News Column

Nexon Announces Second Quarter 2014 Results

August 13, 2014

Strong Mobile Revenue Growth Driven by Legion of Heroes and FIFA Online 3M

Dungeon&Fighter User Metrics in China Stabilize

TOKYO--(BUSINESS WIRE)-- NEXON Co., Ltd. (“Nexon”) (3659.TO), a worldwide leader in free-to-play online games, today announced financial results for its second quarter ended June 30, 2014.

Second quarter revenues grew 1% year-over-year. Operating income decreased 26% year-over-year, with a 27% operating margin. During the quarter, Nexon continued its share repurchase program, and as of July 31, 2014, the Company had acquired 8.8 million shares for ¥8.3 billion. As previously announced, the share repurchase program concludes on August 14, 2014. The Company will provide the total number of shares repurchased under the program, and the aggregate purchase price, on its investor relations website shortly.

“Our second quarter results exceeded the high end of our outlook, driven in particular by the continued strength of our business in Korea and our laser-like focus on quality across all platforms, which is translating into solid performance from titles such as FIFA Online 3, and on mobile Legion of Heroes and FIFA Online 3M,” said Owen Mahoney, President and Chief Executive Officer. “We also announced several more strategic partnerships with world-class developers, combining our free-to-play expertise with some of the most premier talent in the industry to secure high-quality content, especially in the U.S. and Europe. We remain committed to focusing our efforts on creating the industry’s best online games that are both wildly creative and differentiated, which we believe will grow the business.”

 

Second Quarter Fiscal 2014 Financial Highlights (IFRS)

(Millions of yen, except for per share data)

 
      Q2 2013     Q2 2014     YoY%
Revenues

¥36,624

¥36,8941%
PC 29,333 28,459 (3%)
Mobile 7,291 8,435 16%
Operating income13,4259,962(26%)
Net income111,3654,085(64%)
 
Earnings per share: 25.98 9.33
 

Footnotes:

1

  Net income refers to net income attributable to owners of the parent, as stated in Nexon’s consolidated financial results.
 
 

Revenue by Region and Platform1 (IFRS)

 

(Unit: ¥ millions)





Revenue by Region

 

Q2 2013

 

Q2 2014

(As-

Reported)

 

Q2 2014

(Constant

Currency)3

  YoY % Change

As-

Reported

 

Constant

Currency 3

China ¥15,477 ¥13,530 ¥12,056 (13%) (22%)
Korea 8,605 13,433 11,895 56% 38%
Japan 9,398 7,656 7,654 (19%) (19%)
North America 1,446 1,131 1,086 (22%) (25%)
Europe and Others 2 1,698 1,144 1,037 (33%) (39%)
Revenue by Platform
PC 29,333 28,459 25,576 (3%) (13%)
Mobile 7,291 8,435 8,152 16% 12%
Nexon Total36,62436,89433,7281%(8%)
 

Footnotes:

1   Based on the region in which revenues originate; not a representation of our revenues according to
Nexon entities.
2 Others consists of other Asian countries and Central and South American countries.
3 On a constant currency basis (using Q2 2013 currency exchange rates).
 


Second Quarter 2014 Regional Highlights

China

  • Revenues were ¥13.5 billion, down 13% year-over-year, or down 22% on a constant currency basis
  • Large scale “Grand Genesis” tier 1 update for Dungeon&Fighter was launched on June 17
  • Dungeon&Fighter MAUs were stable quarter-over-quarter despite strong first quarter seasonality

    Korea

  • Revenues were ¥13.4 billion, up 56% year-over-year, or up 38% on a constant currency basis
  • FIFA Online 3 and FIFA Online 3M users scaled up during the World Cup, and remained strong afterward
  • Legion of Heroes showing strong and stable user trend, consistently ranking around the top 10 of Google Play Top Grossing apps, generating over 2 million downloads and ¥300 million/month
  • Year-over-year growth from key PC titles Dungeon&Fighter, Sudden Attack, and MapleStory

    Japan

  • Revenues were ¥7.7 billion, down 19% year-over-year on a constant currency basis
  • Existing browser titles were stable despite declining browser market, illustrating strong execution by gloops
  • Successful Skylock mass promotion nearly doubled June revenue month-over-month
  • 3+ new native titles from gloops to launch in 2H 2014

    North America, Europe and Others

  • Revenues in North America were ¥1.1 billion, down 22% year-over-year, or down 25% on a constant currency basis
  • Revenues in Europe and other regions were ¥1.1 billion, down 33% year-over-year, or down 39% on a constant currency basis
  • The Company continued to enter into strong partnerships with top Western studios with titles to launch in 2H14 and 2015
  • New product launches scheduled for 2H 2014 include Legion of Heroes (mobile) and Dirty Bomb (PC), with continuous launches thereafter

    Third Quarter 2014 Business Outlook

    Nexon expects revenues for the third quarter to be flat to an increase of 7% year- over-year on an as-reported basis. The Company also expects mobile revenues to increase 19% to 30% year-over-year on an as-reported basis. Nexon expects the operating margin to be between 27% and 30% due to higher royalty costs associated with third-party IP, including FIFA Online 3 and FIFA Online 3M; higher HR costs related to an increased headcount and the granting of stock options; higher revenues from Korea, which have a lower margin than revenues from China; and increased marketing costs related to new title releases in Korea, North America and Europe. Geographically, the Company expects mid to high single-digit revenue growth on an as-reported basis in China, a double-digit increase in Korea, high teens to double-digit decrease in Japan, and a single digit to mid-teens decrease in North America, Europe and Others.

    The following table presents Nexon’s outlook for the third quarter of fiscal 2014 on an as-reported basis.

     

    (Millions of yen)

          Q3 2013

    (IFRS)
      Q3 2014

    (IFRS)
     

    YOY % Change

           
    Revenues¥39,883¥39,975~¥42,8340%~7%
    PC 32,995 31,746 ~ 33,864 (4%) ~ 3%
    Mobile 6,887 8,229 ~ 8,970 19% ~ 30%
    Operating income16,23710,748~13,043(34%)~(20%)
    Net income18,0547,337~9,055(9%)~12%
     
    Earnings per share18.3516.98~20.95
     

    Footnote:

    1   Net income refers to net income attributable to owners of the parent, as stated in Nexon’s consolidated financial results.
     


    Conference Call

    Nexon’s management will host an earnings presentation for analysts, investors, and the media which will be conducted in Japanese today in Tokyo, at 4:00 p.m. Japan Standard Time (JST) / 3:00 a.m. Eastern Daylight Time (EDT) to discuss Nexon’s financial results and outlook. A video replay of the presentation will be made available via Nexon’s Investor Relations website a few days after the presentation.

    There will also be a live conference call conducted in English at 9:00 p.m. Japan Standard Time (JST) / 8:00 a.m. Eastern Daylight Time (EDT). A replay will be made available 60 minutes following the conclusion of the conference call, and a transcript will be available a few days after. Dial-in information is as follows:

    Conference call dial-in:           81-3-4570-1816 (Japan)
    1-646-502-5131 (US)
    44-20-7660-2144 (UK)
    852-306-00227 (Hong Kong)
    65-642-98366 (Singapore)
    Pass Code: 698065#
    Conference call replay: 81-3-4570-2856 (Japan)
    Replay passcode: 213092#
     


    For additional information regarding Nexon’s second quarter 2014 financial results, please visit the Investor Relations section of Nexon’s website at http://ir.nexon.co.jp/en/.

    This press release is prepared to offer reference information about Nexon to investors and is intended to generally provide investors and analysts with financial and operational information about Nexon, but not to solicit or recommend any sale or purchase of stock or other securities of Nexon.

    About NEXON Co., Ltd.http://company.nexon.co.jp/

    NEXON Co., Ltd. (“Nexon”) (3659.TO) is a worldwide leader in free-to-play online games. Founded in Korea in 1994, Nexon developed one of the world's first graphics-based massively multiplayer online games. Nexon also pioneered the concept of microtransactions and the free-to-play business model, setting a new standard in which play is free, and users have the option to purchase in-game items to enhance their experience. Nexon currently services nearly 150 online games in more than 100 countries and since its founding, Nexon has generated more than 1.4 billion player registrations. The Company is headquartered in Tokyo, Japan and its shares are listed on the Tokyo Stock Exchange.




    NEXON Co., Ltd.

    Greg Melchior, +81-3-3523-7919

    Corporate Public Relations


    Source: NEXON Co., Ltd.


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