NEXON Q3 2015 Earnings Call Transcript

Key insights

6 takeaways

01
Nexon exceeded Q3 2015 financial expectations for revenue, operating income, and net income, driven by the performance of Dungeon&Fighter in China and the launch of DomiNations in Korea.See it on page 5
02
The company divested its 15.08% stake in NCSOFT for ¥64 billion to increase cash reserves for future mergers and acquisitions.See it on page 4
03
The conclusion of Dungeon&Fighter intellectual property amortization in August 2015 is projected to increase 2016 profitability by approximately ¥5.6 billion.See it on page 10
04
Management expects a year-over-year revenue decline in China for Q4 2015 due to difficult comparisons, despite a stable overall financial outlook.See it on page 5
05
Operating income for the remainder of 2015 is expected to remain flat as increased marketing and variable costs are offset by the conclusion of amortization expenses.See it on page 6
06
Nexon is prioritizing a high-quality development pipeline, including a collaborative mobile iteration of Dungeon&Fighter with Tencent and partnerships with Respawn Entertainment and Bluehole Studio.See it on page 10

Summary

Nexon experienced a robust third quarter in 2015, characterized by financial performance that surpassed expectations across revenue, operating income, and net income. This growth was primarily fueled by the sustained success of Dungeon&Fighter in the Chinese market and the effective launch of DomiNations in Korea. The company continues to leverage strategic partnerships with global developers, including Respawn Entertainment and Bluehole Studio, to bolster its competitive position. While management anticipates a year-over-year revenue decline in China for the fourth quarter due to challenging comparisons, the organization remains focused on a strong pipeline of upcoming PC and mobile titles to sustain long-term momentum.

Financial outlooks for the remainder of the year remain stable, with operating income expected to remain flat as increased marketing and variable costs are balanced by the conclusion of amortization expenses related to the Dungeon&Fighter intellectual property. This shift in amortization, which concluded in August 2015, is projected to provide a significant boost to 2016 profitability, estimated at approximately ¥5.6 billion. Furthermore, the company successfully divested its 15.08% stake in NCSOFT for ¥64 billion, reinforcing a strategy of maintaining substantial cash reserves to ensure flexibility for future mergers and acquisitions.

The company’s broader strategy emphasizes a rigorous, high-quality development approach, particularly regarding the collaborative effort with Tencent on the mobile iteration of Dungeon&Fighter. By balancing capital allocation between growth-oriented investments and potential shareholder returns, Nexon aims to navigate the evolving global gaming landscape. The company remains committed to maintaining a disciplined financial structure while aggressively pursuing new opportunities within the PC and mobile segments throughout the upcoming fiscal year.