Nexon First Quarter 2014 Financial Results

Key insights

6 takeaways

01
Nexon reported Q1 2014 revenue of 47.5 billion yen, a 7% year-over-year increase, with an operating income of 21.2 billion yen and a 45% operating margin.See it on page 1
02
Performance was driven by the PC online segment, which accounted for 85% of total revenue, led by Dungeon&Fighter in China and titles like FIFA Online 3 and Sudden Attack in Korea.See it on page 2
03
China and Korea remain the dominant markets, contributing 45% and 32% of total revenue respectively, with Korea showing 44% year-over-year growth.See it on page 3
04
Nexon projects a Q2 2014 revenue decline of 3% to 9% and a contraction in operating margins to between 19% and 22% due to rising royalty costs, higher HR expenditures, and a shift toward the lower-margin Korean market.See it on page 3
05
Mobile revenue fell 4% year-over-year, representing 15% of total revenue, despite the launch of five new titles during the quarter.See it on page 2
06
The company initiated a share buyback program of up to 12.5 million shares, valued at 10 billion yen, to support long-term shareholder value.See it on page 1

Summary

Nexon’s first quarter 2014 financial results demonstrate a period of growth, with total revenues reaching 47.5 billion yen, a 7% increase year-over-year. Operating income also saw a 2% rise to 21.2 billion yen, maintaining a robust 45% operating margin. These results exceeded the company’s initial outlook, largely driven by the strong performance of the PC online segment, specifically the Lunar New Year update for Dungeon&Fighter in China and the sustained popularity of existing titles in Korea, such as FIFA Online 3 and Sudden Attack.

The company’s revenue distribution remains heavily weighted toward PC gaming, which accounted for 85% of total revenue, while mobile platforms contributed 15%. Geographically, China and Korea remain the primary markets, representing 45% and 32% of total revenue, respectively. While Korea experienced significant year-over-year growth of 44% on an as-reported basis, other regions including Japan, North America, and Europe faced declines. Despite the overall revenue growth, mobile revenue experienced a slight 4% year-over-year decrease, though the company noted progress in its mobile strategy through the launch of five new titles during the quarter.

Looking ahead to the second quarter of 2014, Nexon anticipates a year-over-year revenue decrease of 3% to 9% on an as-reported basis. The company projects a contraction in operating margins to between 19% and 22%, citing increased royalty costs for third-party intellectual property, higher human resource expenditures, and a shift in regional revenue contributions toward the lower-margin Korean market. To support long-term value, the company announced a share buyback program of up to 12.5 million shares, totaling 10 billion yen.