NCSOFT Q3 2023 Earnings Release

Key insights

7 takeaways

01
NCSOFT reported Q3 2023 sales of KRW 423.1 billion, representing a 4% decline quarter-over-quarter and a 30% decline year-over-year.See it on page 2
02
Operating profit fell significantly to KRW 16.5 billion, marking a 53% decrease from the previous quarter and an 89% drop compared to Q3 2022.See it on page 4
03
Mobile game revenue, the company's primary driver, totaled KRW 273.8 billion, an 8% decrease quarter-over-quarter.See it on page 5
04
Legacy PC online game revenue grew 6% quarter-over-quarter to KRW 93.2 billion, supported by content updates and expansion pack launches.See it on page 5
05
Marketing expenses surged 126% quarter-over-quarter to KRW 27.7 billion due to new title launches, though they remain 29% lower than the same period last year.See it on page 7
06
Labor costs, the largest operating expense at KRW 198.3 billion, decreased 5% quarter-over-quarter due to a reduction in welfare expenses.See it on page 7
07
Regional sales remained concentrated in Korea at KRW 276.4 billion, while overseas and royalty revenue accounted for 35% of total sales at KRW 146.7 billion.See it on page 6

Summary

NCSOFT’s third-quarter 2023 earnings report reflects a period of significant financial contraction, characterized by declining revenues and compressed operating margins. Total sales for the quarter reached KRW 423.1 billion, representing a 4% decline quarter-over-quarter and a 30% decrease year-over-year. Operating profit experienced a sharper downturn, falling to KRW 16.5 billion, which marks a 53% drop from the previous quarter and an 89% decline compared to the same period in the prior year.

The revenue decline was driven primarily by the mobile gaming segment, which generated KRW 273.8 billion, an 8% decrease from the second quarter. Conversely, the legacy PC online game segment demonstrated resilience, posting KRW 93.2 billion in sales—a 6% quarterly increase attributed to successful content updates and expansion pack launches. Geographically, the company remains heavily reliant on the domestic market, with Korea accounting for KRW 276.4 billion in sales, while overseas and royalty revenue contributed the remaining 35% of total sales.

Operating expenses remained relatively stable at KRW 406.6 billion. While labor costs decreased by 5% due to reduced welfare expenditures, marketing expenses surged by 126% quarter-over-quarter to support new title launches and expansion packs. Despite this quarterly spike, marketing efficiency improved on a year-over-year basis, resulting in a 29% reduction in marketing spend compared to the third quarter of 2022. The company’s consolidated financial position shows total assets of KRW 4.33 trillion against total liabilities of KRW 1.17 trillion, with net income for the quarter reaching KRW 44 billion, an 18% increase over the previous quarter.