NCSOFT (036570) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue was KRW 360.3 billion, down 12% quarter-over-quarter and 9% year-over-year, mainly due to lower royalty sales and stabilization in flagship game revenues.

• Operating profit turned positive quarter-over-quarter to KRW 5.2 billion as severance costs subsided, but fell 80% year-over-year.

• Net income was KRW 37.5 billion, positive sequentially and a turnaround from prior losses, but down 34% year-over-year.

• Cost reduction initiatives, including headcount reduction and spinoffs, have been implemented over the past year.

Financial highlights

• Q1 mobile game sales were KRW 206.3 billion, down 4% quarter-over-quarter, with Lineage W sales up 8% and Lineage M/2M down 7% and 8% respectively.

• Online PC game sales were KRW 83.3 billion, down 11% quarter-over-quarter; royalty sales fell 39% sequentially but rose 38% year-over-year to KRW 45.0 billion.

• Overseas and royalty sales accounted for 37% of total revenue.

• Operating costs decreased 34% quarter-over-quarter and 5% year-over-year to KRW 355.1 billion; labor costs dropped 40% quarter-over-quarter and 8% year-over-year to KRW 187.2 billion.

• Pre-tax income rose to KRW 31.3 billion, up from a loss in the previous quarter.

Outlook and guidance

• Sales guidance for next year is KRW 2 trillion to KRW 2.5 trillion, with expectations of significant leverage on operating profit.

• Legacy IPs are expected to generate KRW 1.4–1.5 trillion in annual sales, covering the optimized cost structure.

• New IPs are targeted to contribute KRW 600 billion to KRW 1 trillion in annual sales.

• Multiple new titles, including Aion 2, LLL, Breakers, and Time Takers, are scheduled for release from H2 2024 to early 2025.

• M&A activities are ongoing to drive additional growth, with results expected soon.