NCSOFT Q1 2024 Earnings Release

Key insights

6 takeaways

01
NCSOFT reported Q1 2024 total sales of KRW 397.9 billion, marking a 17% year-over-year decline.See it on page 2
02
Operating profit reached KRW 25.7 billion, representing a 68% year-over-year decrease despite a 568% quarter-over-quarter recovery.See it on page 4
03
Mobile game revenue, which comprises 63% of total sales, fell 17% quarter-over-quarter, while PC online game revenue grew 4% to KRW 91.5 billion.See it on page 5
04
Total operating expenses decreased 14% quarter-over-quarter, primarily driven by an 83% reduction in marketing expenditures.See it on page 7
05
Geographic performance showed broad weakness, with domestic sales in Korea falling 9% and overseas/royalty revenue dropping 10% quarter-over-quarter.See it on page 6
06
The company is shifting strategy to stabilize legacy IP, expand globally with 'Throne and Liberty,' and open the PURPLE platform to third-party AAA titles.See it on page 10

Summary

NCSOFT’s Q1 2024 earnings release details a period of financial contraction characterized by a 17% year-over-year decline in total sales, which reached KRW 397.9 billion. While operating profit saw a significant 568% increase quarter-over-quarter to KRW 25.7 billion, this figure represents a 68% decrease compared to the same period in 2023. The company’s performance was primarily impacted by a 17% quarter-over-quarter decline in mobile game revenue, which remains the firm's largest segment, accounting for 63% of total sales. Conversely, PC online games demonstrated resilience, growing 4% quarter-over-quarter to KRW 91.5 billion.

Geographically, the company experienced broad-based declines, with domestic sales in Korea falling 9% and overseas and royalty revenue dropping 10% quarter-over-quarter. Total operating expenses were reduced by 14% compared to the previous quarter, largely driven by an 83% reduction in marketing expenditures and lower distribution fees associated with the decline in mobile game volume. Labor costs remained relatively stable, showing only a 1% decrease quarter-over-quarter.

To address these trends, the company is prioritizing a multi-faceted growth strategy focused on stabilizing legacy intellectual properties while expanding their global reach through targeted regional launches, including Throne and Liberty. Future growth initiatives involve diversifying the product portfolio with new intellectual properties, developing new genre adaptations of existing franchises, and leveraging the PURPLE platform to host third-party AAA titles. These efforts aim to offset the current volatility in the mobile sector and restore long-term revenue stability across both domestic and international markets.