[NX] Nexon Reports Third Quarter Financial Results

On November 8 2012 you may convert the monetary figures below from Japanese Yen (JPY) to United States Dollars (USD) by multiplying them by 0.0126.

Tokyo-based Nexon Co. Ltd. has released its financial results for the third quarter of 2012. The results showed that revenues were flat year-over-year (YoY), 3% below the forecast. Operating income was down 8% compared to last year but 8.5% above forecast for an operating margin of 41%. Details on Nexon’s momentous acquisition of Gloops and a strong portfolio and pipeline were also released.

47% of global revenue (JPY 11,414 million) came out of China with the region growing 31% YoY.
27% of global revenue (JPY 6,578 million) came out of Korea with the region declining 23% YoY.
13% of global revenue (JPY 3,231 million) came out of Japan with the region declining 7% YoY.
5% of global revenue (JPY 1,430 million) came out of North America with the region declining 21% YoY.
6% of global revenue (JPY 1,701 million) came out of Europe and other areas with the category declining 5% YoY.

This means that China was the only category of Nexon’s operations which saw improved revenue performance over last year. Overall Nexon saw revenues of JPY 24,256 million, flat against last year.

Global performance was obviously driven strongly by China with the two biggest growth drivers being Dungeon Fighter Online and Counter-Strike Online. The next game in the pipeline for launch in China is the award winning action game Cyphers.

Strong competition in the quarter quite harshly impacted Nexon’s performance in Korea, with revenues falling 23% YoY. The company’s key titles including Sudden Attack, MapleStory and Dungeon Fighter Online maintained leading positions in the market. It was stated that operations in Korea were more focused on user retention than monetization this quarter which may also have affected revenue. A solid and impressive pipeline is coming up for launch in Korea including Mabinogi 2, Dota 2, FIFA Online 3, Counter-Strike Online 2, Warface, Epic of the Three Kingdoms and more.

Japanese revenue declined some YoY, 7%. The company maintains a strong market share in the region and the upcoming launch of Dota 2 is expected to grow the existing PC business in the region. Nexon’s strategic acquisition of mobile developer Gloops has pushed total Japanese revenue to over 33% of global revenue with Nexon now being the world’s largest mobile game developer by revenue. Nexon is really targeting the mobile gaming market in Japan, the largest mobile game market in the world. Despite the fall in revenues, Nexon is positioned to return to double digit revenue growth in the region in coming quarters.

After the hacking and server issues that battered Nexon’s operations in North America late last year and early this year, the company is now focusing on new customer acquisition and retention to rebuild the userbase. The company has recognized that it has a lot of work to do if it is to return to the high levels of upward revenue momentum it had previously enjoyed in North America. Nexon America is now led by veterans responsible for building Nexon America as well as personnel from the development and live operations teams in Korea.

Other regions of Nexon operations saw revenue fall a bit, down 5% YoY. Looking at Europe specifically, however, revenues grew by all of 12%. The current focus of Nexon in Europe at this time is the continued expansion of the local team in the office in Luxembourg which was set up just over a year ago. The company is also focusing on the building of the infrastructure needed to service bigger games in the region.

Nexon’s acquisition of Gloops is truly a transformational move in the company’s history. This takeover will catapult the mobile gaming market from 3% of Nexon’s global revenue all the way up to 24%. Japan will also surge into the second largest revenue producing region, ahead of Korea but behind China, expecting to move from 13% of Nexon’s global revenue straight up to 33% of global revenue. The acquisition of Gloops has significantly diversified Nexon’s regional base. From available information, Nexon finds itself to be the world’s largest mobile game developer by revenue and it now has the largest percentage of revenue from mobile games of any major game publisher. Gloops’ recent game releases have been huge successes and its pipeline of upcoming games look set to drive growth in the region. Nexon is taking advantage of its currently globally popular intellectual property (IP) and combining this with Gloops’ world-class development on mobile to crate strong mobile franchises from Nexon’s global IP. The company is looking to use its live game development expertise to extend average user lifetimes of Gloops’ games and leverage Nexon’s substantial global footprint to expand Gloops’ operations outside of Japan.

Nexon’s overall payrate (the percentage of users opting to purchase optional in-game virtual items) was 9.6% this quarter, down from 10.3% last quarter but up from 9.3% YoY. Monthly active users across Nexon’s games was 78.8 million, up from 77.4 million in the second quarter but down from 87.3 million last year. Average revenue per paying user (ARPPU) was JPY 1,729, up from JPY 1,521 last quarter and JPY 1,486 last year.

With the acquisition of Gloops, Nexon has revised up its forecasts for both the third quarter of 2012 and the full year of 2012. Details can be see in the chart below.

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Posted on November 8, 2012, in Gloops, International Nexon. Bookmark the permalink. 15 Comments.

  1. Hm. I thought you would’ve made a post on Nexon KR/JAP publishing D.O.T.A 2. That’s gonna ring in revenue.

  2. Sorry ya gotta live without me for a few more days…. just 22 more hours…. !!!! AAAAAH =D

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