Nexon Annual Securities Report: 17th Fiscal Year

Key insights

6 takeaways

01
Nexon achieved significant financial growth in fiscal year 2018, with consolidated revenue rising 8.0% to 253,721 million yen and net income surging 89.7% to 107,672 million yen.See it on page 33
02
The company maintains a strong liquidity position with 205,292 million yen in cash and cash equivalents, supporting a strategy of prioritizing growth-oriented investments and acquisitions over dividend payouts.See it on page 88
03
Revenue is primarily driven by a free-to-play microtransaction model centered on long-running intellectual properties, most notably MapleStory and Dungeon&Fighter.See it on page 15
04
Nexon expanded its mobile development capabilities in 2018 through the strategic acquisitions of NAT GAMES Co., Ltd. and Pixelberry Studios.See it on page 10
05
Operational risks for the company include intense global competition, cybersecurity threats, and potential regulatory shifts regarding loot boxes and juvenile protection in key markets like China, Korea, and North America.See it on page 27
06
Executive compensation is tied to performance metrics such as consolidated operating income and relative Total Shareholder Return to align management interests with long-term value.See it on page 77

Summary

The 17th fiscal year annual report for NEXON Co., Ltd. details the company’s financial performance, corporate governance, and strategic operations for the period ending December 31, 2018. As a global entity operating across Japan, Korea, China, and North America, Nexon maintains a business model centered on the development and service of PC online and mobile games. The company’s primary objective is to solidify its position as a leading global game developer by leveraging a portfolio of long-running intellectual properties, such as MapleStory and Dungeon&Fighter, while aggressively expanding its mobile development capabilities through strategic acquisitions like NAT GAMES Co., Ltd. and Pixelberry Studios.

Financial results for 2018 demonstrate significant growth, with consolidated revenue reaching 253,721 million yen, an 8.0% increase, and net income rising 89.7% to 107,672 million yen. This performance was largely bolstered by robust results in the Chinese market and a strong liquidity position, with cash and cash equivalents totaling 205,292 million yen. The company utilizes a free-to-play microtransaction model, recognizing revenue based on the satisfaction of performance obligations over the estimated usage period of virtual goods. Despite this growth, the company faces operational risks, including intense global competition, cybersecurity threats, and sensitivity to regional regulatory changes regarding loot boxes and juvenile protection.

Corporate governance is structured around a Board of Directors and an Audit and Supervisory Committee, with executive compensation strategically linked to performance metrics, including consolidated operating income and relative Total Shareholder Return. The company maintains a policy of retaining capital for growth-oriented investments and acquisitions rather than dividend payouts. Throughout 2018, Nexon executed a two-for-one stock split and continued to utilize equity-based compensation to align management interests with long-term shareholder value, supported by a rigorous internal control framework and adherence to IFRS accounting standards.