The Pearl Abyss Q2 2019 Investors Call

In Pearl Abyss' Quarter 2 investors call held Friday morning, the developer of Black Desert Online announced record revenues for the second consecutive quarter. Operating profit jumped 212.6% in Q2 over Q1, and 3.8% over Q2 2018. Net profit also jumped 266% quarter-over-quarter, but fell 1.1% compared to Q2 2018.

Pearl Abyss credited a couple of developments for their increased revenue. In May, the company took over direct publishing of Black Desert Online in Korea. Since taking over the publishing duties, the number of daily users from Korea has doubled. The company also mentioned the introduction of the Shai class as another reason.

On mobile, Pearl Abyss continues to see greater penetration into the Japanese market, which apparently is unusual for a Korean mobile game. One of the analysts on the call questioned the strength of the game in South Korea, but PA claimed steady revenue from the game and that any slippage in game rankings is due to new games jumping up upon initial hype.

The jump in profits came from two main sources. The first was the drop off in advertising by 49% in Q2 as Q1 saw marketing pushes for Black Desert Mobile in Japan and the introduction of Black Desert Online on the XBox One. The second was in labor expenses. While employee headcount increased to 1,074 in Q2, the first quarter saw the payout of ₩ 9.4 billion ($775,000) in incentive payments. While not reporting on the number of employees at CCP as they had the past two quarters, PA reported that 635 of their employees are actual game developers and not support personal. In reply to an analyst's question, PA indicated they planned to continue to hire additional staff.

Pearl Abyss also reported growth in all IPs. EVE Online saw an increase of 3% in revenues over Q1, growing by ₩400 million ($330,000). When Pearl Abyss looks at their business, they do so by intellectual property. If everything goes according to plan, EVE Online will see its revenue added to by the upcoming mobile game EVE Echoes. The status of the Singularity server in China was not addressed. According to one of the analysts on the call, NetEase is putting a lot of effort into getting Echoes published.

Pearl Abyss also mentioned EVE: Aether Wars a few times during the call. Currently, PA is interested in game engine development, with all it's upcoming games using a newer engine than the one that runs Black Desert Online. PA not only indicated it liked CCP's efforts with Hadean to improve, but if successful could lead to a spin-off game. PA also left the impression it would like to use the technology in all its upcoming games.

EVE Echoes is not the only game under development for one of the existing IPs. Pearl Abyss also plans on introducing a battle royale game, Shadow Arena, to the market. The company stated it would show game play for the title sometime this year. In a related note, PA is also bringing BDO to the Playstation 4 on 23 August. PA claimed that sales of the PS4 version are up 30% over the XBox One version at the same time in the launch schedule.

Pearl Abyss has three yet unnamed IPs that the analysts were very interested to learn more about. The first is Project K, an online shooter under development led by a team headed by Counterstrike creator Minh Le. The next is Project V, a game described as a casual title.

The third IP is new and had all the analysts on the call asking questions. All Pearl Abyss would acknowledge is it is an online role playing game. While CCP has job openings listed for an unnamed MMO, the impression left from the call is that Pearl Abyss is developing its own engine and not making a move to Unreal Engine 4.

For all three projects, Pearl Abyss declined to give more details than those already announced. PA indicated they would announce more details when the projects were closer to launch.