NC Barely Avoids Deficit... Aiming for Rebound with New Releases and Strategic Investments (Comprehensive)

Q2 Sales 368.8 Billion KRW, Operating Profit 8.8 Billion KRW
Down 16.2% and 74.9% Year-on-Year

NCSoft barely avoided a loss in the second quarter of this year. The rebound of its main IP, Lineage M, and cost-efficiency policies such as restructuring helped reduce losses. Amid ongoing concerns about the 'one-game risk,' NCSoft's strategy is to secure new growth engines through external investments for IP expansion.

NCSoft announced on the 5th that it recorded consolidated sales of 368.8 billion KRW and an operating profit of 8.8 billion KRW in the second quarter. These figures represent decreases of 16.2% and 74.9%, respectively, compared to the same period last year.

By region, sales were 240.3 billion KRW in Korea, 56.9 billion KRW in Asia, and 33.9 billion KRW in North America and Europe. Royalty revenue amounted to 37.7 billion KRW, increasing by 15% from the previous quarter due to the Neo Classic server update for Blade & Soul in China. Overseas and royalty revenues accounted for 35% of total sales.

By game, the Lineage IP stood out in sales. Lineage M accounted for the largest share with 107 billion KRW, followed by Lineage W with 65.5 billion KRW, Lineage 2M with 42.3 billion KRW, Lineage with 24.6 billion KRW, Guild Wars 2 with 23.5 billion KRW, Lineage 2 with 21.2 billion KRW, Aion with 13.1 billion KRW, and Blade & Soul with 3.8 billion KRW.

By platform, mobile games recorded sales of 218.2 billion KRW, and PC online games recorded 86.2 billion KRW. Mobile game sales decreased by 13% compared to the previous quarter, and PC online game sales decreased by 6%. However, Lineage M saw a significant increase in user metrics due to its 7th-anniversary update and the launch of the Reboot World.

NCSoft aims for a rebound in the second half through new releases and global expansion. First, the switching RPG (role-playing game) Hoyun will be released on the 28th in Korea, Japan, and Taiwan. NCSoft is also preparing for the global service of TL (THRONE AND LIBERTY) in collaboration with Amazon Games. The company plans to accelerate global regional expansion by preparing services for Blade & Soul 2 in China and Lineage 2M in Southeast Asia.

Hong Won-jun, NCSoft’s Chief Financial Officer (CFO), explained during a conference call that "three new games based on legacy IPs are under development; one is scheduled for release in the fourth quarter of this year, and the other two are planned for release in the first and second halves of next year, respectively."

He added, "We are preparing for the global service of TL within this year, as well as the expansion of Blade & Soul 2 in China and Lineage 2M in Southeast Asia. In particular, for Lineage 2M, we are establishing a joint venture with a local company ahead of the launch, which will be finalized soon."

NCSoft is investing in diversifying its game portfolio with genres such as shooting and subculture, as well as expanding into global markets. Recently, it made a 4.8 billion KRW investment in Moon Rover Games, a Swedish shooting game specialist developer, and completed a 37 billion KRW investment in rights and equity in Big Game Studio, a domestic subculture game specialist developer. The company plans to actively seek additional investment opportunities such as M&A to continue business diversification.

Regarding the investment strategy, CFO Hong said, "Our approach consists of two tracks: investment and M&A. However, I hope these two are not confused." He explained, "Investments may be at an early stage or for rights acquisition. Continuous investments will be made. M&A is aimed at improving overall direction and profitability."

Addressing concerns about profitability decline due to genre diversification, he emphasized, "Diversifying genres does not affect our focus and concentration on MMO. We will continue to, and even more strongly, promote revenue and profitability growth through legacy IPs."

Restructuring, including workforce reduction, will also continue. CFO Hong stated, "We reduced the number of executives by about 20% at headquarters and implemented a voluntary resignation program in May, with retirement procedures planned through the end of the year. Through this, we plan to reduce headquarters staff to the mid-4,000s by year-end."