum from 2025. When it comes to 2026, the growth of Dungeon & Fighter Mobile -- the annual growth of Dungeon & Fighter Mobile, recovering that remains one of our top priorities. And we do hope to see some tangible outcomes from such efforts.

And next, for the FC Franchise, we believe the World Cup season, which begins in June, will provide and offer some momentum for the franchise. Fourth, we have MABINOGI Mobile expanding to Japan, and this definitely is a title that has seen quite a great performance in Korea. And lastly, number five, ARC Raiders, of course, we do expect the title to sustain the strong momentum throughout the year based on monthly content drops as well as strong live events.

And before wrapping up, I would also like to comment a little bit on the pipeline. So 2 years ago in our Capital Markets briefing, we have disclosed and introduced several new games in the pipeline that will be launched by 2027. We are hard at work to introduce the games to our users. And right now, the development is smooth sailing overall. And we believe for 2026, we will be able to introduce a new -- a few new titles based on a strong partnership. For more details, we would be disclosing more at the Capital Markets briefing, which will be taking place in March.

[interpreted] I look forward to participating in the CMB scheduled in March.

[Operator Instructions] This concludes the question-and-answer session. Mr. Kawai, I'd like to hand over to you for any additional or closing remarks.

[interpreted] Thank you. If there are no further questions, I would like to take this opportunity to thank you for your participation in this call. Please feel free to contact the Nexon Investor Relations at [email protected] should you have any further questions. We appreciate your interest in Nexon and look forward to meeting with you whether it is here in Tokyo or in your corner of the world.

That brings us to the end of the meeting. Thank you for your participation.

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

Hello, everyone, and welcome to NEXON's online earnings presentation. Thank you for joining us today. With me are Junghun Lee, President and CEO of NEXON; Shiro Uemura, CFO; and Patrick Söderlund, CEO of Embark Studios and NEXON's Board of Directors.

Today's presentation will contain forward-looking statements, including statements about our results of operations and financial condition such as revenues attributable to our key titles, growth prospects including with respect to the online game industry, our ability to compete effectively, adapt to new technologies and address new technical challenges, our use of intellectual property and other statements that are not historical facts. These statements represent our predictions, projections and expectations about future events, which we believe are reasonable or based on reasonable assumptions. However, numerous risks and uncertainties could cause actual results to differ materially from those expressed or implied in the forward-looking statements.

Information on some of these risks and uncertainties can be found in our earnings-related IR documents. We assume no obligation to update or alter any forward-looking statements. Please note net income refers to net income attributable to owners of the parent as stated in NEXON's consolidated financial results. Furthermore, this presentation is intended to provide investors and analysts with financial and operational information about NEXON, not to solicit or recommend any sale or purchase of stock or other securities of NEXON. A recording of this presentation will be available on our Investor Relations website following this presentation. Unauthorized recording of this presentation is not permitted.

Now I'll pass to Junghun.

Thank you, Kawai-san, and good afternoon, everyone. Thank you for joining our call. Earlier today, NEXON posted slide deck and press release detailing our performance and Q4 outlook. On today's call, I will begin with some context, including some insights in the highly successful launch of upgraders on [indiscernible]. Then Uemura-san will follow with detailed financial highlights.

In Q3, we delivered revenue of JPY 118.7 billion and operating income of JPY 37.5 billion, both within our expected rates. Our Q3 results and Q4 outlook demonstrates how the IP growth initiative we introduced a year ago is driving sustainable long-term growth. Our MapleStory franchise [indiscernible] elements of the strategy delivers growth, a strong recovery in Korea driven by new content, hyperoptimization in global MapleStory and regional expansion on our UGC platform, MapleStory Worlds. Also last week -- MapleStory Idle RPG is expected to further expand our player base with our industrial casual experience.

In total, MapleStory is starting to grow annual revenue by 48% in 2025, resulting in the highest annual revenue in the 22-year history of the franchise. And there is a clear sign of global progress. Approximately 40% of total franchise revenue is coming from outside of MapleStory's primary market in Korea. [indiscernible] progress we've made [indiscernible] content and globalizing the peer of our MapleStory franchise can be applied to much of NEXON's IP portfolio. This includes the Mabinogi franchise, which is now in development for mobile release in Japan next year. And for [indiscernible], which released the first of 3 new games designed to introduce the franchise to large new audience in the West.

Another strategic fronts in our global expansion plan is partnership. In 2024, our publishing agreement with Tencent delivered strong returns with the [indiscernible] in China. And November 18, Tencent will host -- on our version of the fines, especially for the Chinese sales.

Looking further ahead, we are also working with Tencent on Chinese adaptations of operators and the [indiscernible]. Among our plans for expanding NEXON's global footprint, a big driver is ARC Raiders, which launched globally on October 30 and established itself as #1 on steam list of top-selling games with upgraders concluding in the second week in the market, we feel confident in saying it's off to a particularly strong start.

With us today is the founder and leader of Embark Studios and a member of our Board of Directors, Patrick Söderlund. We've asked Patrick to provide some color on the launch and the strategy to sustain purchase and engagement in ARC Raiders.

Thank you, Junghun. The response to ARC Raiders has received from players worldwide is particularly gratifying for the small team at Embark that created the game. As gamers ourselves, we believed we had created something meaningful, but the immediate and overwhelmingly positive response from players is truly humbling.

We have watched engagement numbers climb higher and higher towards 700,000 peak concurrent players this weekend, exceeding our initial targets. The game received widespread acclaim from both players and critics earning a very positive rating on steam, and ranking among the highest rated titles of the year on various sites. ARC Raiders is a labor of love that came with a few twists and turns. More than once we decided the game was good, but not good enough to match our vision. So we stopped and started over, decisions that took guts by the creative leadership and patients by NEXON.

The result is a game that is highly differentiated from anything else in the market. The tech tests we ran in May and the service plan we hosted in October sent a message to players that ARC Raiders is not the same shooter you've been playing a year after year.

Today, more than 4 million players agreed and bought the game and a special start for a newcomer in the market packed with established players. Looking ahead, we are committed to sustaining the excitement with promotions and content updates that expand the player experience and grow the game through 2025 and into the new year.

Later this month, we will introduce a fifth map, followed by updates that include new ARC machines that require adaptation and tactical planning, new weapons and gadgets and new quests. All of it supported by world-class live operations for matching, balancing, sheet detection and what we call quality of life features that constantly strive to improve the experience.

In summary, we are deeply humbled and inspired by the passion global players have shown for our game and deeply committed to sustaining that passion.

Thank you, Patrick, and congratulations to you and your team on delivering on outstanding game. ARC Raiders as sold over 4 million units to date across all platforms and promises to engage the core and attract new players with our contacts plan that extends through 2026. We believe that with Embark coming months to live operations, operators can grow to become an enduring contributor to [indiscernible] global franchises.

With that, I will turn the call over to Uemura-san for a detailed review of our Q3 results and Q4 outlook.

Thank you, Junghun. Q3 revenue and operating income both came within the expected range at JPY 118.7 billion and JPY 37.5 billion, respectively, driven by solid performances from our 3 largest franchises. Year-over-year revenue and operating income declined by 12% and 27%, respectively, due to last year's launches of Dungeon&Fighter and Fighter Mobile in China and the First Descendant.

Net income exceeded our outlook at JPY 38.2 billion. Year-over-year, it was up 41% primarily due to a JPY 9.2 billion FX gain in Q3 compared to a JPY 19.6 billion FX loss in the year ago quarter.

Turning to the franchise review. The collective revenue from our 3 major franchises declined 11% year-over-year due to a revenue decrease in Dungeon&Fighter Mobile. The PC Dungeon&Fighter achieved 72% year-over-year revenue growth driven by positive player reception to a series of content updates. On the other hand, total franchise revenue declined by 45% year-over-year due to the mobile launch in 2024.

In Korea, Dungeon&Fighter delivered 145% year-over-year revenue growth. In China, Q2 revenue exceeded our expectations and marked double-digit growth year-over-year, driven by the successful Summer and National Day update. As for KPIs, MAUs be used in ARPU were all up year-over-year.

For Dungeon&Fighter Mobile revenue came at the high end of our outlook, multiple updates, including [indiscernible] release plus new Dungeons and rate content drove quarter-over-quarter revenue growth.

The first codeveloped content with Tencent was released in late September, which have maintained key matrix including retention rate. The MapleStory franchise sustained its momentum from the previous quarter with 61% year-over-year revenue growth in Q3. In Korea, MAUs, PUs and ARPU were all up year-over-year, reflecting strong momentum from the summer updates. As a result, Korea MapleStory story increased it's revenue approximately 3x year-over-year.

Conversely, Global MapleStory declined year-over-year. MapleStory Worlds delivered a year-over-year growth of over 8x. FC Online revenue increased year-over-year in Q3, exceeding our expectations, driven by the successful team of the season update. Mabinogi Mobile, again made a strong contribution this quarter, while Q3 revenue was somewhat below expectations.

Moving on to our fourth quarter outlook. We anticipate double-digit growth year-over-year in MapleStory NHG franchises as well as PC Dungeon Fighter. Also, we expect to benefit from contributions from Mabinogi Mobile and new titles launching in Q4, including arcades, MapleStory IDRPG and the China service of the finals. Consequently, Q4 revenue is expected to be in the range of JPY 115.8 billion to JPY 129.3 billion representing a 45% to 62% increase on an as-reported basis or 43% to 39% increase on a constant currency basis year-over-year.

We expect the Dungeon&Fighter franchise revenue to decline roughly 10% year-over-year. For PC Dungeon&Fighter, we anticipate continued year-over-year growth in both Korea and China. For Dungeon&Fighter Mobile, we expect revenue to be roughly flat sequentially driven by multiple updates despite the typical weak seasonality. The next release of codevelocontent with Tencent is scheduled for next year.

Moving to MapleStory, we expect the franchise to grow approximately 40% year-over-year, driven by a strong performance in Korea. Our revenue increased from MapleStory Worlds and a contribution from a new title Maple Story Idle RPG. We expect the PC version of MapleStory in Korea to support its strong player engagement with the release of the winter update.

For Global MapleStory, we expect a slight year-over-year revenue decline. We also expect revenue per MapleStory Worlds to grow year-over-year in Q4. In addition, we will benefit from the contribution from MapleStory Idel RPG, which launched on November 6. For FC franchise, we anticipate year-over-year growth to continue in Q4 despite the absence of major professional [indiscernible] events in 2025, we expect the franchise to finish the year with revenue roughly flat compared to the strong performance in 2024. Overall, we expect Q4 revenues from the 3 largest franchises to increase by approximately 15% year-over-year.

For Mabinogi Mobile in Q4, in which we anticipate a sequential moderation in revenue, we also expect to sustain players with exciting collaborations and new content updates. Since its launch on October 30, our creators has already sold 4 million copies. We plan to sustain player engagement and drive additional purchases through a high cadence of events immune content drops. The finals is set to start the open beta in China on November 18 and will modestly contribute to our Q4 performance.

Moving on to the operating income outlook. We expect Q4 operating income to be in the range of JPY 21.7 billion to JPY 31.9 billion. Year-over-year, we anticipate increased variable costs associated with contributions from new titles launching in Q4, including ARC Raiders and Mabinogi Mobile. Also, we expect increased marketing expenses, primarily associated with promotions for new titles launching in Q4, such as ARC Raiders and MapleStory Idle RPG. In addition, we expect increased cloud service costs and fees to creators in MapleStory Worlds.

On the other hand, we expect another gain of approximately JPY 5 billion associated with the liquidation of our subsidiary funds.

Despite the year-over-year operating income increase, we anticipate net income to be in the range of JPY 22.2 billion to JPY 30.6 billion, representing a 31% to 4% decrease on an as-reported basis or a 38% to 14% decrease on a constant currency basis year-over-year. This is due to the comparison against the JPY 21.7 billion FX gain on cash deposits in Q4 2024.

Finally, I will provide an update on our shareholder return initiative. NEXON has been steadily executing our IP growth initiatives to enhance shareholder value over the medium to long term. With significant and stable cash flows and a robust balance sheet already in place, we are well positioned to continue driving substantial growth while enhancing shareholder returns.

To that end, NEXON's Board of Directors today approved a doubling of the dividend up from the initially planned JPY 15 to JPY 30 per share, reflecting our firm confidence in continued stable growth and cash flow generation from our core franchises and new titles in development.

Accordingly, our FY '25 annual dividend forecast will be JPY 45 per share. And the FY '26 annual dividend forecast will be JPY 60. Additionally, under the year JPY 100 billion share buyback policy outlined in February, we completed a JPY 25 billion buyback on October 24. And in total, we have completed a JPY 75 billion buyback to date.

Also today, our Board approved the execution of the repurchase for the remaining JPY 25 billion worth of shares scheduled from November 12 to January 26, 2026. We will continue our fundamental policy of returning more than 33% of the previous year's operating income to shareholders while promoting proactive shareholder returns through both stable dividend payments and flexible share repurchases. At the same time, we will maintain a robust balance sheet that supports growth investments and strategic capital allocation while remaining committed to enhancing capital efficiency.

With that, I will turn the call back to Junghun.

Thank you, Uemura-san. As we near the close of another exciting year, expense management can measures our progress in 2025 with a 100% of comparison. NEXON is delivering on the cars online in our 2024 IP growth strategy. We accommodated our game plan for generating [indiscernible] in our large established franchises with new content and globalization. And we are creating sustainable horizontal growth with the launch of new games like ARC Raiders, which has set a record as the largest and most successful global launch in NEXON history. At the same time, we are actively pursuing strategic partnerships and investments that will accelerate our growth in high potential markets for long-term value equation backed by the strength of our business on robust balance sheet and strong cash generation, we have doubled our dividend in conjunction with execution of JPY 25 billion share buyback to provide greater value for our shareholders.

This concludes our summary. Operator, we are ready to take questions.

[Operator Instructions] The first question is from Mr. Seyon Park from Morgan Stanley.

So I have 2 questions. The first is relating to ARC Raiders. Congratulations to Embark and the team for a very strong start. I know having gone through the cycles. It's been a long process, but it's great to see that the game has come out in such a great quality. Can I ask, just given the current trends, whether you have an estimate of roughly how many units you expect to sell by maybe the end of the year? And also, what that revenue mix is between the actual sale of the game. And then if there are any micro transactions within the title? And is it fair to assume that as time passes, that revenue mix would be more towards in-game item sales going forward? That's my first question.

My second question is relating to Dungeon&Fighter Mobile and the hyper localization that Tencent and NEXON is doing together. Can you maybe provide a little bit more detail about what that's been able to accomplish. And as we have more title or more updates that come out in the future, can we maybe expect a recovery for the DNS mobile revenues in China going into 2026?

[Interpreted] Thank you very much, Seyon, for your question. I believe you had 2 pieces of questions, second of which will be answered from my end on Dungeon&Fighter Mobile in China. For the first one on ARC Raiders, Patrick will be able to provide his view directly.

[Interpreted] And so right now, Junghun mentioned that regarding the response to ARC Raiders related question, Patrick will be responding to that. But since the questions pertain to [indiscernible] point, our CFO, Uemura, would like to respond to those questions.

[Interpreted] First of all, thank you very much for your warm comments regarding ARC Raiders, and we are very happy to see a very robust start of this game. As to your question about what is our forecast for the sales for Q4, we believe that it will be somewhere around 5 million units, and that maybe it might be 5.5 million units altogether.

So far, we have sold 4 million units even given the very short period of time since its launch. And we are encountering Christmas season and the competitive environment will be severe. So we started very strong, and we believe that we might moderate at one point in time, but we plan to sell the number of units that I have told you already.

About your question regarding the revenue mix, it is basically a package gain. And so most of the revenue is from the sales of the package and not DLC. But going forward, there will be more DLC drops and there will be some changes in the revenue mix. But all in all, I think it will follow the trajectory of conventional package games.

I can add to that. This is Patrick. There are, obviously, today like more said, predominantly packaged goods sales. We have an in-game store where we allow for micro transactions, cosmetics and other aspects that players are enjoying. We will, of course, increase the availability of content in the store as we go along. And like we've said publicly, we aim to support this game for a long time and to have frequent content drops, both free and paid going forward.

All right. So I'll be able to provide my answers to the question on Dungeon&Fighter Mobile. As mentioned in our previous earnings calls as well as I have done recently, we are right now making a long-term effort to bring in recovery to Dungeon&Fighter Mobile and improve the game. So this is just like how in PC, Dungeon&Fighter in China, we are addressing and resolving the problems that we had in '24 and '25.

So in regards to our co-development efforts with Tencent, of course, we are expecting and hopefully, we are expecting increase in traffic and revenue. So adding on to the content that will be produced in Korea with this development effort with Tencent, we will be able to provide more locally tailored content as well as more timely events in a more ample manner. So with that, I believe we will be able to expect some traffic in revenue increase.

So our first codeveloped content with Tencent was released in [indiscernible] on September 24. And from the player retention perspective, it was received very well. So as I believe many of you will be already expecting for both PC and mobile Dungeon&Fighter, we are now finalizing our New Year's plan for next year as well as the development road map for the year of 2026.

So for Dungeon&Fighter Mobile's 2026 plan, we do have plans to add not only the Korea developed content -- the codeveloped content with Tencent in quite an ample manner. So for 2026, we are confident that we will be able to see some stronger performance there. That concludes my answer. Thank you.

Next, we will take a question from Yijia Zhai of UBS Securities.

[Interpreted] I have 3 questions. My first question is related to ARC Raiders. You commented that there will be in-game charges. And I would like to confirm about that. You also commented that the trend of the sale of this game will be quite similar to regular or ordinary console based game. So I would like to confirm that you mean that the in-game charge will not contribute to the next fiscal year's performance as that is my first point that I would like to confirm. And also, any deferral related to the in-game charge and also any performance-based bonus in the fourth quarter?

The comment I just made is on the sales revenue mix currently, current revenue is mostly made up of the packaged sale. And also Patrick added his commenting that we will be focusing on adding in-game content in the future. So that will be the focus going forward. So towards next fiscal year, we will be focusing on DLCs.

And your question on deferral, whether we defer the booking of the sale of such item will very depending on the item, so there will be a variety of items sold in game. And partly, there would be deferrals, but that amount will not be large, relatively small.

Can you also comment on the bonus related to the performance?

My apology for missing that question. With regards to the performance-linked bonus, that will be calculated with the compensation structure that the company has. And so our policy -- company's policy is to provide bonus for the performance generated. So basically, that is how we handle our human capital, and that is something that we are supposed to do. So it's possible that in the future, we will be paying performance-based bonus.

My second question is related to Dungeon&Fighter Mobile. In China, by the end of September, already a jointly developed contents have been released and partially, that is reflected in a KPI such as MAU. So do you expect this momentum to continue in the future? And what is the level you are targeting -- at what point did you achieve a certain level and then you plan to bring it back to that level? Or shall we assume that the status quo will be maintained, and then it will bottom out?

Obviously, our goal is to increase the numbers. So as mentioned earlier briefly, our top priority right now is how we can bring efficiency and how we can execute this entire development process in a more smooth manner with this content supply procedure with Tencent's codevelopment initiative in place. That is something that I've been looking into thoroughly for the past half of the year -- earlier half of the year. And after the update in September, we believe it has been kind of settled down in enough pace and efficiency.

So speaking from our decades of experience in providing live service for our players, I don't think it is truly a healthy thing to basically see a temporary large boost in terms of traffic and revenue with a single large-scale update that wouldn't be healthy in terms of the long-term health of the game. So as mentioned, briefly earlier for our development road map for 2026. We are taking this long-term approach so that the game can be sustained in the longer term, and we plan to improve and address problems in a gradual and step-by-step manner.

So I think our franchises of Dungeon&Fighter and MapleStory have already proven such results for the past 20 years. And I would like to ask for your continued interest and support for Dungeon&Fighter Mobile going forward in 2026 as well. So that -- and with that, we will be able to provide and do our best to deliver results.

The third question is on the MapleStory Idle RPG. We understand that the initial strength or momentum has been very strong. And I think this is a good example for your horizontal deployment of IPs. So if possible, can you share the regional breakdown of the global release, what -- how did it fare in each region? And also the breakdown between new players and existing players and also whether we need to be concerned about cannibalization with the existing titles. So this has been ranked #1 and I also would like to know how sustainable this position is?

So MapleStory Idle RPG was launched on November 6 on selected countries globally, excluding some countries around the world. It's still less than a week since lunch, so it is pretty early. So I would like to ask for your understanding for my answer to this question.

So this game has a clear distinction in terms of its genre when compared to other games within the franchise or the existing games within the franchise. So we haven't seen any cannibalization happening and we do not foresee to see any going forward either.

To share some details here for Korea, Taiwan and North American regions, the performances are very strong. So the revenue numbers as well as the early retentions are quite strong. So basically, we chose this genre, and this was quite a strategic decision for us. But we thought that genre would help us generate a new group of MapleStory fan base within the franchise. So idle games, typically, they do not boast too much of a long-term sustainability when compared to other genres. However, we will put long-term efforts so that the game can be -- game remains sustainable and our users can circulate within the franchise of MapleStory at large. That concludes my answer. Thank you.

The next question is from Robin Zhu from Sanford C. Bernstein Limited.

Congrats on ARC Raiders success. I guess first question, just curious on -- you said there will be a cadence of updates from here. Curious how much developer resources that you're putting towards the operations of the game versus, say, the original development team? And should we expect gameplay updates to add more game modes in addition to just going have more weapons and more missions and more of the same effectively.

And second question, Embark has been pretty transparent about the use of generative AI in the development of the game. Curious if you could give some highlights on where you think AI has been most impactful in development to date or in the live ops that you anticipate? And further how management or the company plans to address some of the online controllers that's appeared as a result of the AI use?

I'll start, Patrick here from Embark. In regards to what -- how we make sure that the engagement stays strong. I think there's a couple of things that we look at. The first one is how the game is retaining players. And we have been quite surprised at how well the game is retaining players. Our retention numbers are, I would say, very strong in the first couple of weeks. I think that's evident by an increasing CCU population. The fact that we had our peak so far CCU on Sunday, yes, 10 days after launch tells us that players are obviously have purchased the game, but they're also playing the game a lot, and they're staying inside the game. So those are all good signs.

What I would then say is in order for us to ensure that people stay engaged, you pointed out that not only do we plan on updating with content, meaning weapons, new arc enemies, maps for that matter, but also quests, like you said, larger changes to the game are obviously conceptualized, but not yet communicated. And I think it's going to be a discussion with the community, what people are doing, what do we see them doing, but we won't be afraid to add to the game in a way that make people stay and play the game.

And when it comes to our development team sites, the -- we will continue with the same team that built the game to support the game. We won't shrink the team. We may probably add to the team rather than shrinking it in order to ensure more frequent updates. I think you've seen us do 2 or 3 patches already. And in the coming weeks, there will be more meaningful updates. So we're started -- we're starting that journey now.

The final thing you asked was in relation to Embark's utilization of artificial intelligence and reinforcement learning and machine learning in our development. And you also pointed out that there's some controversy around that subject, which I think is fair. What I would like to say is, I think there's a misconception that Embark is automated development. That's not how we do it. We don't automate development. We use AI and other means of efficiencies to unleash the creativity in the company. We don't use AI to lower costs. We don't use AI to replace a certain work field, we use it so that we can focus on the things that matter and the things that we would like to spend less time on that can be automated, we automate. I know that there's some controversy around audio. Our credits for the most part, is utilizing recorded voice because we believe that, that has a higher quality. Yes, there are instances of automated voices, but that is because we want players to get frequent updates quickly.

So it's an efficiency and something that we do to be able to get players a better experience very quickly. It has nothing to do with our goal or we have -- we have a ton of voice actors, we love them, and we will continue using them. So I just want to make sure that, that's clear in regards to how Embark treats automation and AI.

Next, we will take questions from Yamamura-san of JPMorgan Securities.

I'm Yamamura from JPMorgan Securities. I have 2 questions. My first question is related to the company's strategy. My second question is more of a confirmation of technical matter. So my first question on the ARC Raiders. To what extent do you expect that this momentum of sales will continue for the home game type of product. There are 2 types -- 2 ways to sustain the revenue in general. First is to reduce the price continuously so that there will be repeat customers in the long term. The second way is to build up revenue through in-game charging. And listening to your response to the questions, I believe your company's strategy is the latter, which is to add revenues through in-game charging. And I wanted to confirm whether my understanding is correct.

And speaking of the repeat purchase repeat sale. In case of ARC Raiders, the initial price point is set at relatively low level. Therefore, I think there is a smaller room for further price reduction. So I understand that your focus will be more on DLC, paid DLC and I understand that this is in a way the first title that you achieved a major hit for the packaged games. So that's why I wanted to ask you on the strategy.

Patrick here, I'll answer that as well. The -- when it comes to price reductions and what business model we use in the game, I think that they're pretty standard as with any packaged goods game, which my previous career [indiscernible] and other places, I spent 15 years in the packaged goods space. You will price promote when the time is right. That's any business, any company that does deal with packaged goods, whether it's digital or in the past in store will use that methodology. And we will do the same when the time is right.

For the time being, we are doing well. We're selling well, and we don't have any price promotions planned in the immediate future. But we'll obviously assess the sales situation and make those decisions along the way.

When it comes to -- this is the packaged goods game, which means that the development team and Embark and NEXON need to make sure that the people who have purchased the game are well treated and that get previous free content drops and things that they can -- so that they continue to play in the game, but we will obviously like already in the game today, there will be a store, where we will have offers to players where they can purchase things if they choose to. We will not have -- we will be able of cosmetic nature and we think that so that players can express themselves, business models that are very successful in many other games today in the West and in Asia. So there's no real difference there. But we will obviously evolve and make that component of the game larger as the time goes by. And that's the only way for us to sustain this game over a very long period of time, which is our absolute ambition.

My second question is just to reconfirm when I look at the Chinese business revenue, the revenue is -- forecast is a decline on a Q-on-Q basis. And given that the mobile business forecast is flat, it hints that the PC will go down by roughly JPY 10 billion Q-on-Q. Is it within the regular seasonality range or is there any impact on the strike of Neople or any general environment in the South Korean market?

Firstly on strike, currently, all the employees are coming to office and working. So there is no impact. As analyzed by Uemura-san in China in the Dungeon&Fighter franchise for PC, we have seen a major recovery in Q2 and Q3. And we believe that Q1 of the next year would be extremely important. So in Q4 we will focus on and maintenance, meaning that we will implement measures to enhance user engagement. It's not that there is some major slowdown of the game, but rather strategically in Q4 we will focus on the strengthening of user engagement. That is the reason for the Q-on-Q revenue decline.

Next question is from BMA Securities Masuda-san.

I also have a question related to the sustainability of ARC Raiders momentum. As you know, Escape from [indiscernible] which is another extraction shooter game is scheduled to be released on November 15. So I want to know what kind of impact do you assume?

Patrick here. Escape from [indiscernible] is a game that yes, it's finally releasing, but it's been in an alpha and beta mode for several years. So although it's an efficient launch and it's a game that many people have played for many years. So that, I think, is important. It's actually a game that served to some extent, as the inspiration to ARC Raiders. The goal with ARC Raiders was always to or the hypothesis with ARC Raiders rather, and the concept of ARC Raiders was that we believe that the extraction genre, which is seen as a very difficult than what gamers would describe as a hard core genre could be done more accessible, more easier to play so that we could get it to become a more mainstream product, and that was the goal. So [indiscernible] and other extraction -- successful extraction suiters was something that we looked at quite a lot. So while I do believe that they will do well. It's not a -- it's a new game, but it's not necessarily a new game.

Next, we would like to take questions from Atul Goyal of Jefferies Singapore Limited.

This is for Patrick. Looking at Embark's 2 recent launches, the finals, which had a strong start, but faced challenges to sustain momentum. And then ARC Raiders, which has launched to significant fanfare and apparent success. What are the key learnings from these contrasting outcomes. And how have these experiences shaped your thinking around game development, live ops or community engagement going forward?

I think it's a fair question that I'll try and respond to fairly. The finals, like you said, came out and we, I think, managed to build an IP that had a lot of attraction. Players wanted to try the game and we had shown the world that we can build a game that on the surface or it was actually had a lot of innovation, and it brought something new to the genre of the FPS. What we -- and as I said, we had over 20 million downloads just in the first month. So the game did and we did also monetized quite well for being a free-to-play game.

What we did not account for was the fact that there wasn't enough for players to do for -- to stay engaged over time. So the retention, both day 1, day 7, day 14, and we measure retention on certain cohorts and depending on how many days people have played. And also, even after a month, the retention numbers weren't where they needed to be. These are KPIs that are standardized today in our industry and numbers that NEXON are well aware of and embark at the time of the release of the finals knew of the numbers, but we didn't know how to get the right numbers in full transparency.

What the team then did with the final, if we can stay on that for a second, was something that is difficult to do. They managed through listening to the community, working with NEXON and working with the development team, of course. They managed to increase their retention metrics, both the short- and long-term -- medium- and long-term retention, which then made players stay in the game. So that's why you've seen the finals make a comeback. We have seen an increase in players. We're seeing an increase in both players and revenue every season now that we're launching. And even though the numbers aren't as big as something like ARC Raiders, they are meaningful to us. And again, that's absolutely worth continuing supporting for us.

So the learnings that we had from the finals, I think, paved the way for the success of ARC Raiders. Like I said, as far as I know, ARC Raiders retention numbers are among the highest that NEXON have ever seen for any game that's been developed in the history of NEXON. And that's a testament to the hard work on making sure that we have features that are aligned to support retention. And retention and obviously, your daily active users and your CCU curves are very important -- to very important blueprints to look at as you determine how well a game is doing long term.

So far, so good, I would say. We're very happy with where we are now. But, and I say but we will keep obviously monitoring the situation and what's going on. And in a case where we see a decline, we will do our utmost to sure that decline by being methodical and swift like we have been on the finals.

This concludes the question-and-answer session. Mr. Kawai, I'd like to hand over to you for any additional or closing remarks.

Thank you. If there are no further questions, I would like to take this opportunity to thank you for your participation in this call. Please feel free to contact the NEXON Investor Relations at [email protected] should you have any further questions. We appreciate your interest in NEXON and look forward to meeting with you whether it is here in Tokyo or in your corner of the world.

Good day, everyone, and welcome to NEXON's 2025 Q2 Online Earnings presentation. Today's presentation is being recorded. [Operator Instructions]

I will now hand over to Takanori Kawai, Team Leader of Investor Relations. Please go ahead, sir.

Hello, everyone, and welcome to NEXON's earnings conference call. Thank you for joining us today. With me are Junghun Lee, President and CEO of NEXON; and Shiro Uemura, CFO. Today's call will contain forward-looking statements, including statements about our results of operation and financial condition, such as revenues attributable to our key titles, growth prospects, including with respect to the online games industry, our ability to compete effectively, adapt to new technologies and address new technical challenges, our use of intellectual property and other statements that are not historical facts. These statements represent our predictions, projections and expectations about future events, which we believe are reasonable or based on reasonable assumptions.

However, numerous risks and uncertainties could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Information on some of these risks and uncertainties can be found in our earnings-related IR documents. We assume no obligation to update or alter any forward-looking statements.

Please note, net income refers to net income attributable to owners of the parent as stated in NEXON's consolidated financial results. Furthermore, this conference call is intended to provide investors and analysts with financial and operational information about NEXON, not to solicit or recommend any sale or purchase of stock or other securities of NEXON.

A recording of this conference call will be available on our Investor Relations website following this call. Unauthorized recording of this conference call is not permitted.

Now I'll pass the call to Junghun.

Thank you, Kawai-san, and good afternoon, everyone. Thank you for joining our call. Today, Nexon post a letter, slide deck and press release detailing our Q2 performance and Q3 outlook.

I will start by offering context on recent milestones and then hand off to Uemura-san to provide financial highlights. NEXON delivered a highly positive performance in the second quarter, highlighted by the vitalized momentum in established games and solid results from new titles. This includes 60% year-over-year growth in the MapleStory franchise, strong growth in Dungeon & Fighter PC, a solid performance from FC Online and an impressive contribution from an all-new game, MABINOGI MOBILE, which accomplished a remarkable start in March.

We achieved better-than-expected Q2 results with revenue of JPY 118.9 billion and operating income of JPY 37.7 billion, 8% and 21% above the high end of our guidance, respectively. Year-over-year, revenue was down 3% on an as reported basis and up 6% on a constant currency basis. Operating income was down 70% on as reported basis and down 10% on a constant currency basis.

NEXON has reignited growth in key titles, created momentum for recent launches and successfully introduced new service to expand our presence in large global market. Player enthusiasm for Dungeon & Fighter content update delivered a solid recovery and 67% year-over-year revenue growth on Dungeon & Fighter PC.

In Korea, we set another record for quarterly revenue with MAUs and PUs, which nearly doubled, helping to deliver 132% year-over-year revenue growth. In China, the powerful performance of the Labor Day and Anniversary updates succeeded in returning dormant players, delivering double-digit year-over-year growth and pushing June MAUs and PUs to their highest levels this year.

For Dungeon & Fighter Mobile, we see improved prospects in Q3, driven by a series of updates during the quarter, beginning with the July level cap increase or expected to drive modest sequential revenue growth. We have also made a progress in co-developing new content with Tencent, which is on track for release later this year.

And one more note on the Dungeon & Fighter franchise, while we negotiate with the union representing our Neople studio. We are doing our best to ensure smooth game operation without any disruption. We do not expect an impact on our Q3, and we will keep investors advised if we believe the situation will have a material impact on the game's performance.

Moving to MapleStory. The franchise delivered another exceptional performance with revenue growing 60% year-over-year, driven by strong growth in the core PC game in Korea, plus the regional expansion of MapleStory World. In June, a summer update for MapleStory in Korea contributed 91% year-over-year growth, which included a record 25% market share in PC Cafes.

Additional content released our planned in Q3 to maintain this strong player engagement. And in the West, MapleStory delivered 36% growth. Our strategy for growing the MapleStory IP includes the introduction of additional experiences, which expand the franchise into new regions around the world.

Two recent developments reflect that strategy. MapleStory World, a UGC platform operating over 20 years of MapleStory assets, achieved 7x year-over-year growth in Q2, following the rollout in EU and Asia. And on all-new game, MapleStory Idle RPG is expected to further expand the fan base created by our strategic partnership with Developer Able Games. MapleStory Idle RPG is scheduled for a global release later this year.

The MapleStory franchise has become a flagship in NEXON's strategy of driving vertical growth by leveraging the popularity of well-established IP with hyper localization as well as new experiences designed to excite core and attract new players. In many respects, the franchise is transforming into a platform for multiple experiences that ties to the MapleStory IP.

Next, the Mabinogi IP is tracking to deliver on its potential to become a sustainable contributor in NEXON's franchise portfolio. In Q2, Mabinogi MOBILE exceeded our outlook with strong MAUs, PUs and ARPPU. And in June, we conducted a successful Alpha test for Vindictus, Defying Fate. Our Mabinogi franchise extension, which became the most played demo in the Steam Next Fest.

Another game expected to expand NEXON's international footprint is ARC Raiders, a brand-new and highly anticipated shooter from Embark Studios. Scheduled for release on October 30, ARC Raiders is currently the number six most wished list game on Steam and positioned for global success, particularly in Western market. Also on adaptation of THE FINALS developed for China in partnership with Tencent, has been granted an ISBN license and is now in a closed alpha-test.

And this week, we announced Woochi the Wayfarer, an all-new AAA action adventure set in the Joseon era. The game is developed by NEXON Games for a global audience on PC and consoles.

To summarize my remarks today, NEXON has demonstrated the strategy, execution, and experience to overcome setbacks, jump-start growth, and deliver promising new products. Our fundamentals are solid. Our strategy will define our resilience proven. NEXON is now positioned for breakaway success.

With that, I will turn the call over to Uemura-san.

Thank you, Junghun. The second quarter was highlighted by renewed momentum in established games like Dungeon & Fighter PC and MapleStory, solid performance of FC Online, remarkable results from MABINOGI MOBILE and the successful regional expansion of MapleStory World. Those drove stronger-than-expected revenue and operating income. Affected by negative FX impact, year-over-year revenue and operating income decreased by 3% and 17% at JPY 118.9 billion and JPY 37.7 billion, respectively, while on a constant currency basis, revenue grew 6% and operating income declined 10%.

Despite the outperformance in operating income, net income was below the expectations at JPY 16.8 billion due primarily to an FX loss of JPY 17.5 billion on U.S. dollar-denominated cash deposits. Year-over-year, it was down 58% due to the aforementioned FX loss while recording an FX gain of JPY 8.2 billion in second quarter 2024.

Turning to the franchise review. The collective revenue on our three major franchises declined 13% year-over-year due to the second quarter '24 launch of Dungeon & Fighter Mobile. In the second quarter, Dungeon & Fighter franchise revenue declined 40% year-over-year. However, strong player enthusiasm for recent content updates delivered 67% year-over-year revenue growth on Dungeon & Fighter PC.

In Korea, we accelerated the momentum that began in the first quarter to set a new record for quarterly revenue. Both MAUs and PUs nearly doubled, resulting in 132% year-over-year revenue growth.

In China, second quarter revenue exceeded our expectations and marked strong double-digit year-over-year growth, driven by the solid performance of the Labor Day update. Also, the anniversary update was particularly effective in pushing both June MAUs and PUs to their highest level this year. For Dungeon & Fighter Mobile in China, second quarter performance was below our expectations due to the May anniversary update being less effective than anticipated at sustaining returning of players.

Next, our MapleStory franchise delivered 60% year-over-year revenue growth, driven by strong performance of the core PC game in Korea and the regional expansion of MapleStory World in multiple Asian markets. In Korea, the summer update delivered a significant increase in active players. As a result, Q2 revenue grew 91% year-over-year and marked second quarter record.

Global MapleStory revenue grew year-over-year, led by the strong 36% growth in Western markets, which delivered a successful 20th anniversary and a collaboration event. In April, MapleStory World launched in multiple Asian markets and was particularly well received by players in Taiwan. As a result, our revenue exceeded our expectations and delivered more than 7x year-over-year growth.

Turning to our FC franchise. FC Online exceeded our expectations, driven by a successful seventh anniversary update, which overcame lower seasonality to deliver both year-over-year and quarter-over-quarter revenue growth. For MABINOGI MOBILE, the focus on a peaceful lifestyle elements, which differentiate the game from traditional combat-focused MMORPGs resonated well with the players. Following the highly successful March launch, the game exceeded our outlook with a strong MAUs, PCUs and ARPU.

Moving on to our third quarter outlook. We anticipate another strong double-digit growth in 2 of our flagship titles, Dungeon & Fighter PC and MapleStory, along with the solid contributions from MABINOGI MOBILE and MapleStory World. However, the year-over-year performance will be affected by second quarter '24 launch of Dungeon & Fighter Mobile in China and the Q3 '24 global release of the first descendant. Consequently, Q3 revenue is expected to be in the range of JPY 116.6 billion to JPY 127.1 billion, representing a 14% to 6% decrease on an as-reported basis or 12% to 4% decrease on a constant currency basis year-over-year.

We expect the Dungeon & Fighter franchise to decline by approximately 45% year-over-year. For PC Dungeon & Fighter, we anticipate continued strong year-over-year growth, both in Korea and China, while anticipating a sequential decline in revenue. For Dungeon & Fighter Mobile, we expect modest sequential revenue growth driven by a series of updates during the quarter, beginning with the July level cap increase.

Moving to MapleStory. We expect the franchise to accelerate revenue growth to approximately 70% year-over-year. For the PC version of a MapleStory in Korea, we anticipate revenue to more than double year-over-year, driven by the additional content releases to maintain the strong momentum generated by the summer update. We also expect the MapleStory World to significantly increase its revenue year-over-year again in Q3.

Revenues from the FC franchise are expected to be roughly flat year-over-year and quarter-over-quarter. We expect to maintain player engagement with our TOTS Team of the season update and the marketing initiative of the Legendary Players Exhibition Match planned for September. Overall, we expect revenues from the three largest franchises in Q3 to decrease by approximately 10% year-over-year. Finally, for MABINOGI MOBILE, we expect some sequential moderation, but a significant contribution in Q3.

Moving on to the operating income outlook. We expect Q3 operating income to be in the range of JPY 32.7 billion to JPY 41.2 billion, representing a 36% to 20% decrease on an as-reported basis or 35% to 18% decrease on a constant currency basis year-over-year. We anticipate increased royalty expenses and platform fees due to MABINOGI MOBILE. Also, we expect increased marketing expenses associated with the promotions for FC and MapleStory franchises as well as MABINOGI MOBILE and ARC Raiders. In addition, we expect increased fees to creators tied to revenue growth in the MapleStory World.

On the other hand, we expect a decrease in HR costs due to lower performance-based bonuses. Additionally, we expect a gain of JPY 4 billion associated with the liquidation of our subsidiary funds. Despite the year-over-year operating income decrease, we anticipate net income to be in the range of JPY 26.4 billion to JPY 32.8 billion, representing a 2% decrease to 21% increase on an as-reported basis or flat to 24% increase on a constant currency base year-over-year. This is due to the comparison against the JPY 19.6 billion FX loss in Q3 2024.

Finally, I will provide an update on our shareholder return initiative. Under the 1-year JPY 100 billion buyback policy announced in February, we repurchased a total of JPY 50 billion shares by June 25. Also, today, Nexon's Board of Directors approved the execution of the repurchase for the JPY 25 billion worth of shares scheduled from August 14 to October 31.

We plan to complete the repurchases of the remaining JPY 25 billion worth of shares by February 2026 at the latest with the consideration of factors, including investment opportunities, financial conditions and the market environment. We remain committed to actively returning capital to our shareholders while enhancing capital efficiency.

With that, I will return the call back to Junghun.

Thank you, Uemura-san. In summary, NEXON has reignited growth in our key titles and successfully introduced new games and service to expand our presence in large global markets. Looking forward, we are on a path to broaden our international footprint with new release that includes the October 30 launch of ARC Raiders and later with THE FINALS for release in China. This concludes our summary. Operator, we are ready to take questions.

[Operator Instructions]

I would like to take the first question from Thomas Kwon- san from Daiwa.

Congrats on the strong quarter. I have two. First is among your upcoming game title, which is the new game building up the management's expectation for this successful launch, geographically, which is the market and commercially which game genre? I have the second question.

This is Junghun Lee. Thank you for your question. I'll be able to answer that. First of all, I would like to begin by saying that we are putting our utmost priority in sustaining the solid performances in Korea MapleStory and PC Dungeon & Fighter.

Also for Mobile Dungeon & Fighter China, we are confident that the game will benefit with a better mid- to long-term performance as the co-developed content with Tencent is to be introduced later this year.

Moving on to our pipeline. We believe the biggest upcoming momentum would be the launch of ARC Raiders. ARC Raiders, which is slated to launch on October 30, is continuing to gain strong traction and is currently ranked number six on Steam's top wish list worldwide ahead of its launch.

So we believe the currently set $40 price point for our creators will be received pretty well by players, especially within this market that's saturated with older and more expensive and more hardcore franchises. So we plan to sustain the game, the fun and the longevity of the game with our proven capability in live operations, as well as a steady stream of DLCs going forward.

Adding on to that, we also have MapleStory: Idle RPG, which is planning for its launch later this year globally. With its casual and more lighthearted gameplay, we believe this title will contribute to expanding our fan base in a more broader spectrum.

I'd also like to briefly touch upon our prospect for the first half of next year. So for the China service of THE FINALS, currently, we are conducting closed-alpha test, and we are seeing some highly positive trends from this testing.

Now for your reference, THE FINALS, which is currently on its live service, was benefited from this continued efforts of the development team and NEXON's live operations and returned to a year-over-year growth trajectory.

Also lastly, for next year, I would like to touch upon MABINOGI MOBILE, which is performing very well in South Korea. We are planning to bring the game to the global market next year. So it is quite a rare mobile game, MMORPG game, I would say, in terms of its interesting user demographics composition, which is split roughly in half by gender, that being around 54% male and 46% female, and the retention still remains very strong.

So all in all, we believe MABINOGI MOBILE's gameplay holds much potential in attracting a wide spectrum of global users. So to summarize, NEXON will continue to make steady efforts to sustain our growth next year with some of the initiatives that I just mentioned, maintaining the stable trend in our live service, bringing on or executing on the momentum with new titles, as well as bringing our beloved, our games that are beloved in South Korea to the global market. That concludes my answer. Thank you.

Thank you for your detailed comments. My second question is about the operating cost and margin outlook for second half of this year and 2026. It is fair to expect any visible increase in the SG&A cost, especially the labor costs, mainly due to increasing pressure by both the game developers for more bonus payments and labor union for the better working environment. We have to expect this sharp increase in operating cost for staff and others operating expense.

Thank you for your question. I will be able to provide my answer first, and then Uemura-san will be able to add on to it later.

For NEXON, we already have a competitive compensation system and structure in place to attract and retain great talent from the market. Going forward, there will be no abrupt increase in the total HR costs that sits outside of this policy. For your reference, we are doing our best to ensure smooth game operation without any disruption. In addition, we do not expect an impact on our third quarter.

So a little additional information from myself and the CFO regarding the SG&A, the labor estimation. We are trying to achieve the 2027 goals. And then we have been communicating that for that, we will be doing this investment for growth. And recruiting-wise, more or less, we are on track and we are expanding our team to hit the 2027 goal.

Total labor is looking smaller coming down a little bit because the incentive bonuses were smaller. And so we are actually recruiting, and we are expanding our capabilities.

So again, we're on track, and we are investing in human resources, and we're prepping ourselves to achieve this necessary growth.

Munakata-san from the Goldman Sachs, please take the stage.

I have two questions. The first question is about the Dungeon & Fighter PC. In Korea and China, sales are strong in each region, but what is the reason for the strong performance in each region? Also, please explain why you expect the Q-on-Q sales of Dungeon & Fighter PC in Korea and China to decline in Q3. Has there been a recent slowdown in the user engagement?

This is Junghun again. Let me answer your question here. For PC Dungeon & Fighter, we have significantly expanded its content supply in the half of this year, that aiming to reignite the game's momentum. Thanks to this effort, this game achieved a successful turnaround with clear growth in the first quarter.

In particular, we believe that the strategy of increasing content volume supply to make up for our last year's struggle in the Chinese market was effective for this. Now to give a gist of my answer, there has been no recent slowdown in user engagement. Basically, the third might appear relatively moderate due to the very aggressive updates we had in Q1 and Q2. But basically, the growth itself is expected to remain steady and stable.

My second question, you're doing well in the Korean market but what do you see as the upside going forward, considering the size of the Korean gaming market, you already have high market share and the competitive environment. Do you think a further upside is less likely than in other regions? Also in terms of the sales composition by region from second half of this fiscal year to the next fiscal year, with the launch of ARC Raiders coming up, do you expect a growth in the US and Europe, recovering in China, or further growth in Korea?

Sure. So I would like to begin by saying that we believe that there is significant potential for further growth upside within South Korea. As you know, Korea is definitely one of the world's largest markets in its volume.

So basically, with MapleStory, Dungeon & Fighter and FC, NEXON already holds a quite dominant position in the PC platform market with our diverse portfolio. Still, we do believe that there is significant room for growth in the mobile market that we can tap into going forward in South Korea.

So NEXON will continue to maintain our steady and stable growth of our existing PC portfolio. But at the same time, we will also strive to expand our market share on mobile, thereby seeking additional growth upside in this country.

For your reference, next year, we have World Cup, which is a significant seasonality factor for FC ONLINE, one of our largest franchises that we service, and this is being serviced only in Korea so we also do expect some additional growth upside from this.

So in 2026, the Korean market will remain strong. And going beyond that, from the entire company's perspective, the market will serve as a stable foundation, which provides consistent returns, while we pursue aggressive growth in international markets.

So all in all, for South Korea, we do believe we are maintaining quite a solid position, and there will be some further growth upside that we can tap into. And going beyond this region, of course, with our ARC Raiders launch coming up, we will also need to perform well in the Western region, including the EU and North America. And also for Dungeon & Fighter franchise by maintaining its positive trend, as well as launching some good, launching with good performance with THE FINALS and other China services that we are preparing, we will do our best to deliver some favorable trend in China as well. That concludes my answer. Thank you.

Next question from Yijia Zhai-san from the UBS Securities.

I have two questions. The first is about The First Descendant. I read in the document that a Season 3 update can expect to bring in significant revenue growth. It can be as much as 3x Q-on-Q. And I'd like to first understand how the scale volume was upon the release in second quarter and also why the Season 3 update is considered to be a very strong contribution. And also, I'd like to understand how we should think about this sustainability of this, the boost?

Thank you for your question. I'll be able to answer to it. So as mentioned a little bit before our earnings release, The First Descendants did release our third season of the game.

So for Season 3, we were able to supply a large amount of content, including dedicated support for our new players, as well as larger fields and eight-player rates, and et cetera, the content update was pretty big, so this is why we do expect sequential growth in revenue in Q3.

So currently, we are immediately after the release of the update. So the whole team is monitoring, closely monitoring the overall trend post its release. So for The First Descendants, our live service team as well as operations teams, everyone there are making our utmost effort to reignite the growth of the title. And going forward, we will continue to make our best effort in making stable and growing live service of the game.

My next question is China Dungeon & Fighter Mobile. You talked about this third quarter level cap and release, which has happened already, but you are only estimating the Q-on-Q increase to be only slightly sequential increase. And why is it so limited?

And regarding the Tencent co-developed the content, I believe it's going to be coming before the end of this year. And how are you foreseeing the revenue growth coming with it? What time, how much scaling can we actually expect to be coming from that effort?

Now I would like to begin my answer by referencing to the Anniversary update that took place in our second quarter. So basically, the update initially did attract some dormant players, but it was unable to sustain this success. However, as you have mentioned, we did release the July Level Cap increase. And starting with that, we see improved prospects in third quarter mainly driven by a series of updates, including the Level Cap increase.

We do expect some modest sequential revenue growth, thanks to all of those updates. And I would like to add a little bit on to my comments, touching on the mid-to long-term approach that we are taking, which is as important as the updates for our company. So the factor and the element that I am putting high importance right now is, as you know, our co-developed content with Tencent that will be coming to the game later this year. I just wanted to highlight this one fact, which I believe is a highly important piece to it.

So the essence and the key to our collaboration with Tencent is that it is intended to change the development process to enable long- term growth rather than focus on short-term growth in revenue and traffic.

So we do not anticipate an immediate and dramatic turnaround with just one single update. However, we do believe that our initiative with Tencent for greater adaptation with hyper-localization as well as new experiences will gradually generate improved core metrics and performance over time at the end of the day.

So we would appreciate your -- we will appreciate your interest and support in the longer-term and long-term perspective up to the -- from second half of this year to next year is in terms of how Dungeon & Fighter Mobile achieved this improvement both in key metrics as well as the service. That concludes my answer. Thank you.

I have a follow-up question. So I'm hear that long-term recovery can be expected from second half onwards. What are the KPIs that we should actually be finding to be signaling that recovery to be kicking in?

So first of all, as our report covered this time, the core three titles, all of them are showing very solid recovery with the great confidence that we can have. And we are to continue this momentum with all the titles.

And I know that there are two critical things. First will be a Dungeon & Fighter in China. As the CEO has been saying that it's going to be a long term in initiatives, but we are -- we need to actually bring it to regrowth the trajectory. And the second will be about the very promising pipeline titles, which will be coming from the second half. So first, we need to do this utmost preparation, including the R&D, to make the launch as successful as possible and also to retain the momentum that we create upon the launch and have this sustainability.

Let me just clarify the question. So do you want to find out what would be the KPI that you should be watching out for Dungeon & Fighter Mobile?

Apologies. So I'd like to actually talk specifically about Dungeon & Fighter Mobile. Earlier, my answer was about overall. So regarding the Dungeon & Fighter Mobile, the most critical will be to bring back the dormant players. And so the increase in MAU is going to be the very critical component of success.

So first aim is to bring back the users to the platform and make sure that the whole platform is revitalized with rich content, hence, we will benefit from this increased revenue. Thank you for your question.

Next, Seyon Park-san from Morgan Stanley.

Can you hear me?

Yes. Please go ahead.

I have one question. I think most of the questions I had were already answered. It's relating to the MapleStory World, which is a relatively new franchise. I think you mentioned that it's gotten quite positive reception in Taiwan. I'm kind of curious how different this game is to the original MapleStory, why it's gotten to be so popular in Taiwan.

Is the MapleStory franchise already well recognized in Taiwan? And then just how, whether the whole concept and the game play, whether it's different and how sustainable do you think this is?

Thank you for the question. So I would like to begin by saying that MapleStory Worlds has significantly exceeded our expectations, achieving over 7x Y-o-Y growth.

So as you have just mentioned, in terms of revenue, MapleStory Worlds is seeing the biggest success in Taiwan. So if I were to maybe see for the key driver behind this performance, it would be a world called Artale. Basically, it is a world that has already gained quite a great popularity in Korea, and it is well received in Taiwan.

So basically, Artale is still performing quite positively in South Korea as well. And it is about offering an experience before a certain update that was done in the live service of the main PC game. So basically, it can be seen as a classic version of MapleStory.

So in Taiwan, MapleStory PC service is definitely a predominant experience that everyone within the country loves. It is definitely receiving a nationwide love from the country, and it is still maintaining its great performance. So we believe such reputation as well as enormous fan base within the region has backed our performance and success that we were able to see with Artale.

So I would like to conclude my answer by offering my personal view in terms of the stability of the experience. Artale is, has already started its service a while ago in South Korea first, which means that it has some accumulated content. So up to now, with this accumulated content, I believe that it will be able to sustain its success in Taiwan throughout this year.

And as you know, MapleStory Worlds is basically a UGC platform. So with killer contents like Artale, we will be able to gather some meaningful amount of traffic. And by helping those traffic creates a virtuous cycle within this platform, we'll be able to drive the overall growth of this entire platform itself. To achieve this and render great results, we will make sure we do our best going forward.

[Operator Instructions]

This concludes the question-and-answer session. Mr. Kawai, I'd like to hand over to you for any additional or closing remarks.

Thank you. If there are no further questions, I would like to take this opportunity to thank you for your participation in this call. Please feel free to contact the NEXON Investor Relations at [email protected] should you have any further questions.

We appreciate your interest in NEXON and look forward to meeting with you whether it is here in Tokyo or in your corner of the world.

That brings us to the end of the meeting. Thank you for your participation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]