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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello everyone and welcome to Nexon's Earnings Conference Call. Thank you for joining us today. With me are Owen Mahoney, President and CEO of Nexon; and Shiro Uemura, CFO.
Today's call 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 conference call is intended to provide investors 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 www.ir.nexon.co.jp/en/ following this call. Unauthorized recording of this conference call is not permitted.
I'd now like to turn the call over to Owen.
Thank you, Kawai san and good afternoon. On today's call, we will review Nexon's performance in the second quarter and our outlook for the third quarter. We'll provide a summary of the performance of Nexon's multiple virtual world franchises and an update on highly anticipated new virtual worlds scheduled for release in the months ahead. And we will conclude with some perspective on how Nexon represents a truly unique asymmetric upside opportunity for investors.
Nexon delivered another strong performance in Q2 with revenues up by 12% and operating profit up by 22% year-over-year. This represents our fifth straight quarter of double-digit topline growth.
Our financial performance was within our expectation as we emphasized franchise management, specifically strengthening our user metrics and engagement across our biggest virtual worlds.
I'll start with MapleStory in Korea. In Q2, revenue declined 6%, but active users significantly increased year-over-year. We decided to focus on increasing user engagement and active player account ahead of an important update in July. On July 13th, we released that update, which is known in the community as the 6th job update and we saw a solid increase in performance metrics.
Based on careful community management and the strong base of engaged players that we built in the first half of the year, MapleStory is well-positioned for double-digit year-over-year revenue growth in Q3.
In China, Dungeon & Fighter performed within our expected range. Second quarter revenue was down year-over-year against a tough comparison with last year when our China business grew 43%. The team prioritized long-term player engagement over short-term revenue leading to a solid year-over-year increase in MAUs.
MapleStory and Dungeon & Fighter are two of Nexon's most resilient franchises and illustrate Nexon's unusual business model. Unlike other segments of the game business that require a publisher to replace declining title sales with new products, these franchises provide a stable base on which to build a growing business. They represent the gold standard of long-term live service community management leading to consistent returns that so many entertainment companies strive to emulate.
Prioritizing long-term engagement and community management over short-term monetization is one way we ensure franchises like MapleStory and Dungeon & Fighter will endure and grow well into the future.
In Q2, several other virtual worlds helped drive our top line growth. FIFA Online 4 and FIFA MOBILE continued to perform well in Korea even after the World Cup. The two titles recorded a significant increase in monthly active users year-over-year and have actually doubled the number of playing users since 2021 a year prior to the World Cup.
One core component of this success is Nexon's careful management of one of the industry's most passionate player communities. While the World Cup provided a great promotional opportunity, the sustained growth we are seeing today after the World Cup is attributable to our outstanding live operations support and community management.
Last month our partners at Electronic Arts announced that in September these titles will be branded as EA Sports Fc Online and EA Sports Fc Mobile. We don't expect any material impact on the titles, when the brand change is implemented.
Other contributors to our Q2 performance included Wars of Prasia, a new virtual world which exceeded our outlook. HIT2, which expanded into Taiwan Hong Kong and Macau in May, also exceeded our outlook. Blue Archive, now available in Japan, Korea and the West continues to do well and grew significantly year-over-year, in all regions.
Blue archive also debuted in China last week, and has been very well received by players. Also in Q2 our MINTROCKET, label in Korea released Dave the Diver a highly unusual RPG that combines deep sea exploration, with sushi restaurant management. The game is a global hit and hugely popular on steam recommended by more than 97% of players, which puts it at the top 0.12% ranking of all games launched on steam.
The game is easy to learn and a lot of fun. I encourage everyone and make some time to play Dave the Diver. It's currently available on PC and Mac and coming soon to the Nintendo Switch. All in, Q2 was an excellent quarter highlighted by strong performance across our franchises especially, around player metrics. Our focus on building robust communities, over short-term monetization has served Nexon's players and shareholders well for more than two decades.
Our unique portfolio of virtual worlds combined, with our live operations experience provides us with a strong foundation that generates significant revenue operating income, and cash flow. Nexon's franchises are extraordinarily healthy. We are looking forward to building on that robust foundation by launching new virtual worlds, to global audiences.
Next, I'll provide an update on two key new titles in development starting with THE FINALS, the first game from Embark Studios in Sweden. With very little marketing to date, close to three million players have registered to play test THE FINALS and more than 1.5 million players have put it on their steam wish list, making it among the 11 most wish-listed games globally.
In mid-June, the team completed a second closed beta test, which provided key insights ahead of the launch. We are particularly encouraged by a sharp uptick in key KPIs such as early retention. Feedback, from the summer test will be assimilated into the game ahead of one more planned beta test before the game launches on both PC and console, with full marketing campaign later this year.
The second title for Embark Studios, ARC Raiders is also making solid progress. We held a three-day closed alpha test in late June to validate the first hours of gameplay, test core game loops and retention. Again, the test revealed a wealth of insights and the team will use it in preparing ARC Raiders for release. I want to make two key points about Embark and our operational approach around the world.
First, the Embark team has become the center of creative excellence and game innovation for Nexon's global studio organization. The teams in Stockholm and Korea, are working closely together combining their respective strength in global AAA games, with world-class live operations that enable live franchises to grow for two decades or more. We're pleased, with how the teams in Sweden and Korea are collaborating and learning from each other.
Second, we are investing in our marketing capability in the US and Japan starting with several key hires in both regions in preparation for globalizing our franchises and launching new virtual worlds.
Like in other industries, marketing of games is changing rapidly with new channels, new modes of it interacting with customers and new workflows. This disruption represents opportunity for Nexon around the world and we want to be staffed with the appropriate skill sets for this fundamentally different marketing environment.
Before I hand it off to Uemura, I want to reiterate a key point about Nexon's current plan in our future. Nexon is a unique company within the games business, very different from traditional hits-driven game companies. Our business of virtual worlds from the people we hire, to the way we manage global franchises to the KPIs that matter most to us, is so different from traditional games as to constitute an entirely different business.
Our experience in managing global entertainment franchises, and our ability to grow and manage live communities with tens of millions of players over two or more decades each makes us highly unique in the entertainment industry. Predictable and consistent performance from our flagship franchises has generated significant free cash flow, adding hundreds of billions of yen to our balance sheet. Because our product life cycle operates so differently from the traditional games model, we don't have to replace old revenue from decaying games with new revenue. The new revenue from titles in the pipeline can build on top of the existing revenue of our live virtual worlds.
The combination of solid existing franchises and anticipated new virtual worlds, creates an asymmetric upside opportunity for investors. Our downside is protected by the strong foundation of multiple franchises, delivering steady returns and stable growth. Our upside is in multiple new virtual worlds any one of which could become a hit. If one hits, it could create a step change increase in revenue and profit profile. If more than one hits, Nexon will be a whole different company. This quarter demonstrated yet again, the stability of our existing virtual worlds. And that fact combined with the potential of our new virtual world makes Nexon uniquely well positioned in the coming quarters and years.
With that, Uemura will now take us through a detailed report on our performance and our outlook.
Thank you, Owen. Next, I'd review our Q2 results. For additional details, please see the Q2 2023 investor presentation available on our IR website.
In Q2, we achieved record breaking second quarter revenues. Group revenues were JPY 94.4 billion, up 12% year-on-year on an as-reported basis, and up 10% year-on-year on a constant currency basis. Our performance was driven by the growth of people online for FIFA MOBILE and Blue Archive, as well as good contributions from Wars of Prasia and HIT2.
Overall, our top line performance was within the range of our outlook. Wars of Prasia and HIT2 and the Rest of World exceeded our expectations, while revenues from MapleStory in Korea and Dungeon&Fighter Mobile were lower than planned. By region, revenues from Korea and China were within the range of our outlook, while revenues by North from Japan, North America and Europe exceeded our expectations. Revenues from the Rest of World came in lower than expected.
Looking at the total company performance by platforms, PC and mobile revenues were both within the range of outlook. Operating income was up 22% year-over-year and within the range of our outlook at JPY 27.6 billion. Net income was JPY 24.5 billion exceeding our outlook, primarily due to an FX gain of JPY 8.1 billion. Year-over-year it was down 7% due to a JPY 27.7 billion FX gain that we recorded a year ago.
Let's move on to results by region. Revenues from our Korea business were JPY 62.1 billion, representing a record-breaking second quarter revenues in Korea. This performance was within the range of our outlook. On a year-on-year basis, revenues increased by 21% on an as-reported basis and by 19% on a constant currency basis.
FIFA ONLINE 4 PC revenue exceeded our outlook and its mobile revenue was within the range. We were able to sustain the good trend even after the World Cup at the end of last year. MAUs paying users and ARPPU all increased year-over-year and it marked record-breaking second quarter revenues.
For MapleStory as the growth in active users following the anniversary update in April was lower than expected we shifted our focus to increase the number of players rather than monetization ahead of an important update in Q3. As a result, the game experienced double-digit year-over-year growth in the number of its active users though revenue was below our outlook and decrease year-over-year.
In the PC and mobile combined revenues of Wars of Prasia, which launched on March 30 exceeded our outlook driven by better than expected user retention. All-in PC revenues in Korea increased by 33% year-over-year driven by the growth of FIFA ONLINE 4 and the contribution from Wars of Prasia. These were partially offset by MapleStory's revenue decrease.
As for the mobile business, FIFA MOBILE maintained its strong momentum even after the World Cup period like FIFA ONLINE 4 its revenue grew significantly year-on-year and marked record-breaking quarterly revenue. Dungeon&Fighter mobiles revenue was below our outlook as user acquisition following the updates conducted in Q2 was lower than expected.
On a year-over-year basis, mobile revenues in Korea slightly increased primarily driven by contributions from Wars of Prasia and HIT2 and growth of FIFA MOBILE, which were partially offset by a revenue decrease in Dungeon&Fighter Mobile. On a quarter-over-quarter basis, mobile revenues decreased by 8% contribution from Wars of Prasia was more than offset by revenue decreases in HIT2, Blue Archive and The Kingdom of the Winds as well as a seasonal decrease in FIFA ONLINE 4 revenue.
Revenues from our China business were within the range of our outlook at JPY 18.2 billion. On a year-over-year basis, revenues decreased by 5% on an as-reported basis and by 6% on a constant currency basis due to a tough comparison with Q2 2022 when revenues significantly grew year-over-year.
For Dungeon&Fighter, revenue was within the range of our outlook. We focus on stable operations and introduced the Labor Day update in April and the 13th anniversary update in June.
On a quarter-over-quarter basis, MAUs paying users and ARPPU decreased due to seasonality. On a year-over-year basis and the use increased and paying users slightly increased, while ARPPU decreased.
Revenues from Japan increased by 8% year-over-year driven by the growth of Blue Archive and MapleStory. Revenues from North America and Europe decreased by 5% year-over-year due to revenue decreases in choices and other mobile games. Revenues from the Rest of World increased by 11% year-over-year driven by a contribution from HIT2, which launched on May 23. This was partially offset by revenue decreases in MapleStory and older mobile titles.
Moving on to our FY 2023 third quarter outlook. We expect Q3 revenues in the range of JPY 109.9 billion to JPY 119.8 billion representing a 13% to 23% increase year-over-year on an as-reported basis in the 7% to 17% increase year-over-year on a constant currency basis. Driven by the growth of MapleStory and FIFA Mobile in Korea as well as new launches, we expect year-over-year double-digit growth for six consecutive quarters. We expect our Q3 operating income to be in the range of JPY 36.6 billion to JPY 44.5 billion representing a 16% to 41% increase year-over-year on an as-reported basis and a 12% to 36% increase year-over-year on a constant currency basis. I'll discuss the details on this shortly.
We expect net income to be in the range of JPY 28.2 billion to JPY 34.1 billion representing a 32% to 17% decrease year-over-year on an as-reported basis and a 34% to 20% decrease year-over-year on a constant currency basis. The year-over-year decrease in net income is due to a JPY 26.4 billion FX gain that we recorded a year ago. As you know our guidance does not factor FX gains or losses. In Korea, we expect growth from MapleStory and FIFA Mobile as well as a contribution from Wars of Prasia. As a result, we expect revenue in Korea to be in the range of JPY 68.8 billion to JPY 74.2 billion representing a 10% to 18% increase year-over-year on an as-reported basis and a 3% to 11% increase year-over-year on a constant currency basis.
We expect MapleStory's revenue to grow double digit year-over-year driven by an increase in active users in Q2 and a successful major content update introduced in July. We anticipate a decrease in combined PC and mobile revenues from FIFA Online four due to the comparison with an extremely strong performance in Q3 2022. The change in title due to rebranding of the game in September is not expected to have any material impact on performance as well as we will continue to offer the same game plan as before through updates. We expect a continued contribution from Wars of Prasia which launched in Q1 across mobile and PC platforms.
As a result, we expect a year-over-year increase in PC revenues. Regarding the Mobile business, we expect Q3 revenues to decrease year-over-year. We expect year-over-year growth in FIFA Mobile and a contribution from Wars of Prasia. We expect these to be more than offset by year-over-year revenue decreases in HIT2 and Dungeon & Fighter Mobile which was launched in 2022.
Turning to China, we expect Dungeon & Fighter to increase slightly year-over-year as we continue to focus on enhancing user engagement in Q3, amidst the active users trending steadily. We also anticipate the contribution from Blue Archive which launched on August 3 and MapleStory launches on Maple which is scheduled for launch on August 17. Accordingly, we expect revenues from our China business to be in the range of JPY 22.6 billion to JPY 25.5 billion representing a 15% to 29% increase year-over-year on an as-reported basis and a 13% to 28% increase year-over-year on a constant currency basis.
For Dungeon & Fighter, we introduced a summer update on July 6 which includes package sales. We're scheduled to introduce the National Day update in September as usual. In July, the number of active users and paying users increased year-over-year while ARPPU decreased. We will continue to focus on stable operation in Q3. In Japan, we expect revenues in the range of JPY 2.4 billion to JPY 2.6 billion representing a 15% to 6% decrease year-over-year on an as-reported basis and 18% to 9% decrease year-over-year on a constant currency basis. We anticipate growth in FIFA Mobile to be more than offset by decreases from terminated mobile titles.
In North America and Europe, we expect revenues to be in the range of JPY 6.8 billion to JPY 7.4 billion representing a 35% to 47% increase year-over-year on an as-reported basis and a 29% to 41% increase year-over-year on a constant currency basis driven by a contribution from Dave the Diver which launched on June 28. We expect revenues in the rest of world in the range of JPY 9.3 billion to JPY 10 billion representing a 30% to 41% increase year-over-year on an as-reported basis and a 23% to 33% increase year-over-year on a constant currency basis driven by a contribution from HIT2 which launched in Taiwan, Hong Kong and Macau on May 23.
In Q3 2023, we expect operating income to be in the range of JPY 36.6 billion to JPY 44.5 billion representing a 16% to 41% increase year-over-year on an as-reported basis and a 12% to 36% increase year-over-year on a constant currency basis. An increase in Q3 revenue is expected which will contribute to an improvement in year-over-year operating income. Some of this is expected to be offset by increased costs related to business growth.
First, we expect increased HR costs related to additional headcount for the development and operation of our major Virtual Worlds, as well as bonus accruals for contribution to great performances.
Second, we expect increased marketing expenses for MapleStory, which has introduced a large update, and FIFA ONLINE 4, which is scheduled to change its title in September due to its rebranding. Operating income is expected to grow year-over-year as we anticipate revenue increase to be partially offset by the increases in costs due to business expansion.
Overall, Nexon has been building a business model in, which we can grow stably by launching new Virtual Worlds onto a solid foundation of existing franchises. In Q2, we focused on stable operation, grew revenues from the portfolio of our three major franchises, and increased the number of users year-over-year for all three titles. Driven by the stable growth of our existing portfolio and contributions from new games such as Wars of Prasia and HIT2, which launched in Taiwan, Hong Kong, and Macau, overall revenues and operating income grew double-digit year-over-year.
In Q3, we expect continued growth of our existing portfolio through stable operation. In addition, we expect our revenues and operating income to continue to grow double-digit year-over-year driven by contributions from new games such as DAVE THE DIVER, as well as Blue Archive and MapleStory: The Legends of Maple in China.
In contrast to challenges in other sectors of the entertainment industry, our proven ability to manage and steadily grow blockbuster franchises and our pipeline of new Virtual Worlds represents an asymmetric upside opportunity for revenue growth. And current JPY exchange rates offer another incentive to invest, while our company performance has improved dramatically since 2020, the impact of ForEx on Nexon’s enterprise value in US dollars has effectively marked down the value of a well-performing company.
Recognizing these circumstances and the unique value of purchasing Nexon shares in this market, our Board of Directors has authorized a one-year acceleration of the JPY100 billion, three-year share repurchase plan announced on August 09, 2022. The new completion date for purchasing remaining shares is August 2024.
To date, we have repurchased a total of JPY50 billion worth of shares. The remaining shares are expected to be repurchased by the new deadline, including JPY20 billion worth of shares, which the Board has authorized for purchase when the market opens tomorrow, August 10th, and is expected to complete by October 27th.
In addition, we are scheduled to pay the dividends of JPY10 per share per year. We will continue to be committed to consider shareholders' return proactively.
This concludes my comments. Back to you Owen.
Thank you Uemura-san. I’d like to close by providing some perspective on the global entertainment industry and Nexon’s place in it. The contrast is striking. Even while Nexon’s business has been thriving, the wider entertainment industry has been undergoing unprecedented challenge and turmoil. Many of even the most dominant film franchises are struggling at the box office, the most dominant theme parks are reporting sharp declines in attendance, and many streaming media companies are significantly scaling back their spend.
Meantime, a key point of contention in the Hollywood writers and actors strike is the rise of AI, and its potential to replace everyone, from human actors and voice actors, to script writers. The traditional entertainment industry is grappling with tectonic upheaval just as consumer demand moves away from the old, legacy business models, toward newer, more dynamic, interactive entertainment.
Instead of a threat, new technologies represent a massive opportunity for makers of online games and Virtual Worlds. Vast increases in computing and networking power are now available on handsets that literally everyone carries in their pockets, and the exponential rise of AI is a bonanza to makers of Virtual Worlds, enabling much deeper experiences, delivered more quickly and inexpensively, to a much wider audience.
The upheavals in technology and media mean the next entertainment industry leader will not look anything like the last generation. The great entertainment company of the future will exist in the Virtual World, not in the physical, delivered from the cloud, not in theaters or theme parks. It will deliver highly interactive, lean-forward, experiences where you create your own story, not lean-back experiences where you receive a mass-produced, pre-packaged story.
While it’s clear to most traditional tech and media companies that a tectonic shift is happening, delivering this new generation of experiences requires a wholly different set of skills, and a shrewdly-selected set of technologies. Even the smartest and best-funded outsiders have found it impossible to deliver even the most rudimentary Virtual World in practice.
The hundreds of billions spent on the so-called metaverse and on VR, with literally nothing to show for it, are Exhibit A of both the appeal of the vision and how specialized and unique the required skill set is.
Nexon has been quietly building on these experiences for years, refining the skill sets used to operate such world at mass scale in building real-world tools to make the vision a reality. And along the way we've been getting feedback from a highly demanding group of customers, who rightfully want us to obsess about their requirements over anything else.
To successfully deliver this vision, to these demanding customers is to become the leader of the next generation of entertainment companies. I raised this on today's call, because the confluence of the changing Global Media and Technology environment and Nexon's emerging leadership, leads us to conclude that there has never been a better time to invest in Nexon.
As a result, Nexon's Board of Directors has accelerated the completion of ¥100 billion buyback from 2025 to 2024. The deadline for completion of the remaining ¥50 billion is 12 months from now instead of 24 months from now.
And we authorized an immediate repurchase of ¥20 billion worth of Nexon stock under the program beginning tomorrow morning, August 10. In the near-term, we think about, it as an opportunity for massive asymmetric upside. In the long-term we see the current situation as a turning point and think now is the opportunity to become the new leader in the Entertainment Industry.
Operator, we're ready to take your questions.
Thank you, Owen. Next, we would like to open up the lines to live Q&A. Q&A session will be conducted with Japanese-English or English-Japanese consecutive interpretation. Please be noted, that interpretation will come between your questions and our answers. Please hold for interpretation before you hear our answers. Our answers will also be followed by interpretation, so please hold, until the interpretation finishes before moving on to the next question. For those of you, who have more than one question, we will take your questions one-by-one.
Now, we'd be happy to take your questions.
Today, we will accept questions from the conference call participants. [Operator Instructions] [Foreign Language] The first question is from Yamamura Junko, Citigroup Global Markets Japan. Please, Yamamura Junko.
[Foreign Language] And thank you for the presentation and thank you for allowing me to ask you questions. I am Yamamura of Citigroup Japan. And I have three questions altogether.
The first question is on the forecast of Q3. And looking at the numbers it seems that you assume that there will be an increase of ¥10 billion quarter-on-quarter in the Korean business. And I believe that, the assumption is that the PC will grow by ¥20 billion. And I believe that there is some element of seasonality as well.
Looking at the quarterly numbers you try to rectify the imbalance between the normal server and non-normal server regarding MapleStory and maybe that might have impacted the numbers. And while I see the numbers of Wars of Prasia and looking at some external data I think that the mobile business is not that strong.
So I believe that the assumption in Korea going forward for Q3 is that the PC will be the driver in the increase of revenue. And also in the past I think there were some questions regarding the longevity of RPG games as well. So do we still have to back that in? So please tell me what were the assumptions that you made in coming up with the numbers for Q3 in Korea?
Regarding the assumptions that we made for Korean business in Q3, as you have mentioned, we factored in seasonality. And the major contributions will be made by two titles, namely MapleStory and Wars of Prasia. And regarding Wars of Prasia, it is across platform game which can be enjoyed both on PCs as well as mobile. And we have more paying users on PCs.
And regarding MapleStory as mentioned before, during Q2, the number that we have expected to gain leveraging on the 20th anniversary was not as high as we had expected. Therefore during Q2, we put our effort in making improvements in KPIs and that was the background upon which we operated the game during Q2 so that we will be well prepared for Q3, which is a high season for the gain.
So for Q3, we are expecting 2-digit growth year-over-year. And as we do not usually give you any details about each title that will be at the end of my explanation. But please do understand that regarding the assumptions we made for the strong growth of PC in Q3 depends on the two factors that I have mentioned already.
Regarding the point you mentioned about longevity of MMORPG. I think you were referring to Wars of Prasia. And it is indeed true that in Korea MMORPG is a very competitive domain. Therefore it is very difficult to uphold the longevity of the game. So regarding Wars of Prasia we just launched it. And during the initial launch we were able to enjoy stronger figures than we have expected.
Given that background we believe that there will be some decrease in Q3. And so going back to your question Yamamurasan, when you look at Q-on-Q comparison there will be some decline in Wars of Prasia, but we believe that it will contribute to the year-on-year growth given the fact that it is a new title. So mainly the driver for the increase Q-on-Q will be led by MapleStory.
[Foreign Language] Thank you, for your response. Let's move on to the second question, which is China. It seems that the numbers for Q2 have been slightly weaker than now what has been expected, whereas in Q3, you are assuming a stronger trend. And it seems that you try to suppress monetization during Q2 and then drive monetization in Q3. So if you follow that pattern, is it true to believe that you might try to suppress monetization activities in Q4 as well. So, when you look at the quarterly changes, it seems that volatility is relatively high. But is it correct to understand that even -- given the situation, you still believe that you can stably record the revenue of ¥100 billion for the full year? And is the user trend that you are seeing right now is as you have expected?
Regarding China Dungeon & Fighter, as we have been constantly stating, we are aiming at stable operation. And looking at the current situation on Dungeon & Fighter in Japan or rather in China, we see a definitive sign of recovery. And that is represented in the metrics that I can talk about. For example, although ARPPU is declining, we are seeing an increase in both active users, as well as paying users. So, we can say that the China Dungeon & Fighter is in a very healthy situation. So in Q2, we have operated the game as expected. And year-on-year, in Q3, we believe that we can enjoy a slight increase. So, we will try to pursue stable operation of the game going forward, so that in mid to long-term perspective, we will be able to reenergize the game and try to enjoy yet another growth. And so, we do not want to make any drastic major changes. So we will continue pursuing stable operation in Q3, as well as quarters beyond that, so that we can be well prepared for the high season of 2024.
[Foreign Language]
Do plan to launch by the end of the year after one more beta as we said in our prepared remarks. So that's the first point.
Second, I'd say in terms of our intentions, I want to be very clear. Our objective is to create a community of people a community of fans who keep coming back to the game for months and years and decades. That is our objective. And so we're playing for the long term. That is definitely how we are organizing our efforts. We are working on a very robust content plan post launch. It's very important for us to have a long-term success. And in fact that's where a lot of our efforts are focused right now. That's the second point.
And the reason why we do that is, you've heard us say many, many times over the years is that we know from experience that the revenue that we generate over time from an engaged and happy fan base, who keeps coming back that revenue over time is going to dwarf by many, many times over by an order of magnitude or two orders of magnitude any near-term revenue we make from the first couple of quarters after launch. And so the way we think about the game is actually very different than the way that a more traditional game company thinks about a product launch.
But having said all that, I think it's fair to say as we said in our prepared remarks that the anticipation for this game is very high. So we think that, it will garner a lot of interest when it launches. And we know, there's a lot of very, very excited fans out there to see this game out. And so we think it will generate a lot of interest when it first launches.
Thank you very much. I understood it very well.
Thank you very much.
The next question will come from Mr. Seyon Park from Morgan Stanley. So, Mr. Seyon Park, over to you.
Hi. Thank you for the opportunity to ask questions. I have two questions. The first is, I think is given all the success that you had I guess, I kind of just maybe wanted to cover some of the other side where given if you look at the new games that are out this year, obviously, don't have done very well some haven't. And I was just kind of curious where or the likes of, let's say KartRider: Drift which I think compared to expectations hasn't yet been able to perform. Are you still kind of working on these games so that at some point you can come out with a content update and try to go again to get an audience? And I think for like Blue Archive in China as well, it's had a I think a decent start but then we started to see, I think at least on the charts the rankings did fall a little bit. And I was just kind of curious whether for that game as well given that it had so much success outside of China whether that's an ongoing progress or maybe it's a game, which over time that you plan to monetize more? I guess just given that you've had cases where you've been able to revive some of these franchises. I was just kind of curious for these titles which have not had as strong as a start as well. That was my first question.
Second question, I think, Owen you mentioned about AI. And clearly this year we are seeing AI is the biggest I guess trend, which is being talked about particularly on Wall Street. And I was just kind of curious whether you had any thoughts about how Nexon clearly been using AI. I guess, the buzz this year is really more related to the generative AI. And I was kind of curious whether you see that where do you see the opportunities of potentially generative AI changing the landscape for the videogame industry? Thank you.
[Foreign Language] Okay. I'll take both of your questions. The second one we could talk about for a couple of hours or a couple of days. So I won't do that, but I'll try to summarize but I'll start with your first question.
Regarding KartRider and Blue Archive both franchises we are deeply committed to. And in both cases we feel like they're a very long game, meaning, we're deeply committed to content updates. I would encourage you and I know you know this say for sure in a virtual world like Blue Archive not to look at short-term app rankings as an indicator for long-term success. It's usually not a good indicator sometimes can be, but there's all sorts of noise in those rankings to be very much wary of. What really matters is retention and content plans and how engaged the community is and that's what we watch very closely.
In terms of KartRider, yes, we are very committed to this franchise. We are working very hard on the content update as I talked about we're deep at work on incorporating the feedback that we got loud and clear firm users around the world working very hard on issues like user interface and so on. And this is a franchise we will continue to be very committed to because it is so big and so beloved by folks and we think it has great potential.
[Foreign Language] Okay. And then second on generative AI. This is as you mentioned it's definitely a buzzword. We get a question about it all the time now. This is up there with let's see should we get on the list. We've talked about this before San. Esports, crypto, VR, Metaverse they kind of come and go. So, it's definitely within that thing that people that captures observers imagination and then ask game companies what their strategy is on that topic. So, why don't I say that first and ask for translation then I'll give you more of an answer.
And in the case of generative AI, I would pause it that the reason why degenerative AI is so interesting to people is because it resembles sort of like the Metaverse that resembles popular Sci-fi. As you recall the topic of VR has popped up three times and they followed in the history of VR, three major Sci-fi books. And generative AI, it looks the most like the HAL9000 in Movie 2001 or like typical robots that you see. And so it captures all of our imagination.
But we have been as you recall including when we spoke at the Morgan Stanley conference in London in 2019, we spoke in depth about the revolution that we think AI represents for the video games industry. And I think a lot of people's eyes glazed over when they heard that. They thought it was kind of boring. We weren't talking about generative AI, but I will tell you AI is really real. It is a bonanza to the games industry.
Generative AI is one vector on -- that could be very, very helpful for the games industry, but this is a revolution. And what I was saying in my prepared remarks is I can tell you my friends who are actors and writers are very worried about generative AI, but it is an unmitigated bonanza for the games industry and it goes way, way beyond generative AI. And so I think a lot of the observation is missing the point. And with that we could go into much more detail at a longer opportunity.
Thank you. And the reason I'm asking you is I think in the past, we never had these kind of big trends you've been quite on the spot with your observation. So, I do appreciate the color.
Thanks. And thanks for your good questions as always.
[Foreign Language]]
[Foreign Language]
[Foreign Language] The next question is from Mory-Sen [ph] of JPMorgan Securities, Japan. Please, Mory-Sen
[Foreign Language] Yes. Thank you and I have one question on the acceleration of your repurchase of Nexon stocks. And I believe that you have mentioned, that in your prepared remarks Owen, and I want to know more specific background upon which what has actually triggered the company to accelerate the repurchase of Nexon stock? And I know that unfortunately looking at the stock price right now, we are seeing some adjustment. And do you think that the current situation of the stock market pushed you to accelerate the repurchase, or is it because of the high expectations and the competence that you have on FINALS, after you completed the two beta tests you were able to get very good response. And because of that did you decide to accelerate repurchase?
Or regarding the changes of the industry, you see that the changes are occurring much faster than you had expected. So you believe that now, is the right timing to invest in your own company stock. I know that given your situation you will not be able to give me any clear and definitive answer, but if you can shed some light as much as possible on the background upon, which you accelerate the repurchase plan, I will really appreciate it.
Sure, I'd be happy to. Just to reiterate, what we announced today, we announced that we doubled the rate at which we're committing to finishing the remaining JPY 50 billion from two years from now to one year from now, in August 2022. So, we're doubling the rate at which we're doing our repurchase. And we also announced that we're that $20 billion of that remaining $50 billion amount starts tomorrow morning and we will complete that within three months. So that's the announcement, we made today. I'll let that translate and then I'll get to the rest of your question.
The second thing, I can tell you is that we have a very active dialogue going on about this, in our Board meetings especially, recently given the recent stock price performance. The third thing, I'd say is, for all the reasons we said in our prepared remarks and we've been saying a lot recently, we're very happy with our own performance and we're very happy with our position within the industry and we think both our own execution, while it can always be better we're very proud of and we are really happy that the trends overall in the entertainment industry, we feel really favor us. And so we feel our future is very bright. [Foreign Language] Third, I think it'd be helpful to understand a little bit about just the math that's going on right now. So let's walk through the math just a little bit. We were doing some discussion about this internally the other day. And let's just take a snapshot compared to three years ago in August 2020, the earnings call that we had exactly three years ago in August 2020.
Okay. At that time our stock was trading almost exactly the same as it is today. We were at 24.19 on August 11th. And yesterday we closed at 24.95. At that time we had JPY474 billion in the bank. Today three years later we have JPY586 billion in the bank and we bought back in the intervening period, an additional JPY150 billion between three years ago and now and we retired all the shares that we bought.
[Foreign Language] So our enterprise value in Japanese yen terms has gone down in the last three years by JPY121 billion from JPY1.67 trillion to JPY1.54 trillion. So the question to us is, is the company worth less than it was three years ago?
[Foreign Language] Now let's talk about company performance. Our revenue has gone way up in the last three years. In Q2 2020, we did JPY64.5 billion in revenue. In the most recent quarter that we announced today we did JPY94.4 billion, which is up by JPY29.9 billion. So we did 46% more than we did three years ago. And our key franchises have been incredibly resilient and our company has been growing at double digits for the last five quarters running.
[Foreign Language] Of course, we stand at the cost of launching the most exciting products we've ever had, which included THE FINALS and our creators among others. So we think we're a way more valuable company than we were three years ago. And so that's just in Japanese yen terms.
[Foreign Language] But, of course, as a side note, a lot of our investors are outside Japan. They're US dollar-based investors. And as you probably have noticed the yen has sunk by about 40% in the last three years. Three years ago to be exact it was trading at JPY 105 for every dollar. You could buy JPY 105. Today for every dollar, you can buy about JPY 143. So in US dollar terms, our enterprise value has gone way down by our calculation from about $15.6 billion three years ago to about $10.8 billion. And so income from $15.6 billion to $10.8 billion in US dollar terms.
So this is probably -- this yen currency situation is probably one of the reasons why Tokyo real estate is being bought up. It seems recently by foreigners and people like Warren Buffett are buying Japanese trading companies and a lot of people are taking a second look at Japan. So that's not the main point. The main point is Nexon we think is its valuation hasn't changed. Its value has gone way up as a company. We just feel that we're in a much better position even than we were three years ago. And so those are some of the components of our thinking as we examine this on an ongoing basis.
And the last thing, I would say just very briefly is that's not a recommendation to anybody else, but that's how we see the world. That's how we see the world in our place and it certainly informs our action and that's why we have such an active dialogue going on at the Board level and why we made the announcement today that we did.
Thank you very much.
[Foreign Language] The next question will come from Mr. Kenji Fukuyama from UBS Securities. So Mr. Fukuyama, please.
[Foreign Language] Thank you for this opportunity. I actually have two questions both on Embark Studios. So my first question, so it's really about how many people do you want to like hire? What is going to be the organization as we prepare to release two titles from now? And I believe that my understanding is that this is going to be operated mainly from South Korea trying to leveraging on the know-how the skills that you have already been able to accumulate for yourselves. But then do you think you've been able to hire most of the people you need for what you're trying to do? Because I do realize that year-over-year we have already increased like 700 people in South Korea. And including what you'd be doing for Embark there's probably going to be other works that you will probably want to add more people. So my first question is how many more people do you think you will have to add for South Korea?
[Foreign Language] So in regards to the title coming from Embark. So that would be for example to give you an example of The FINALS. We do believe we already do have quite an ample on number of people and even for the operations side. And of course there might be some little more adjustments that we will have to make. But with that said we're not really expecting that we'd have to increase such massive number of people for THE FINALS. Now you also did raise the question who's going to do the main operation.
Now there certainly will be support from South Korea because there's a lot of knowledge and know-how that we've been able to accumulate. But the main operation is going to be from Embark Studios, which means it's going to be coming from Stockholm in Sweden. So that's what we are thinking. And in terms of the support from Korea, yes, we do believe we have enough people at this moment. So it's not that we expect to hire a large number of people for this specific purpose.
Now for the next title which will be starting with ARC Raiders. This is something that is still in the midst of the development, but we again do believe, as we -- while we will think of hiring the necessary number of people if that is going to be the need this is a title that we have already been able to accomplish to a great extent of the development. So again it's not that we at the moment feel the necessity to hire a large number of people at the moment.
This is Owen. I'd just add on to what Uemura san said. There's a reason for why we're able to execute on bringing a very large AAA game to market without a radical increase. Your question is actually very insightful. A lot of companies require hundreds and hundreds of people to create new development for a live game or to operate those games. And we really wanted to avoid that. And so the Embark team very early on you've probably heard us talk about the technology stack for making games that Embark developed.
And we think that we're able to put together or to bring the game to market and update it very rapidly much more quickly than a standard with many, many fewer people. And we think this will be proven to be a revolution in live operations and live development. And so we've been very premeditated in our desire to put out a AAA game without having to hire many, many people and be able to do that and then be able to produce that content live very, very quickly.
[Foreign Language]
[Foreign Language] Thank you very much for your response. My second question also has to do with the Embark titles. And I do believe that next year at some point of time you will be focusing on two titles. In other words THE FINALS and ARC Raiders. And I understand both would be shooting game. And that means your main for the portfolio is going to be a shooting game. And I am sure at some point in time you will also have first extended. And also including some of the tag that means you will have four shooting game titles which I thought was quite a lot for a game company. And so my question is how do you need to differentiate the value of each of these titles to the user? And I was wondering why you would need for but if you'd be able to sort of help me sort out my doubts here.
This is Owen. I guess the best way to describe it is as follows: on the surface a game can be a shooting game or it can be another genre but when you play it you realize that there are vast differences between games that are technically in the same genre. So you maybe – two games may be shooting but they could be vastly different in terms of the gameplay. And the four titles that you mentioned I mean FINALS is nothing like ARC Raiders and you'll see it when it comes out or when they come out. They play completely differently.
And a different type of player often will play very, very different types of games. I happen to like both a lot but I like both styles of gameplay. And both of those games are very, very different than first ascendants and other games that are in the market. So the market for shooting games is vast and tastes very widely. And so from our perspective no there's not. It's not like the market is too small for what we are trying to pull off. These are not small differences between gameplay styles between these different virtual worlds.
That was a very insightful comment that you have been able to give me.
This concludes the question-and-answer session. Mr. Kawai, at this time I'd like to turn the conference back over to you for any additional or closing remarks.
Thank you. We passed the scheduled time, so I would like to take this opportunity to thank you for your participation in this call.
Thank you. That concludes today's conference. Thank you for your participation. You may now disconnect.