On Tuesday morning Seoul time, Pearl Abyss held its earnings call for the 4th Quarter of 2022. The big news is that the South Korean company lost ₩41.1 billion ($35.6 million) in 2022. The loss was punctuated by the ₩100.3 billion ($79.5 million) the company lost in the final quarter of last year.
What caused the shortfall? Pearl Abyss stated in large part the cause was the depreciation of assets at the end of the year belonging to Pearl Abyss Capital. Long time followers may remember that Pearl Abyss Capital was responsible for a ₩32.6 billion ($27 million) bump in revenues in Q4 2021. The venture capital arm of Pearl Abyss was active in the final three months of 2022, participating in an $11 million round of funding in CLASSUM in October and a $9 million round of funding for Plugo in December.
Overall, operating revenue increased 6.1%, from ₩97.3 billion ($68 million) in the 3rd quarter to ₩97.3 billion ($81.8 million) in the final quarter. For the year, revenue dropped 4.4% down to ₩386 billion.
At this point, observant readers will have noticed that the percentage changes are different between won and U.S. dollar totals. That is due to the wildly swinging values of the two currencies. In the fourth quarter, the won gained 11.8% in value against the dollar. But as a South Korean company, Pearl Abyss performs its accounting in won.
About the best the executives on the call could claim about 2022 was that the Black Desert and EVE intellectual properties managed to maintain sales at 2021 levels. But the fourth quarter news wasn't that great. While Black Desert posted a 6.3% year-over-year, revenue declined 7% from the third quarter, from ₩76.6 billion ($53.6 million) down to ₩71.2 billion ($56.5 million). No, that is not a typo, just the wild currency fluctuation of 2022 at work. While won revenue fell 7%, the same figure converted to USD increased by 5.4%.
The same occurred with EVE revenue. In won, revenue declined by 9.3%, from ₩19.4 billion to ₩17.6 billion. But in USD terms, revenue increased 2.9%, from $13.6 million to $14.0 million. But even calculated in dollars, year-over-year revenue declined 9.7%, from $15.5 million in Q4 2021 to $14.0 million in Q4 2022. Overall, based on the quarterly earnings calls, EVE revenue declined from $62.9 million in 2021 to $62.4 million in 2022. If Russia had not invaded Ukraine, EVE revenue probably would have increased for the year.
One of the analysts on the call asked about how Pearl Abyss saw labor costs going in 2023. The executives on the call were non-committal, just expressing they would manage the costs. But a look at the employee counts in the presentation shows headcount decreased by 116, or 7.4%, during the course of 2022. Labor costs, however, only decreased by 2.5% from the final quarter of 2021 to the last quarter of 2022. Perhaps a cause for concern as 2023 continues.
Perhaps the biggest subject of concern, as is customary at this point, was Crimson Desert. Pearl Abyss CEO Jin-young Heo stated the game would launch sometime in the second half of 2023. But under what business model? The game sounds like a single-player, single time purchase for the PC and console. But then the discussion moved into possibly making the game multi-player after launch. By the end, the game sounds like a candidate to become another live service game.
Not knowing the business model at this late date in development doesn't inspire a lot of confidence. Plus the pressure to launch in the second half of 2023. Pearl Abyss continued to tell the analysts on the call that development on DokeV has to wait until Crimson Desert is complete. Personally, I would not pre-order the game.
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