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Edited Transcript of 036570.KS earnings conference call or presentation 7-Feb-18 7:00am GMT

Q4 2017 NCSoft Corp Earnings Call

Seoul Feb 8, 2018 (Thomson StreetEvents) -- Edited Transcript of NCSoft Corp earnings conference call or presentation Wednesday, February 7, 2018 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Jae-Soo Yoon

NCsoft Corporation - CFO

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Conference Call Participants

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* Han Joon Kim

Deutsche Bank AG, Research Division - VP and Research Analyst

* Jaewon Bae

Veritas Asset Management LLP - Asian Analyst and Assistant Portfolio Manager

* Minuh Cha

Crédit Suisse AG, Research Division - Research Analyst

* Stanley Yang

JP Morgan Chase & Co, Research Division - Analyst

* Sung Eun Kim

Korea Investment & Securities Co., Ltd., Research Division - Senior Analyst

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Presentation

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Jae-Soo Yoon, NCsoft Corporation - CFO [1]

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(foreign language) Good afternoon. This is Jae-Soo Yoon, the CFO of NCSOFT. I would like to first thank everyone for taking time out of your busy schedule to participate in this earnings conference call for the fourth quarter 2017. Let me begin my presentation with the fourth quarter earnings highlights.

(foreign language) Boosted by the success of Lineage M, fourth quarter sales jumped 87% year-on-year to KRW 533.3 billion. When compared to the third quarter, PC online game revenue was on the rise. But as Lineage M revenue stabilized, it decreased around 27% quarter-on-quarter.

(foreign language) In line with the top line trends, operating profit posted KRW 189.2 billion, 86% up year-on-year, but 42% down quarter-on-quarter.

(foreign language) Pretax income grew 69% year-on-year to KRW 176.3 billion, and net income increased 81% year-on-year to KRW 120.7 billion.

(foreign language) Next, let me discuss the full year earnings.

(foreign language) Full year 2017 revenue was KRW 1,758,700,000,000, representing an increase of 79% versus the previous year. Operating profit was KRW 585 billion, a surge of 78% year-on-year. And net income totaled KRW 443.9 billion, which translates into a 64% increase year-over-year.

(foreign language) With the successful penetration into the mobile game market, the company, in 2017, was able to set another historical record in terms of earnings.

(foreign language) Now let me break down fourth quarter sales by game.

(foreign language) Mobile game revenue posted KRW 327.1 billion, a decrease of around 41% versus the third quarter. Lineage M showed a natural slowdown after the initial launch, but the PCU numbers and traffic metrics have remained steady. In particular, we have seen significant user participation in Siege Warfare that started last quarter. Moving ahead, we expect to extend the game's life cycle and enjoy stable revenue via continuous content updates.

(foreign language) On the PC online game side, the sales from Guild Wars 2 second expansion pack was reflected in full during the quarter, driving PC game sales up 73% quarter-on-quarter and 135% year-on-year to KRW 34.9 billion. The effects of the expansion pack are expected to partially continue into the first quarter.

(foreign language) Aion sales were KRW 12.7 billion, an increase of 25% quarter-on-quarter on the back of in-game item promotions. On January 17, we changed the monetization scheme in Korea, which has resulted in DAU and PCU numbers doubling. In addition, we continue to experience an inflow of new users and revival of dormant accounts for Aion, which, I believe, should lead to stronger performance in the future.

(foreign language) Lineage I, Lineage II and Blade & Soul all posted revenues similar to the previous quarter without any special issues.

(foreign language) Lastly, royalty revenue posted KRW 59.5 billion, an increase of 36% quarter-on-quarter and 43% year-on-year, driven by the release of Lineage M in Taiwan and stronger Blade & Soul China sales.

(foreign language) Last, let me shift to the full year performance by game.

(foreign language) Mobile games sales in 2017 totaled KRW 995.3 billion, representing 57% of total revenue. Going forward, the company is committed to strengthening its influence in the mobile game market by developing mobile games based on the company's dominant IPs.

(foreign language) For PC online games, Lineage I recorded KRW 154.4 billion, a decline of 59% year-on-year due to customers who moved over to Lineage M, with the game's success beating expectations.

(foreign language) Blade & Soul full year revenue was KRW 161.1 billion, 12% less versus the historic peak revenue it posted last year, following the launch in North America and Europe.

(foreign language) Guild Wars 2 recorded KRW 82.8 billion of revenue, an increase of 8% year-on-year due to the effects of the expansion pack that was launched in September last year. Lineage II and Aion experienced a sales decrease of 15% year-on-year and 35% year-on-year, respectively, ending with KRW 65.8 billion and KRW 47 billion of sales.

(foreign language) Let me move on to expenses.

(foreign language) Operating expenses in the fourth quarter totaled KRW 344.1 billion, down 14% quarter-on-quarter. (foreign language) To break it down by item, labor cost was KRW 161 billion, up by 4% quarter-on-quarter, largely due to special bonuses paid as a result of the strong performance of Lineage M.

(foreign language) Variable expenses totaled KRW 108.2 billion, 39% less versus the previous quarter, due to the decline in mobile game distribution fees.

(foreign language) Marketing increased 10% quarter-on-quarter to KRW 24.2 billion, driven by advertising for Lineage M mega update and more in-game item events for each of the titles.

(foreign language) To look at costs for the full year 2017. Labor costs posted KRW 562.3 billion, an increase of 47% year-on-year, resulting from hiring new development talent and increasing bonuses paid in relation to the success of mobile games.(foreign language) Variable costs ended at KRW 341.7 trillion, which is a significant increase versus the previous year, due to an increase in royalty expenses and distribution fees linked to the revenue growth of mobile games.

(foreign language) Marketing executed during the year increased on the back of new game releases, totaling KRW 83 billion, representing approximately 5% of revenue. (foreign language) Other expenses increased 13%.

(foreign language) 2017 was a very busy year for us here at NCSOFT because we started to actively make inroads into the mobile game market. (foreign language) By executing the Lineage IP on a mobile platform, we believe the mobile MMORPG market, in the true sense, has started. By overcoming the boundaries of platforms, we are able to confirm the value of our IPs. The experience we gained through Lineage M will be reflected in the development process of all of the other titles. We believe it will increase the rate of success for the projects we have ongoing.

(foreign language) Moving forward, the company will continue to focus on securing global competitiveness by actively targeting the overseas market and launching blockbuster mobile MMORPGs such as Blade & Soul 2, Aion Tempest and Lineage II mobile. Moreover, we will also remain committed to exerting our best efforts to continuously strengthen shareholder value. (foreign language) Thank you.

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Questions and Answers

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Operator [1]

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(foreign language) (Operator Instructions)

(foreign language) The first question will be provided by [Jeong Moon] from (foreign language).

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Unidentified Analyst, [2]

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(foreign language) The first I would like to ask you is about your new title lineup. Going forward, for the new games that you will be releasing, what type of characteristics do these game have? And in terms of the launch timing, when do you believe would be the launch time for these games? In addition to that, if there are any changes that have taken place versus the pipeline that you have shared with us, please explain what those are. The second question I have is about your overseas game strategy. For the China market and also Japan and maybe other Western markets, what type of strategy do you have for these specific markets? And what type of games are being prepared for -- to address these markets? I do believe that last year, your overall very strong performance was based upon the local operations that you were able to strengthen, and this year may be a very good opportunity for the company to show your potential in the overseas market. So I would like to know more about this area.

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Jae-Soo Yoon, NCsoft Corporation - CFO [3]

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(foreign language) So to address your first question about our pipeline going forward, I do believe that last time, there was an opportunity through which we actually ran through the whole list. And versus that time, there has nothing that has been changed significantly. There are a few games here and there that we have added on, but most of them are in the early stage. So I do believe it's a bit too premature to share that with you. All in all, we have around 13 titles that we are developing. And of those 13, the biggest and largest impact games will probably be Blade & Soul II, Aion Tempest and also Lineage II mobile. (foreign language) And when we talk about large impact, of course, those games would mostly be for the mobile market. On the PC online game side, as you are aware, we do have the Lineage project, or Project TL, which is ongoing. As you are aware, there has been significant changes for the development team that was dedicated for this project. However, things seem to be going very smoothly throughout the development process right now. So we do believe that by the end of this year, there should be something that we can show to you and maybe also have a testing phase during that period of time. (foreign language) For our overseas strategy, first, maybe starting with China. For China, as you are aware, we are launching new games through our partners that are the local Chinese publishers. However, in terms of adding on, adding new games, it is very difficult as of this time to specifically pinpoint when we will be able to release such a game. However, we are monitoring the situation closely. And in the case that the environment does change, we have had lengthy discussions with our publishers about how to move forward. (foreign language) And in terms of other markets outside of China, specifically mentioning Japan and also maybe the Western markets, what we want to do here in these markets is develop content that are most fitting or maybe custom-made for those local markets. Of course, there will be games that we will be publishing that have been developed at the HQ level here in Korea. But for both Japan and also the U.S., we have set up internal development teams in these locations, and we do believe that the development results of those teams are something that we will be able to launch as a possibility within the year. Of course, these are first-time studios that we have set up in these locations. And therefore, for the actual performance of the games that have developed -- been developed, we will have to see how that plays out. But we do believe that, as time passes, this will be something that can take place.

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Operator [4]

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(foreign language) The following question will be presented by Sung Eun Kim from Korea Investment & Securities.

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Sung Eun Kim, Korea Investment & Securities Co., Ltd., Research Division - Senior Analyst [5]

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(foreign language) So there are 2 questions that I would like to ask you. First is about Lineage M. Since the update in November, what are the traffic metrics like? And how has the revenue trend been working or moving for this game? And what is your outlook for 2018 for the title? In addition, the second question I would like to ask you is about Blade & Soul II. For this game, when would be the rough launch schedule? And what would your strategy be for this game overseas?

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Jae-Soo Yoon, NCsoft Corporation - CFO [6]

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(foreign language) First, let's talk about Lineage M. Since the update that we had in November, we have seen a rebound in the overall traffic numbers and also in terms of the revenue numbers. And this effect is something that has continued into the -- into this year for 2018. Therefore, if we compare the daily average revenue in the fourth quarter to that of year-to-date 2018, those numbers are very similar. (foreign language) And in particular, of course, whenever there is a content update or when there is an in-game item event, this is something that we see as a response in terms of the revenue numbers to take place very quickly. Even under slow conditions or under very quiet periods of time, it seems that the low point in our revenues are very stable. And therefore, we do believe that this is a trend that can be sustained going forward. So therefore, for 2018, this is a trend that we do believe will continue. As we move towards the end of the year, we do believe that there will be a natural decline. However, we don't expect any significant decrease in the overall trend, and we are incorporating a -- that this trend will continue throughout the year in our business plan. (foreign language) So moving on to Blade & Soul II. In terms of the actual development process and the time line, actually, there has -- everything is going very smoothly, and there has not been anything that was unexpected. However, what we are giving some thought to as of now is as you, as investors, are probably well aware, if we look at the general market conditions or the backdrop since the -- since last year, it has been that after Lineage M was released into the market, since then, there have been follow-up new game titles released by other parties. However, if you look at the market response to those games, it seems that none has been as successful as Lineage M and none have attracted a lot of attention. So we do believe that this is due to the fact that the users, in general, within the market in terms of the play patterns or in terms of the business model patterns, have a sense of fatigue that they are feeling and experiencing. So in such a market environment, what we are really focusing on right now is how we should package Blade & Soul II to really appeal to the customers with a fresh eye. So this is a thing that we are giving a lot of thought for in terms of what points of the game we should try to emphasize and try to highlight. So according to what determination we've come for this point, of course, we do believe that our plans and our schedule going forward may change a bit. So it's very difficult as of now to pinpoint a specific launch schedule. But I can say that, in general, in terms of the development process in itself, everything is going according to our initial plan.

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Operator [7]

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(foreign language) The following question will be presented by Stanley Yang from JPMorgan.

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Stanley Yang, JP Morgan Chase & Co, Research Division - Analyst [8]

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(foreign language) So the first question I would like to ask is a follow-up of what you have just said. For Blade & Soul II, initially you had said that this would be something that you would be launching within the first half of this year. However, what you're saying now seems to indicate that there may be some uncertainties relating that launching schedule. So is it fair to say that the first half launch is something that is still valid? Or is that not the case? The second question that I would like to ask you is about your labor cost and your headcount and, in relation to that, the number of new games that you are launching. Because it seems to be that when you compare yourself versus your competitors, that versus the size of your organization in terms of your headcount and the amount of labor cost that you are spending, the new game releases are much smaller or less. For example, if you compare yourself to your competitors, which have a much smaller market capitalization, they are planning to launch 18 games this year. And in addition to that, if you look at your 2017 labor cost, you are spending around 50% more than what they're spending. So that indicates that you are spending heavily in terms of your R&D investments in total. For Lineage M, I do understand that you have a team that you have dedicated there and that team does need to be compensated for the work that they have done. However, in terms of the overall headcount and also in terms of the R&D, I do believe that there is a need for the company to maybe accelerate your efforts and maybe put more emphasis on the drive that you have or the momentum that you can build for new game launches. Because what you're saying now seems to indicate that for the major titles, there are some uncertainties related to the launch schedules, and I do believe that, that creates an issue of concern as a shareholder. So on the R&D side, we would hope that you would be able to accelerate the overall process so that you could launch more games or a larger amount of new games. So in addition to the 3 major titles that you have talked about going forward, we would like some comments about this issue.

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Jae-Soo Yoon, NCsoft Corporation - CFO [9]

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(foreign language) In terms of what you have just commented, for example, pointing out what you have just said, I do think that there are some areas that we do agree with, and I do believe that what you have may be a valid comment. For example, for Blade & Soul, in terms of the launch schedule or the need to maybe accelerate our overall development and launch of new games and increase the overall number of size of games that we do release. In addition to that, the argument that versus the labor cost that we are inputting, that the number of games is small and thus that may seem to be -- or indicate that we are less efficient. I do believe that this line of thought, all is very consistent with a certain point of view. However, what I would like to say, and maybe in response to what you have just said, is that for the competitor that you had mentioned, which is planning to release 18 games into the market, I do believe that, that company for this year or 2017 had also released a similar number of games. However, what I would like to ask the market as of this time is of those games that have been launched, how many are actually generating a meaningful amount of revenue? Which means that in such a market situation like we see now with the current market trends, I do believe that the -- if we look at how the market is evolving, for the patterns that the users are showing in terms of how they are responding to various games, I do think that the current market is very different from the market last year or the year before. So since the middle of last year going into this year, I think that the market, in terms of the overall dynamic, has changed so that, in such a market environment, rather than having a large number of new games hitting the market and having a very short life cycle, I do believe it should be more meaningful to have maybe fewer games that you launch into the market but create a larger impact in the market in itself. Because having that type of significance in terms of impact is how you actually are able to contribute to the revenue and also in terms of the operating profit. So I do believe that, that may be a more effective way of launching games. And I do believe that this is where NCSOFT's forte lies. So therefore, if you look at the new games that we are releasing into the market, we're not just repeating the mechanics that we had in previous games and just changing the scheme or making changes on a facial way to releasing new games, but we are truly trying to come up with new games that will have a significant or meaningful impact on the market and, as a result of that, create a presence into the market that we can actually dominate. So from that point of view, that is what we are doing with Aion Tempest, and that is also what we're doing with the development of Lineage II mobile. So this is an important factor that we continue to keep in mind in the development of those games. In addition to that, if we look at Blade & Soul II, what we're also doing is looking at the current market environment and think of what our point of differentiation can be for that game. So therefore, for the development in itself, if we were just to launch a game and say, okay, being in the top 2 -- top 10 in rankings would be enough for us, we could actually launch that in the first half of this year without any issues. But what I'm trying to say here is that we're taking a step back and thinking, is this the real -- is this really the way that we want to present these games that we are developing. (foreign language) In addition, if I could add on some comments about the point that you made in terms of our efficiency versus the labor cost that we are inputting in terms of the number of games that we are releasing and whether we are efficient or not, I do think that you do have a valid argument here. But if you look at the reason for the labor cost increase in 2007 (sic) [2017], some of that is driven by the special bonuses that we have paid during that year. And another factor is that during the past 2 years, we have hired around 1,000 people. So that means that most of that headcount is related to our development resources because we have been trying to hire a lot of the outstanding talent that we have seen in the market. And as a result of that, there have been a multiple number of projects that have been ongoing within the company. However, if you look at the situation this year, we do think that the market in itself in terms of the high-quality talent is drying up a bit. So therefore, rather than focusing on hiring from outside, what we do want to focus for 2018 is look at the internal resources that we have and maybe make a quick decision about how our resources management should take place. For example, in terms of the games that we will go ahead of and maybe not go ahead with, make a determination in that area. And if we need to relocate people to other teams, being able to do that in an efficient manner is something that, as a project, we want to focus on in 2018. So that would be one of our initiatives.

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Operator [10]

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(foreign language) The following question will be presented by Han Joon Kim from Deutsche Securities.

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Han Joon Kim, Deutsche Bank AG, Research Division - VP and Research Analyst [11]

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(foreign language) There are 2 questions that I would like to ask. First is about your view about the trends that Lineage M will show. You did mention that you do believe that there will be a natural decline from -- during 2018 as we end into the end of the year and that is something that you will try to control or manage. But the question that I would like to ask is, do you think that a decline is inevitable? And if so, what would the reason be for that? Is that -- is it that users will be moving on to other games? Or do you believe that the users that do stick with a game would be spending less on the game? Because if you look at your past experience with Lineage I as a PC online game, I do believe that you do have other types of experiences. So why do you believe that there will be a natural decline and maybe stabilization of this game? That would be the first question that I would like to ask you. And the second question is maybe a follow-up from what you have just said in your answer to the previous question. I do agree that maybe rather than having a large number of games out into the market, it's better to focus on a fewer number of higher-quality games. But if you look at how things have been developing within the online game space in general, especially for the PC game cycle, in the beginning, there was a very -- a ramp-up period, during which there was a lot of activity, then we reached a point of saturation. And then after that saturation point, it seems that people were moving on to other formats, whether it be mobile or maybe other types of games. And I do think that, that is something that has taken place. Within the market right now, I think that there is a lot of discussion that maybe mobile MMORPG games have run its course. But if you differ from that view and you don't think that mobile MMORPG, that this is the end of that or maybe it's not at saturation yet, why do you believe so? For example, in terms of the quality or in terms of the points of -- differentiate going forward what you believe could differ based on your experience.

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Jae-Soo Yoon, NCsoft Corporation - CFO [12]

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(foreign language) So maybe to address your first question about Lineage M, I do believe that there was some misunderstanding. So I'm not saying that we're expecting that there will be a decline in Lineage M going forward. For example, if you look at the fourth quarter indicators and the first quarter metrics that we see, as mentioned before, there's no real difference. It has been sustained. And therefore, of course, our target would be to ensure that this revenue trend in terms of the revenues and also in terms of the users -- user base is something that we can maintain throughout the year. In addition to that, of course, we do also have the ambition that through various in-game item events and other types of promotions, that we would actually be able to create an uplift for the game in itself. However, what I was trying to say before is that if we look at the full year for 2018, starting from the first day of the year to going maybe to December 31, just to be a bit conservative, I do believe it would be maybe unrealistic to think that the overall base, that no one would move from where we have right now and that there would not be any changes at all. So I was just trying to indicate that to be conservative in the views that we shared with you. And I do hope that you understand it from that point of view. However, again, if we look at our current indicators, they are very stable, and they are very strong. (foreign language) In addition, I think that you asked a question about how we see the MMORPG mobile, MMORPG developing and how that will change going forward and -- versus the past historic experience that we had. When we were to -- if we were to compare it to that experience, what the industry trend would be going forward. I think for that point, there are 2 things that I would like to highlight: First is that if we look at the IPs that we have developed for our previous or our more traditional PC games, I do believe that the story lines that we have for these IPs and the gameplay in itself for the overall dynamic is something that, regardless of time, still remains very valid. So there is a timeless quality to what we have there. However, what our developers do feel is that reflecting the changes in technology development and based upon the experience that people are having today versus what they had at the back -- in the past, even if we take the same type of storyline and content, if we are able to add a more modern feel to that and also apply the new technology that is available to the market, we can actually come up with an interpretation -- a new interpretation of a much more enjoyable and also appealing type of game. So that is the actual process that we are trying to go through with our new game development. And if you look at the new games that we will be launching going forward, I do believe that you will be able to see how NCSOFT is reinterpreting the IPs that it has had in its franchise. In addition to that, for the mobile game market, of course, we're not limiting ourselves only to the MMO market because we do have the past experience of being a latecomer into the mobile market. So we have taken that lesson to heart. So that is why, in addition to the MMO games that we are developing, we are also developing games that will be using virtual reality or maybe augmented reality type of technology. And in addition to that, when we develop new games, for example, for our PC titles, we do have at the front of our mind the possibility that this is a game that also could also maybe be applied or expanded into a console-based platform. So therefore, we are being mindful of the new technology that is available and the wider variety of platforms upon which people are playing games. For example, artificial intelligence is another thing that we do have in front of mind. So our development process does reflect this type of change and this type of development. This year, if we look at the overall situation, the market in itself does not have a very large user base for this type of game -- or these types of games yet. So therefore, even if we were to release something into the market, we don't believe it would have a significant impact in terms of contributing to our revenue. However, again, we're not limiting ourselves or just focusing on MMO games. But we are looking at a very broad market in terms of the global market. We are looking at a wide variety of technology, of genres and experiences and focusing our development to ensure that we address all of these different factors.

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Operator [13]

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(foreign language) The following question will be presented by Eric Cha from Crédit Suisse.

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Minuh Cha, Crédit Suisse AG, Research Division - Research Analyst [14]

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(foreign language) I would like to ask one question about the dividends that you have disclosed today. I would like to understand what the thinking was behind in setting the amount of dividends that you did set for the cash dividend. In addition, I would like to understand your overall shareholder return policy. For example, would you be taking the overall thought process that you have had behind your dividends this time and maybe even applying that and just taking that as a general stand? Or do you believe that there could be a change in your stance going forward?

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Jae-Soo Yoon, NCsoft Corporation - CFO [15]

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(foreign language) To talk about our overall stance in terms of our shareholder return policy, I do believe that this started back for the fiscal year 2014 in which we [dividended] out in 2015. There was a time that we did provide a general overview about what our stance was. And during the past 3 to 4 years, we have actually been very consistent in what we have been trying to do. So the stance has really been the same. Of course, we can't go through the detailed process about how we calculated the actual amount, but I do believe that -- just to give you a general understanding, we look at the free cash that the company has been generating throughout the year, and then we take into consideration how much we do believe we will need for the future. For example, for future investments and also investments that will be needed and also for any potential M&A opportunities that we may feel attractive. So we allocate about approximately 1/3 for both of those items. And then we take the remaining balance, and that is what we try to share with our shareholders through various shareholder-friendly measures. This is a stance that we have maintained consistently throughout, and I do believe that it will be our stance going forward with the caveat that, of course, there would not be any significant changes in our investment requirements going forward. So if that does not change, then we will maintain our current stance.

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Operator [16]

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(foreign language) The last question will be presented by Jaewon Bae from Veritas Asset Management.

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Jaewon Bae, Veritas Asset Management LLP - Asian Analyst and Assistant Portfolio Manager [17]

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(foreign language) I would like to ask you a follow-up, the shareholder policy that you have just mentioned right now. In terms of the dividends that you will be paying out for -- on a per share basis, that being what it is, do you have any other plans to maybe add on to that? For example, conduct a share buyback or engage in other types of shareholder-friendly initiatives. That would be the first question. And the second question is that you did mention a possible M&A opportunity. Is there something specific that you are looking at right now in terms of targets? If so, what type of size? What type of genre? And what type of synergies would you hope to derive from such an opportunity?

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Jae-Soo Yoon, NCsoft Corporation - CFO [18]

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(foreign language) To address your question about whether the share buyback would be something that we are thinking of, of course, a share buyback is, whenever we have an internal senior management discussion or when we have a Board of Directors meeting, something that is always discussed. Not always, but from time to time, is discussed and put on the table. And therefore, when we do discuss this, what I can say is that our general stance is that as part of our general shareholder return policy, that this is an option that we always review. The way that we look at this issue would be that there could be various options. For example, one option would be that we would decrease the amount of cash dividend that we actually pay out. And as a result of that, on a year-to-year basis, maybe gradually, we could buy back some shares. Or a second option will be that we would actually do a one-off large-size share buyback or a special share buyback, similar to what we did a couple of years ago. And another option would be that for the share -- for the cash balance that we have, whether we should actually use this to do a share buyback when there might be investment needs down the road that we could better use for this cash is also an issue of concern or is something that we always think of. So these are the 3 different types of options that we always put on the table to think through what the best would be for the company at that time. So to give you a short answer to your question, as of now, we don't have any immediate plans to engage into a share buyback. However, it is something that is always at the top of our minds when we do think of our shareholder policy. So therefore, if we do believe that, that is the way to move forward, of course, we will let you know as soon as we make a decision. (foreign language) The second question you asked is about our M&A -- our thoughts about M&A opportunities. Of course, if we look at M&A -- small-scale M&As, this -- and acquisitions, this is something that we have continuously or routinely engaged upon. But I do believe that your question is more focused on a significant size M&A that would actually have an impact on our overall revenue or the overall asset size of the company. Up until now, I do believe it is true that the company has been in a more opportunistic position when we viewed M&A opportunities. However, from this year, we do want to change a bit to be a bit more aggressive and maybe go out into the market more to seek and try to develop opportunities in itself. So therefore, versus the stance that we have in the past, I do believe that, this year, we will be a bit more aggressive and active looking at both the local market and also the overseas market. In particular in the overseas market, I do believe that based upon our overseas strategy, the position that we have in the market, the revenue that we see there, the growth opportunities and also in terms of the development talent that want to secure, that we will be engaging and actively reviewing and pursuing M&A opportunities.

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Operator [19]

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(foreign language) This brings us to the end of the fiscal year 2017 fourth quarter earnings results by NCSOFT. Thank you.