NEXON Q2 2018 Earnings Prepared Remarks

Key insights

6 takeaways

01
Nexon is prioritizing long-term live service management over new game releases to generate annuity-like cash flows, aiming to avoid the industry's typical boom-bust cycle.See it on page 2
02
The 15-year-old MapleStory franchise achieved 61% year-over-year revenue growth in Korea, demonstrating the financial viability of sustained franchise support.See it on page 2
03
The Dungeon&Fighter franchise remains a critical global asset, having generated over $10 billion in life-to-date gross revenue.See it on page 3
04
Q2 2018 total revenue reached 47.8 billion yen, a 2% year-over-year increase, with operating and net income exceeding company projections.See it on page 8
05
Nexon projects Q3 2018 revenue between 60.9 and 65.9 billion yen, driven by international expansion in North America and Europe via titles like Darkness Rises and MapleStory M.See it on page 8
06
Revenue in Korea experienced pressure due to the transition from FIFA Online 3 to FIFA Online 4, reflecting the challenges of platform and title migration.See it on page 7

Summary

Nexon’s second-quarter 2018 earnings report emphasizes a strategic commitment to long-term live service management over the industry-standard focus on new game releases. The company posits that well-maintained online games function like theme parks, generating predictable, annuity-like cash flows for decades. By prioritizing sustained player engagement and consistent content updates, Nexon aims to build stable intellectual property that provides the capital necessary to fund creative risks and geographic expansion without relying on the boom-bust cycle typical of the broader gaming market.

Financial results for the second quarter of 2018 reflect this strategy, with total revenues reaching 47.8 billion yen, a 2% year-over-year increase on an as-reported basis. Performance was anchored by the enduring success of key franchises; notably, the 15-year-old MapleStory franchise achieved 61% year-over-year revenue growth in Korea. Meanwhile, the Dungeon&Fighter franchise continues to serve as a massive global asset, having generated over $10 billion in life-to-date gross revenue. While mobile revenues in Korea fell slightly below expectations due to the transition from FIFA Online 3 to FIFA Online 4, overall operating and net income exceeded company projections, bolstered by favorable foreign exchange gains and the consolidation of NAT Games.

Looking ahead to the third quarter of 2018, the company projects revenue between 60.9 and 65.9 billion yen. Growth is expected to be driven by international expansion in North America and Europe, supported by recent launches such as Darkness Rises and MapleStory M. While the company anticipates continued revenue pressure in Korea and Japan due to platform transitions and the natural deceleration of older mobile titles, the core thesis remains focused on leveraging stable, long-lasting franchises to maintain financial health while scaling new intellectual property globally.