Quarterly Securities Report: The Second Quarter of the 20th Fiscal Year

Key insights

6 takeaways

01
Nexon’s Q2 2021 revenue declined 13.1% year-over-year to ¥56,009 million, while net income dropped 54.7% to ¥8,957 million due to underperformance in flagship titles Dungeon&Fighter and MapleStory.See it on page 6
02
The company recorded a ¥4.5 billion revaluation loss on crypto-asset holdings, which are now classified as intangible assets under a new accounting policy.See it on page 27
03
Nexon acquired the remaining 27% stake in Embark Studios AB, making it a wholly-owned subsidiary to support long-term growth.See it on page 47
04
Despite earnings volatility, the company maintains a strong financial position with total assets of ¥928,109 million and an equity ratio of 84.6%.See it on page 7
05
Basic earnings per share for the first half of the 2021 fiscal year fell to ¥61.90, down from ¥78.91 in the same period of 2020.See it on page 19
06
Operational cash flow decreased during the period, driven by lower pre-tax income and increased tax obligations.See it on page 8

Summary

Nexon experienced a challenging second quarter and first half of the 2021 fiscal year, characterized by a contraction in both revenue and net income compared to the same period in 2020. Quarterly revenue declined by 13.1% to ¥56,009 million, while net income fell by 54.7% to ¥8,957 million. These results were primarily influenced by underperformance in flagship titles such as Dungeon&Fighter and MapleStory, compounded by rising operating expenses and a ¥4.5 billion revaluation loss on crypto-asset holdings. Despite these headwinds, the company maintained a robust financial foundation, ending the period with total assets of ¥928,109 million and a strong equity ratio of 84.6%.

The company’s operational cash flow decreased due to lower pre-tax income and higher tax obligations, though it continued to manage its capital structure through strategic financing activities. A notable shift in accounting policy now classifies crypto-assets as intangible assets under a revaluation model, reflecting the company’s ongoing engagement with digital asset markets. Furthermore, the organization continues to operate across five geographic segments, with Korea remaining the primary driver of its global revenue. Basic earnings per share for the six-month period dropped to ¥61.90, down from ¥78.91 in the previous year.

Strategic initiatives following the second quarter indicate a focus on long-term growth and consolidation. Nexon moved to acquire the remaining 27% stake in Embark Studios AB, transitioning the entity into a wholly-owned subsidiary, and issued stock acquisition rights to key personnel to incentivize performance. Additionally, the company provided a significant loan to its subsidiary NXMH BV and declared an interim dividend of ¥2.5 per share. These actions, alongside the continued utilization of a rigorous three-level fair value hierarchy for financial instruments, underscore a commitment to maintaining fiscal stability while navigating a volatile market environment.