Nexon Earnings Letter: Q4 and Full-Year 2023

Key insights

7 takeaways

01
Nexon achieved record 2023 full-year revenue of ¥423.4 billion, a 20% year-over-year increase, and operating income of ¥134.7 billion, up 30%.See it on page 9
02
Q4 operating income dropped 59% year-over-year due to one-time costs, including a regulatory penalty, a retention incentive plan, and an impairment loss on the AGBO investment.See it on page 12
03
Nexon projects a Q1 2024 revenue decline of 14% to 22% compared to the previous year, driven by economic imbalances in China and a shift away from probability-based items in MapleStory.See it on page 3
04
The December 2023 launch of THE FINALS exceeded internal expectations, attracting over 10 million players within its first two weeks.See it on page 3
05
Core franchise performance faced headwinds in late 2023, including a promotional controversy for MapleStory in Korea and difficult year-over-year comparisons for FC ONLINE following the 2022 World Cup.See it on page 9
06
To counter near-term declines, the company is doubling content volume for major franchises and has secured an ISBN license for the release of Dungeon&Fighter Mobile in China.See it on page 1
07
Nexon has initiated a ¥100 billion share repurchase program to signal confidence in its long-term growth trajectory despite current operational challenges.See it on page 15

Summary

Nexon’s 2023 full-year and fourth-quarter earnings report highlights a period of record-breaking financial performance tempered by specific, localized operational challenges. For the full year, the company achieved record revenue of ¥423.4 billion, a 20% increase year-over-year, and operating income of ¥134.7 billion, up 30%. These results were driven by the sustained growth of core franchises—MapleStory, Dungeon&Fighter, and FC ONLINE—alongside the successful global launch of the new title, THE FINALS, which exceeded internal bookings expectations by attracting over 10 million players within two weeks of its December release.

Despite these annual gains, the fourth quarter and the outlook for the first quarter of 2024 reflect near-term headwinds. Fourth-quarter revenue reached ¥84.6 billion, yet operating income fell 59% year-over-year due to revenue underperformance in key titles and one-time expenses, including a retention incentive plan, a regulatory penalty in Korea, and an impairment loss on the AGBO investment. Specific challenges included a promotional controversy affecting MapleStory in Korea, an in-game economic imbalance in China’s Dungeon&Fighter, and difficult year-over-year comparisons for FC ONLINE following the 2022 World Cup.

Looking toward 2024, the company anticipates a revenue decline in the first quarter of 14% to 22% compared to the previous year. Management attributes this to the ongoing impact of the aforementioned economic imbalances in China, a transition in MapleStory’s business model away from probability-based items to improve long-term player satisfaction, and challenging year-over-year comparisons. To mitigate these issues, the company plans to double the volume of new content for its major franchises and accelerate update cadences. Bolstered by the recent acquisition of an ISBN license for Dungeon&Fighter Mobile in China and a new ¥100 billion share repurchase program, the company maintains a positive long-term outlook, viewing these current obstacles as temporary fluctuations in a broader, non-linear growth trajectory.