Nexon Consolidated Financial Results for the Three Months Ended March 31, 2016

Key insights

6 takeaways

01
Nexon reported a net loss of ¥6,272 million for Q1 2016, driven primarily by a ¥24,364 million impairment loss on goodwill and unfavorable foreign exchange fluctuations.See it on page 5
02
Total revenue grew 10.6% year-over-year to ¥57,497 million, supported by strong performance in the Korean mobile sector and established PC titles in China.See it on page 5
03
The mobile segment generated ¥12,443 million in revenue, validating the company's strategic shift toward portable gaming platforms.See it on page 5
04
Due to the Q1 net loss and non-operating expenses, management issued a cautious forecast anticipating a decline in operating and net income for the first half of 2016.See it on page 8
05
To improve future profitability, the company plans to implement cost-reduction measures, including decreased marketing spend and the completion of intellectual property amortization cycles.See it on page 7
06
Nexon authorized the issuance of 5,298,000 stock options to 303 employees and directors, with an exercise window extending through May 2022.See it on page 18

Summary

Nexon achieved a 10.6% year-over-year revenue increase during the first quarter of 2016, reaching a total of ¥57,497 million. This growth was primarily fueled by robust performance within the Korean mobile sector and sustained popularity of key PC titles in the Chinese market. Mobile segment revenue specifically reached ¥12,443 million, underscoring a successful strategic pivot toward portable gaming platforms.

Despite these top-line gains, the company recorded a net loss of ¥6,272 million for the period. This deficit was largely attributable to a substantial ¥24,364 million impairment loss on goodwill, compounded by increased finance costs resulting from unfavorable foreign exchange fluctuations. These non-operating expenses significantly overshadowed the operational revenue growth, leading to a loss before income taxes of ¥2,007 million. In response to these financial pressures, the company initiated a cautious forecast for the first half of 2016, anticipating a decline in operating and net income compared to the previous year.

Looking ahead, the company maintains a constructive outlook for the second quarter, projecting continued revenue expansion in the mobile segment. Management expects improved profitability through strategic cost-reduction measures, including lower marketing expenditures and the completion of amortization cycles for certain intellectual properties. To align long-term incentives with these performance goals, the company also authorized the issuance of 5,298,000 stock options to 303 employees and directors, exercisable through May 2022. These efforts reflect a broader strategy to stabilize the balance sheet while capitalizing on the momentum of core regional markets.