NCSOFT Q1 2023 Earnings Release

Key insights

6 takeaways

01
NCSOFT Q1 2023 revenue fell to KRW 478.8 billion, representing a 13% quarter-over-quarter and 39% year-over-year decline.See it on page 2
02
Operating profit reached KRW 81.6 billion, a 72% increase from the previous quarter, despite being 67% lower than Q1 2022.See it on page 4
03
Total operating expenses decreased by 21% quarter-over-quarter to KRW 397.1 billion, driven primarily by a 90% reduction in marketing spend.See it on page 7
04
Mobile game revenue totaled KRW 330.8 billion, impacted by the downward stabilization of the Lineage W title.See it on page 5
05
Royalty revenue grew 9% quarter-over-quarter, supported by record-high quarterly sales for Guild Wars 2 in the Chinese market.See it on page 6
06
Domestic Korean sales accounted for KRW 303.7 billion, while overseas and royalty income comprised 37% of total revenue.See it on page 6

Summary

The first quarter of 2023 for NCSOFT reflects a period of significant contraction in top-line revenue alongside a strategic reduction in operating expenditures. Total sales reached KRW 478.8 billion, representing a 13% decline quarter-over-quarter and a 39% decrease year-over-year. Despite the revenue downturn, the company achieved an operating profit of KRW 81.6 billion, marking a 72% increase from the previous quarter, though this remains 67% lower than the same period in the prior year.

The revenue decline was driven by downward stabilization in mobile game performance, particularly within the Lineage W title, and a decrease in legacy PC online game sales following the conclusion of major update cycles. Mobile game revenue totaled KRW 330.8 billion, while PC online games contributed KRW 91.4 billion. Geographically, the domestic Korean market remains the primary revenue driver at KRW 303.7 billion, while overseas and royalty income accounted for 37% of total sales. Notably, royalty revenue grew 9% quarter-over-quarter, bolstered by record-high quarterly sales for Guild Wars 2 in the Chinese market.

Operational efficiency improved as total operating expenses fell by 21% quarter-over-quarter to KRW 397.1 billion. This reduction was largely attributed to a 90% decrease in marketing expenditures due to the absence of large-scale game updates, as well as a 9% decline in labor costs following the lapse of incentives associated with Lineage W. The financial results are prepared on an unaudited basis under K-IFRS and encompass the performance of the company’s global subsidiaries across North America, Europe, and Asia.