Pearl Abyss Q1 2023 Earnings Call

On Thursday morning in Anyang, South Korea, Pearl Abyss conducted its earnings call for the 1st quarter of 2023. The South Korean corporation reported earnings of ₩85.5 billion ($65.9 million), a 16.9% decline compared to the final quarter of 2022 and 6.1% less than Q1 2022. Pearl Abyss recorded an operating profit of ₩1.1 billion ($850,000) and a net profit of ₩9.4 billion ($7.2 million). 

From the Q1 2023 Pearl Abyss Earnings Call

During the presentation, Pearl Abyss explained that a big part of the reason for the revenue decline was the lack of reporting from Pearl Abyss Capital. Pearl Abyss could not include its investment company as no separate evaluation was conducted in the first quarter.

From the Q1 2023 Pearl Abyss Earnings Call

All of the losses are not the fault of Pearl Abyss Capital, as both of PA's major gaming IPs experienced revenue declines in the first quarter. The Black Desert Franchise recorded a drop of 5.2% quarter-over-quarter down to ₩67.5 billion ($44.3 million) and a 4.8% decline compared to the first quarter of 2022. A good sign was a 21% QoQ revenue gain for Black Desert Mobile. The struggling mobile game benefitted from the introduction of new classes ahead of their introduction on PC and console. Pearl Abyss indicated they expect the impact of changes to Black Desert Online on both platforms to become apparent during the second quarter.

The fourth quarter revenue numbers for EVE Online were adjusted downward from ₩17.6 billion down to ₩17.3 billion for reasons not disclosed or asked about by analysts. The adjustment made the first quarter's revenue decline 2.3% down to ₩16.9 billion ($13 million). The year-over-year decline was 7.1%. The presentation pointed out the introduction of a Simplified Chinese language client and the Uprising expansion featuring factional warfare as positive factors that led to relatively stable financial results.

One standard subject Pearl Abyss usually addresses on these calls are their efforts to connect with players. Connected players are usually loyal customers who will continue to spend money on the company's games, especially MMORPGs like Black Desert and EVE. In addition to discussing organized player meet-ups, the following was used to describe EVE's next expansion, Viridian:

By providing enhanced content of a social side, with more personalized options, we plan to further strengthen the relationship between users and implement an environment where they can cooperate with each other.

While sounding a bit stilted (probably due to the translation), the fact that EVE and CCP is discussed as much as they were on this call is a long, long way from the days when the only mention of EVE was on the Power Point slides. Now, even factional warfare is getting mentioned.

Of course, upcoming games were a topic on the call. Crimson Desert still is on pace to finish development in the second half of 2023. The company would not commit to a release date, but plans to launch the game as soon after development is complete as possible. I took that to mean a 2024 release date sometime in the first half of the year is possible. Also, the prospect that Pearl Abyss skimps on the QA work is probably higher than normal.

Next came a question about DokeV. Pearl Abyss believes that since the game will build off of the work on Crimson Desert, DokeV could launch fairly quickly after Crimson Desert goes on sale.

A concern about development speed was sounded due to a rather large drop in the number of employees listed as working at Pearl Abyss in the first quarter. Overall, employee headcount dropped 6.7% from 1452 at the end of Q4 2022 down to 1355 at the end of the first quarter. The drop in the number of developers was more severe, dropping 9.5% down to 793 from 876 the previous quarter.

Pearl Abyss assured the analysts that the drop in developer headcount would not affect the speed of development on Crimson Desert and DokeV. The drop was attributed to two actions. The first was the end of an internship period as the interns left. The second, and more important reason, was Pearl Abyss shut down a game studio in the first quarter of 2023.

In May 2021, Pearl Abyss purchased Factorial Games, a maker of mobile games most famous for Lost Kingdom, for ₩20 billion. The company came out with a new game, Super String, in May 2021. The game shut down on 28 March 2023.

Finally, CCP's web3/blockchain game in development was mentioned a few times. Although no timing or even a name for the game was mentioned, Pearl Abyss did tell the analysts the following:

As it is a triple-A project that has received great attention since the seed round by solving problems that have occurred in existing web3 & blockchain based games. We are working hard to create a next-level eco-system. 

On the list of games under development, I would say the game known by a URL, Project Awakening, is now third on Pearl Abyss' priority list, behind Crimson Desert and DokeV but ahead of Project 8. No mention of any other game under development by CCP has been heard for a few calls now. Those wishing for a first person shooter will probably have to wait for some time.