NEXON Co., Ltd. Q1 2016 Earnings Call

Key insights

6 takeaways

01
NEXON reported Q1 2016 revenue of ¥57.5 billion, representing an 11% increase as-reported and 23% on a constant currency basis, driven by Dungeon&Fighter in China and mobile titles in Korea.See it on page 5
02
The company recorded a net loss of ¥6.3 billion, primarily due to a ¥22.6 billion impairment loss on goodwill related to its Japanese subsidiary, gloops, and unfavorable foreign exchange fluctuations.See it on page 4
03
NEXON is aggressively expanding its development capabilities through the acquisition of U.S.-based studio Big Huge Games and a 22.4% equity investment in Korean developer NAT Games.See it on page 3
04
Management has adopted a quality-first development strategy, leading to the postponement of mobile titles such as LAPLACE LINK in Japan to ensure product stability.See it on page 3
05
The company anticipates a year-over-year revenue decline for Q2 2016, attributed to a lack of major new title launches and the depreciation of the Korean won and Chinese yuan against the Japanese yen.See it on page 5
06
NEXON maintains a long-term growth strategy focused on leveraging its existing flagship titles while preparing a robust pipeline of new releases for the second half of 2016.See it on page 6

Summary

NEXON’s first quarter 2016 earnings call highlights a period of strong revenue performance driven by key titles in China and Korea, contrasted by strategic operational challenges in Japan. The company reported revenues of ¥57.5 billion, an 11% increase on an as-reported basis and 23% on a constant currency basis, exceeding initial expectations. This growth was primarily fueled by the robust performance of Dungeon&Fighter in China and various mobile titles in Korea. However, the company recorded a net loss of ¥6.3 billion, largely due to a ¥22.6 billion impairment loss on goodwill associated with its Japanese subsidiary, gloops, and negative impacts from foreign exchange fluctuations.

The company’s geographic scope remains centered on Asia, with significant operations in China, Korea, and Japan, alongside expanding interests in North America and Europe. A key strategic focus during this period was the acquisition of the U.S.-based studio Big Huge Games and a 22.4% equity investment in the Korean developer NAT Games. These moves reflect a broader commitment to strengthening in-house development capabilities and securing high-quality intellectual property for global markets. Management emphasized a quality-first approach to game development, which necessitated the postponement of certain mobile titles, including LAPLACE LINK in Japan.

Looking ahead to the second quarter of 2016, the company anticipates a year-over-year revenue decline, citing the absence of major new title launches and the ongoing depreciation of the Korean won and Chinese yuan against the Japanese yen. Despite these headwinds, management remains optimistic about long-term growth, noting a rich pipeline of games scheduled for release in the second half of the year. The company continues to prioritize game stability and longevity for its flagship titles while maintaining a disciplined approach to operational costs and strategic partnerships.