Nexon Co. Ltd. Q2 2013 Earnings Conference Call and Webcast

Key insights

7 takeaways

01
Nexon achieved a 60% year-over-year revenue increase to JPY 36.6 billion and an operating income of JPY 13.4 billion in Q2 2013.See it on page 3
02
Financial performance exceeded internal guidance for the third consecutive quarter, driven by the strength of Dungeon & Fighter in China and the launch of FIFA Online 3 in Korea.See it on page 3
03
Operating margins declined year-over-year due to increased marketing spend for mobile games, a shift toward mobile revenue, and higher royalty costs for third-party IP.See it on page 3
04
Total monthly active users (MAUs) decreased to 71 million, as the company shed casual users in China who historically demonstrated lower monetization and retention.See it on page 4
05
Management attributes revenue growth to effective content updates, the weakening Japanese yen, and a strategic focus on the free-to-play model across PC and mobile.See it on page 4
06
Future growth strategies include the upcoming launch of DOTA 2 in Korea and a continued focus on global expansion through targeted mergers and acquisitions.See it on page 6
07
The company maintains a strong cash position to fund new opportunities and support shareholder dividends while projecting continued double-digit growth in China and Korea for Q3.See it on page 4

Summary

Nexon’s second quarter 2013 earnings call highlights a period of significant financial growth, characterized by a 60% year-over-year revenue increase to JPY 36.6 billion and an operating income of JPY 13.4 billion. The company exceeded its own guidance for the third consecutive quarter, bolstered by the strong performance of key titles such as Dungeon & Fighter in China and the successful launch of FIFA Online 3 in Korea. Management attributes this success to a combination of effective content updates, a weakening Japanese yen, and a strategic focus on the free-to-play business model across both PC and mobile platforms.

While overall revenue grew, the company reported a year-over-year decline in operating margins, which management attributed to increased marketing investments for mobile games, a shift in revenue mix toward mobile, and higher royalty costs associated with third-party intellectual property. Total monthly active users (MAUs) saw a slight year-over-year decrease to 71 million, primarily due to a reduction in casual users in China; however, leadership emphasized that this did not materially impact revenue, as these users typically exhibit lower monetization and shorter retention periods.

Looking ahead, the company maintains a positive outlook for the third quarter, projecting continued double-digit growth in China and Korea. Strategic priorities include the upcoming launch of DOTA 2 in Korea and a continued commitment to global expansion through targeted mergers and acquisitions. The company remains focused on leveraging its operational expertise to navigate the evolving gaming landscape, emphasizing that its strong cash position provides the flexibility to pursue new opportunities and reward shareholders through dividends.