Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net income increased by 24% quarter on quarter and 133% year on year, reaching KRW71.1 billion.
- Royalty sales grew by 15% quarter on quarter, driven by the NEO Classic server update for Blade & Soul in China.
- NCSOFT has been actively pursuing global expansion with planned releases of Throne and Liberty, Blade & Soul 2 in China, and Lineage 2M in Southeast Asia.
- The company is focusing on diversifying its portfolio with new game genres and strategic investments in external game developers like Moon Rover and VIC Game Studios.
- NCSOFT is implementing cost efficiency measures, including recommended resignations and corporate spin-offs, to streamline operations and reduce labor costs.
Negative Points
- Second-quarter sales declined by 7% quarter on quarter and 16% year on year, totaling KRW368.9 billion.
- Operating profit fell significantly by 66% quarter on quarter and 75% year on year, amounting to KRW8.8 billion.
- Mobile game sales dropped by 13% quarter on quarter, with only Lineage M showing an uptick while other mobile games declined.
- PC online game sales decreased by 6% quarter on quarter, with only Lineage showing an increase while other PC games declined.
- Marketing costs surged by 152% quarter on quarter due to promotional campaigns, impacting overall profitability.
Q & A Highlights
Q: After the successful update for Lineage M, how do you plan to stabilize sales for Lineage 2M and Lineage W, given their structural weaknesses?
A: (Won Jun Hong, CFO) We acknowledge the differences between Lineage M and the other titles. However, we have seen a clear upward trend in traffic with the recent update for Lineage M. By applying similar approaches to Lineage 2M and Lineage W, including new content and server openings, we believe we can attract new users and bring back lapsed users, resulting in a significant rebound in sales and traffic.
Q: What is the rationale behind NCSOFT's focus on diversification into new game genres?
A: (Won Jun Hong, CFO) Diversification does not mean we are shifting focus away from MMORPGs, where we have significant expertise. We have separate organizations and sufficient resources dedicated to developing new genres. This two-track strategy includes both internal development and external collaborations to ensure we can excel in new areas while maintaining our strength in MMORPGs.
Q: Can you elaborate on the criteria for selecting potential M&A candidates?
A: (Won Jun Hong, CFO) Our criteria have not changed. We look for candidates both domestically and internationally, considering regional implications and management capacity. The price of acquisition is critical, and we ensure it aligns with shareholder interests and EPS accretion. We are more selective in choosing our partners to ensure value creation.
Q: What were the labor costs related to the recommended resignation program in Q2, and are there additional cost savings expected in Q3?
A: (Won Jun Hong, CFO) Labor costs dropped by 7% quarter on quarter to KRW180 billion, including severance packages and long-term reserves. The recommended resignation program will continue until the end of the year, and we aim to reduce HQ headcount to mid-4,000 by the end of 2024.
Q: What are the reasons for the disappointing results of Battle Crush, and what are the success factors for upcoming blockbuster titles like Tactan and Aion 2?
A: (Won Jun Hong, CFO) The management is open to new projects, and financial success is not always the primary expectation. For upcoming titles, the development teams have strong expertise and understanding of their genres. Project G (Tactan) combines strategy and simulation, offering unique gameplay and monetization strategies. We are excited about these new releases and will communicate more details soon.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
