[Click eStock] "Nexon Games' Deficit Widens Amid New Release Slump and Workforce Growth"

Responding to Poor New Releases by Expanding Workforce
Cash Burn Accelerates... 'Purdy' Recovery Unlikely
Annual Deficit Expected to Widen to 50 Billion KRW This Year

Nexon Games entered a deficit in the fourth quarter of last year as expected. With a lack of new releases and an accelerating cash burn rate, it is forecasted to record an annual deficit in the 50 billion KRW range this year as well.

On the 11th, Meritz Securities issued a 'sell' investment opinion on Nexon Games with a target price of 10,000 KRW. The closing price the previous day was 13,480 KRW.

Meritz Securities projected that Nexon Games' quarterly deficits would increase due to a heavy workforce structure. In the fourth quarter of last year, Nexon Games recorded sales of 48.3 billion KRW and an operating loss of 2.1 billion KRW. Its flagship titles, such as Purdy and Blue Archive, all underperformed compared to expectations. In the case of Purdy, a significant rebound is unlikely until the first anniversary update in July.

After the initial success of Purdy, there have been no new releases, but the cash burn rate is accelerating. Following a failed update, Nexon Games responded by massively recruiting for the Purdy team. Currently, about 100 job postings are active, indicating the possibility of further workforce expansion. Since the launch of Nexon Games, the workforce size has increased from around 900 to 1,400 employees.

However, Purdy's sales are declining. Users have left, making a rebound unlikely, and the next new release is too far off. The performance of 'Kazan,' which shares intellectual property (IP) with the next new title 'Dungeon & Fighter Arad,' is considered crucial.

This year, sales are expected to reach 176 billion KRW, with an operating loss of 54.9 billion KRW. The report expressed concerns that while the possibility of liquidity issues arising from group support is low, there is a high likelihood that the group will influence workforce decisions. The limitation of group publishing in an environment where overseas expansion is essential also reduces the company's attractiveness.

Researcher Lee Hyo-jin of Meritz Securities explained, "To enhance investment appeal, changes in workforce-related decision-making or a rebound in existing titles are necessary."