NCSOFT Q2 2024 Earnings Release

Key insights

7 takeaways

01
NCSOFT reported a significant decline in profitability for Q2 2024, with operating profit falling to KRW 8.8 billion, a 75% drop year-over-year.See it on page 2
02
Total quarterly sales reached KRW 368.9 billion, representing a 16% decrease compared to the same period in 2023.See it on page 4
03
Net income rose by 24% quarter-over-quarter to KRW 71.1 billion, driven primarily by non-operating income rather than core operational performance.See it on page 4
04
Mobile gaming remains the company's primary revenue driver at KRW 218.2 billion, accounting for 59% of total sales.See it on page 5
05
The company remains heavily concentrated in the Korean market, which generated KRW 240.3 billion, while overseas and royalty sales combined for 35% of total revenue.See it on page 6
06
Operating expenses were reduced to KRW 360 billion through a 7% cut in labor costs and a 6% reduction in variable distribution fees.See it on page 7
07
Marketing expenses saw a sharp 152% increase to KRW 17.4 billion, reflecting higher investment in game updates and new title promotions.See it on page 7

Summary

NCSOFT’s Q2 2024 earnings release details a period of contraction in core revenue streams alongside a significant decline in operating profitability. The company reported total sales of KRW 368.9 billion, representing a 7% decrease quarter-over-quarter and a 16% decline year-over-year. Operating profit saw a sharper downturn, falling to KRW 8.8 billion, which marks a 66% decrease from the previous quarter and a 75% drop compared to the same period in 2023. Despite these operational headwinds, net income grew by 24% quarter-over-quarter to KRW 71.1 billion, bolstered by non-operating income.

The revenue decline was driven primarily by the mobile gaming segment, which generated KRW 218.2 billion—59% of total sales—following adjustments in business activities. Legacy PC online games contributed KRW 86.2 billion, accounting for 23% of total sales. Geographically, the company remains heavily reliant on the Korean market, which generated KRW 240.3 billion, while overseas and royalty sales accounted for the remaining 35% of total revenue.

Operating expenses were managed down to KRW 360 billion, a 3% reduction quarter-over-quarter. This was largely achieved through a 7% decrease in labor costs, attributed to lower long-term incentive reserves, and a 6% reduction in variable costs linked to lower mobile game distribution fees. Conversely, marketing expenses surged by 152% to KRW 17.4 billion, reflecting increased investment in large-scale game updates and promotional activities for new titles. The financial data, prepared on an unaudited basis under K-IFRS, covers the global operations of NCSOFT and its consolidated subsidiaries across North America, Europe, and Asia.