NC, Quarterly Loss for the First Time in 12 Years... "Sorry for the Disappointment" (Comprehensive)

143 Billion KRW Loss in Q3... First Deficit in 12 Years Since Q2 2012
"Painful Measures to Rebound Performance by Q4"

NCSoft faced an 'earnings shock' as it recorded a quarterly loss for the first time in 12 years. This was due to a decline in existing game sales and sluggish performance of new releases. The management apologized for the poor results and stated that they will achieve meaningful performance improvements through organizational restructuring.

NCSoft announced on the 4th that its consolidated sales for the third quarter of this year amounted to 401.9 billion KRW, with an operating loss of 14.3 billion KRW. Sales decreased by 5% compared to the same period last year, and operating profit turned into a loss due to increased operating expenses such as marketing costs. Net income also recorded a loss of 26.5 billion KRW due to operating losses and foreign exchange-related non-operating losses caused by exchange rate fluctuations.

This is the first time NCSoft has recorded a quarterly loss since the second quarter of 2012, 12 years ago. Hong Won-jun, NCSoft’s Chief Financial Officer (CFO), said during the conference call immediately after the earnings announcement, “We apologize for not meeting market expectations,” adding, “Unlike before, we are actively pursuing diversification of the new game portfolio. We will prepare various measures in terms of genre and platform.”

Operating expenses were 416.2 billion KRW, up 2% from the same period last year. In particular, marketing expenses increased by 76% year-on-year to 48.7 billion KRW. This was influenced by marketing activities related to new game launches and large-scale updates of live games. Labor costs rose by 1% year-on-year to 201.1 billion KRW.

Sales by region were 286.2 billion KRW in Korea, 49.4 billion KRW in Asia, and 28.2 billion KRW in North America and Europe. Royalty revenue was 38.1 billion KRW.

Mobile game sales recorded 253.4 billion KRW. Lineage M’s sales increased by 49% compared to the previous quarter due to the reboot world effect launched in June, but PC online game sales decreased by 6% compared to the previous quarter.

[Image source=Yonhap News]

NCSoft explained its strategic changes in response to the poor earnings and forecasted a significant performance rebound starting in 2025. CFO Hong said, “We plan to release five new titles in 2025,” adding, “Along with Aion 2, LLL, and TACTAN, we will introduce Breakers through an external investment studio, Big Game Studio, and one new genre game targeting the global market.”

He added, “We are about to announce publishing contracts in one domestic and one overseas location through collaboration with external intellectual properties (IP). One of these is targeted for release next year, and the other will not take long to launch either.”

CFO Hong emphasized the strategy of utilizing existing IPs, saying, “We are focusing on realizing the hidden value of IPs from the customer’s perspective,” highlighting the use of existing IPs such as Journey of Monark.

He also mentioned the recently announced voluntary retirement and the plan to spin off development subsidiaries. Previously, NCSoft decided to establish four new corporations by independently separating game development and new business divisions equipped with future competitiveness. The plan includes launching three IPs?TL, LLL, and TACTAN?as independent game development studios and establishing an AI-specialized company to advance AI technology and commercialization. Through these changes, the company aims to maximize creativity and proactiveness and establish a sustainable growth foundation.

CFO Hong said, “We will complete the restructuring by the fourth quarter and apply a new cost structure starting in 2025,” adding, “Through this, we plan to reduce the headquarters staff from the current mid-4,000s to the 3,000s level next year.”

He also stated, “While immediate survival is important, once assetization is achieved, we are considering additional investment attraction or an initial public offering (IPO).” In particular, he explained that the establishment of the AI subsidiary aims not only to support NCSoft’s development but also to create its own business model.

CFO Hong concluded, “Until the fourth quarter, we will undertake painful efforts to resolve accumulated issues and reverse performance. From 2025, we will focus on our core business to deliver better results.”