February 12 Earnings Conference Call Recap
2023 Revenue: 1.5781 Trillion KRW, Operating Loss: 109.2 Billion KRW
Revenue Down 11.3% Compared to 2023
On the 12th, Park Byung-moo, co-CEO of NCSoft, which recorded its first annual operating loss since going public, stated, "The massively multiplayer online role-playing game (MMORPG) genre still has significant growth potential."
Co-CEO Park made these remarks during the announcement of the Q4 2024 and annual earnings. He said, "Although users are becoming weary as Lineage-like genre games continue to be released in the market, looking at the global success of Throne and Liberty (TL), MMORPGs still have a potential user base." He emphasized, "If MMORPGs with strong user experiences like Aion or Blade & Soul in the past are released, the market will also grow."
Park also addressed criticisms from last year, saying, "NCSoft received a lot of criticism for declining development capabilities, poor polishing (finalization), and insufficient user communication," adding, "We are deeply reflecting on this." He continued, "From the end of last year to early this year, we reduced our game lineup through personnel adjustments," and stated, "We will focus on securing the completeness of games we can concentrate on, optimizing marketing expenses, and enhancing user communication."
He also mentioned plans for new releases. Using the upcoming MMORPG 'Aion 2' as an example, Park said, "We will first release it in the Korean and Taiwanese markets by the end of the year, then launch it in North America and Europe within a short period, learning from TL's lessons," and added, "We will start communication from the second quarter." He further stated, "'LLL' is expected to be released in the second half of the year, and from the second quarter, we plan to conduct Focus Group Tests (FGT) and Closed Beta Tests (CBT) with a small number of participants."
Regarding investment and mergers & acquisitions (M&A) plans, he said, "We plan to invest about 60 to 70 billion KRW annually to secure IP," and added, "Separately, as previously mentioned, we plan to use treasury shares for M&A and are currently negotiating with various domestic and international companies."
Park also explained NCSoft's artificial intelligence (AI) strategy. He said, "Since last year, instead of developing large language models (LLM), we have been focusing on smaller language models (sLLM) to provide specialized services," and explained, "In terms of game development, we have achieved significant cost savings through advanced work in voice synthesis, animation analysis, and chat translation, and we are also streamlining operations and QA (quality assurance) processes."
He added, "The NC AI spin-off aims to enhance the competitiveness of AI models we excel in and apply them to other developers and third parties for monetization."
NCSoft recorded sales of 1.5781 trillion KRW, an operating loss of 109.2 billion KRW, and a net profit of 94.1 billion KRW last year. Sales fell 11.3% compared to 2023, when mobile game revenue began to decline, and net profit also dropped by 56%. The decline in mobile game revenue was significant. NCSoft's mobile game revenue for Q4 was 215.6 billion KRW, down 27.9% year-on-year. On an annual basis, it decreased by 22% to 936.7 billion KRW compared to 2023. This is more than a twofold reduction compared to 2022, when mobile games alone generated 1.9343 trillion KRW in revenue.
The sales decline was particularly pronounced in 'Lineage W.' While Lineage M's revenue fell 4.6% compared to 2022, Lineage W's revenue dropped by 74.8% during the same period, falling to about a quarter of its peak revenue. Operating expenses for Q4 were 538.9 billion KRW, up 29% from the previous quarter and 24.2% year-on-year. On an annual basis, operating expenses increased by 3% compared to 2023.
The large proportion of labor costs was due to organizational efficiency measures such as voluntary retirement and encouraged resignation implemented last year. Annual labor costs for 2024 reached 906.4 billion KRW, a 10% increase from the previous year, and Q4 labor costs were 314.9 billion KRW, a 56.4% increase from the previous quarter. Marketing expenses also rose by 51% year-on-year to 128.2 billion KRW due to multiple new releases.
Chief Financial Officer (CFO) Hong Won-jun said, "The large operating loss this quarter was due to a company-wide organizational restructuring. It was an inevitable choice as part of the structural improvements demanded by investors and to establish a foundation for NCSoft's sustainable growth," and added, "This year will be a year of turnaround through overcoming remaining challenges and launching global titles."
Meanwhile, NCSoft announced a medium- to long-term shareholder return policy through cash dividends and treasury stock cancellations over three years until 2027. The policy includes paying 30% of consolidated net income as cash dividends within the distributable profit range and canceling 410,000 treasury shares, equivalent to about 1.9% of the total issued shares during the 2025 fiscal year.
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