NEXON Q3 2013 Earnings Call

Key insights

7 takeaways

01
Nexon reported Q3 2013 revenue of ¥39.9 billion and operating income of ¥16.2 billion, marking year-over-year growth of 64% and 53% respectively.See it on page 4
02
Financial performance was driven by strong monetization in core titles like MapleStory and Dungeon&Fighter, alongside favorable foreign exchange tailwinds from a weakening Japanese yen.See it on page 4
03
The company is undergoing a strategic transition toward the mobile sector, which currently operates at lower margins than its established PC business.See it on page 5
04
Core PC titles are experiencing a decline in monthly active users, with Dungeon&Fighter specifically seeing a dip in China due to anti-cheating initiatives and content cycles.See it on page 11
05
Profitability is currently under pressure from elevated marketing and operational expenses related to new product launches and a shifting revenue mix.See it on page 10
06
Nexon is pursuing a dual-platform strategy that includes distributing Dota 2 in Korea, leveraging FIFA Online 3 for regional growth, and investing in Western development studios.See it on page 8
07
Management maintains a cautious outlook for Q4 2013, citing expected seasonal fluctuations across North American, European, and Japanese markets.See it on page 12

Summary

Nexon achieved significant financial growth during the third quarter of 2013, reporting revenues of ¥39.9 billion and operating income of ¥16.2 billion. These figures represent year-over-year increases of 64% and 53%, respectively, bolstered by successful content updates in Korea and China alongside favorable foreign exchange tailwinds from a weakening Japanese yen. Despite these gains, the company faces a complex transition period characterized by a decline in monthly active users for core PC titles and a strategic shift toward the mobile sector, which currently operates at lower margins.

Performance across key franchises remains mixed. While MapleStory and Dungeon&Fighter demonstrated improved monetization through higher pay rates and average revenue per user, the latter experienced a dip in active users in China, partially attributed to rigorous anti-cheating initiatives and content release cycles. Management views these developments as temporary, emphasizing the long-term stability of these flagship assets. Meanwhile, the company is actively diversifying its portfolio, focusing on the distribution of Dota 2 in Korea and preparing for PC café monetization, while leveraging FIFA Online 3 to drive regional growth.

Looking toward the future, Nexon is prioritizing a dual-platform strategy that integrates its established free-to-play expertise with strategic investments in Western development studios. Profitability is currently under pressure due to elevated marketing and operational expenses associated with new product launches and a shifting revenue mix. Although net income has been impacted by one-time tax adjustments and currency translation effects, the company remains committed to scaling its mobile presence and expanding its global footprint. The outlook for the final quarter of 2013 remains cautious, with expectations for seasonal fluctuations across North American, European, and Japanese markets.