Nexon Investor Presentation: Q3 2012

Key insights

6 takeaways

01
Nexon reported Q3 2012 revenue of ¥24.2 billion, which was flat year-over-year but represented a 3% increase on a constant currency basis.See it on page 17
02
The acquisition of gloops, Inc. was completed to establish a mobile gaming presence, with mobile revenue projected to reach 20% to 25% of the company's total moving forward.See it on page 16
03
China remains the company's primary market, contributing 47% of total revenue and experiencing 31% year-over-year growth.See it on page 7
04
Operating income for the quarter was ¥10.0 billion, an 8% decline from the previous year, though the company maintained a strong 41% operating margin.See it on page 5
05
Management is addressing underperformance in North America and Europe through leadership changes and infrastructure improvements.See it on page 11
06
The 2013 product pipeline includes high-profile titles such as Dota 2, FIFA Online 3, and Counter-Strike Online 2 to strengthen the company's competitive position.See it on page 21

Summary

Nexon’s third-quarter 2012 financial results reflect a period of strategic transition characterized by steady revenue performance and a significant expansion into the mobile gaming sector. The company reported quarterly revenue of ¥24.2 billion, which remained flat year-over-year but represented a 3% increase on a constant currency basis. Operating income reached ¥10.0 billion, an 8% decline from the previous year, though this figure exceeded management’s initial outlook. The company maintained a strong operating margin of 41% despite facing a highly competitive environment in the Korean market, where a lack of major releases and updates led to a prioritization of user retention over short-term monetization.

A primary driver of the company’s strategic shift during this period was the acquisition of gloops, Inc., a move that established Nexon as a leading independent mobile game developer. This acquisition is expected to diversify the company’s revenue base, with mobile gaming projected to account for 20% to 25% of total revenue moving forward. Geographically, China remained the company’s largest market, contributing 47% of total revenue with 31% year-over-year growth. Conversely, performance in North America and Europe faced challenges, prompting management to implement leadership changes and focus on infrastructure improvements to support future growth.

Looking toward 2013, the company is positioning itself with its strongest pipeline to date, featuring high-profile titles such as Dota 2, FIFA Online 3, and Counter-Strike Online 2. These additions are intended to reinforce Nexon’s competitive standing in both PC and mobile segments. While the company revised its full-year outlook to account for the integration of gloops and a cautious approach to the holiday season in Western markets, the overall strategy remains centered on leveraging its free-to-play business model, expanding its intellectual property portfolio, and scaling its international footprint to drive long-term growth.