Nexon Announces Strong First Quarter 2013 Financial Results

  Nexon Announces Strong First Quarter 2013 Financial Results

Business Wire

TOKYO -- May 10, 2013

NEXON Co., Ltd. (“Nexon”) (3659.TO), a worldwide leader in free-to-play online
games, today announced financial results for its first quarter ended March 31,
2013. Revenues grew 46% year-over-year, operating income increased 24% and net
income increased 17%.

“We are pleased that our first quarter results exceeded the high end of the
outlook we provided last quarter, primarily due to better-than-expected
performance in China and strong results in Korea, as well as a favorable
currency environment. Additionally, the acquisitions of gloops and inBlue have
positioned us as a major player in mobile, adding significant revenue to our
business,” said Seungwoo Choi, President and Chief Executive Officer of Nexon.
“Content updates to our major PC games were well-received by players around
the world, particularly a tier 1 update for Dungeon&Fighter in China. We also
successfully launched FIFA Online 3 in Korea during the quarter, and the game
is showing strong performance in terms of both user metrics and revenues.”

First Quarter Fiscal 2013 Financial Highlights

As announced on April 22, 2013, Nexon voluntarily adopted International
Financial Reporting Standards (“IFRS”) in order to provide financial
information to its international investor base that can be compared across
companies globally. Beginning with the first quarter of the fiscal year 2013,
Nexon is reporting its financial results consistent with IFRS.

Highlights of the first quarter are described below.

  *Total consolidated revenues were ¥44,364 million, a 46% year-over-year
    increase (or 26% on a constant currency basis).
  *Operating income was ¥20,716 million, a 24% increase year-over-year.
  *Operating margin was 47%. The year-over-year decrease from 55% in the
    first quarter of 2012 reflected the addition of significant new mobile
    revenues at lower margins, as well as higher development and support costs
    due to a more robust schedule of new title launches, and increases in
    royalty payments in Nexon’s PC business.
  *Net income for the first quarter was ¥15,150 million.
  *Earnings per share were ¥34.77.

Key accounting changes resulting from the transition to IFRS include: i)
goodwill is not amortized and is instead valued quarterly with impairments
taken according to IFRS guidelines, and ii) the value of Nexon’s investment
securities, for example its investment in NCsoft, is marked to market, and the
difference between the book value and the market value is recognized, after
tax effects, as other comprehensive income on Nexon’s comprehensive income
statement.

Additional detail regarding Nexon’s results, the Company’s second quarter 2013
outlook, and the transition to IFRS can be found in management’s letter to
shareholders, which is available on the Company’s investor relations website.

                                                      
Revenue by Region / Platform (IFRS) ^ 1
(Millions of Yen)
                                                           
                                 Q1 2013     Q1 2013       YoY % Change
Revenue by Region^2   Q1 2012    (As-        (Constant     As-       Constant
                                 Reported)   Currency)^4   Reported   Currency
China                 ¥ 15,175   ¥ 20,409    ¥ 16,867      34%        11%
Korea                 8,857      10,589      8,730         20%        -1%
Japan                 3,097      9,927       9,927         221%       221%
North America         1,398      1,418       1,215         1%         -13%
Europe and Others^3   1,850      2,021       1,686         9%         -9%
Nexon Total           30,377     44,364      38,425        46%        26%
                                                                      
Revenue by Platform
PC                    30,151     36,877      30,981        22%        3%
Mobile                226        7,487       7,444         33.1x      32.9x
                                                                      
FX rate
100 KRW/JPY           7.03       8.53        7.03
CNY/JPY               12.55      14.73       12.55
USD/JPY               79.28      92.42       79.28

Footnotes:
^1Nexon has voluntarily adopted IFRS beginning in the first quarter of the
current fiscal year. Q1 2012 actual results are disclosed according to IFRS.
^2Based on the region in which revenues originate; not a representation of
revenues according to Nexon entities.
^3Others: United Kingdom, other Asian countries and South American countries.
^4On a constant currency basis (using Q1 2012 currency exchange rates).



First Quarter Actual Results versus Outlook

The following table shows Nexon’s results relative to the Company’s outlook.

                                                             
Selected Consolidated Financial Data (IFRS)
(Millions of Yen, except per share data)
                                                                  
                      Q1 2012   Q1 2013                 Q1 2013   YoY%
                                Outlook^1               Actual
Revenues              ¥30,377   ¥35,975  ~  ¥38,529   ¥44,364   46%
PC                    30,151    28,554    ~   30,346    36,877    22%
Mobile                226       7,421     ~   8,183     7,487     33.1x
Operating income      16,760    13,514    ~   15,562    20,716    24%
                                                                  
Net income^2          12,996    9,140     ~   10,618    15,150    17%
                                                                  
Earnings per share:   30.26     20.98     ~   24.38     34.77     15%
                                                                  
FX rate
100 KRW/JPY           7.03      7.94          7.94      8.53
CNY/JPY               12.55     13.34         13.34     14.73
USD/JPY               79.28     85.08         85.08     92.42

Footnotes:

^1The initial Q1 2013 outlook disclosed on February 13, 2013 was restated
according to IFRS and disclosed on May 9, 2013.
^2Net income refers to net income attributable to owners of the parent, as
stated in Nexon’s consolidated financial results.



Second Quarter 2013 Business Outlook

Nexon expects second quarter 2013 revenues in the range of ¥27.2 billion to
¥28.4 billion for PC and ¥6.8 billion to ¥7.5 billion for mobile. In the PC
business, management expects the solid performance of existing titles in China
and Korea to contribute to year-over-year revenue growth.

In the mobile business, management expects performance of existing titles,
including those launched in first quarter 2013, to continue to gain momentum
towards the latter half of 2013.

During the second quarter, Nexon expects to launch Dragon Girls in Korea on
Kakao and Guardian Break (Royal Tactics) in North America, both as native
applications, further expanding growth opportunities.

Nexon expects second quarter 2013 operating income in the range of ¥11.4
billion to ¥12.3 billion, representing an operating margin range of 33% to
34%. Although China revenues are expected to grow moderately year-over-year,
management anticipates that operating margins will decline year-over-year
primarily due to i) increased marketing, development and support costs related
to new title launches, ii) a greater proportion of mobile revenue, the margins
of which are generally lower than PC margins, and iii) an increase in licensed
title revenues – in particular, FIFA Online 3 – leading to higher royalty
payments and marketing costs.

                                               
Nexon Business Outlook (IFRS)
(Millions of Yen, except per share data)
                                                   
                      Q2 2012      Q2 2012
(Millions of Yen)^1   (J-GAAP)^1   (Reclassified   Q2 2013 (IFRS)
                                   J-GAAP)^2
                                                              
Revenues              ¥22,876      ¥22,877         ¥34,021   ~   ¥35,991
PC                    22,696       22,697          27,246    ~   28,448
Mobile                180          180             6,775     ~   7,543
Operating income      10,678       11,363          11,356    ~   12,325
Net income            6,768        7,377           8,393     ~   8,890
                                                                 
Earnings per share    15.63        17.04           19.22     ~   20.36
                                                                 
FX rate assumptions
100KRW/JPY            7.00         7.00            8.53          8.53
CNY/JPY               12.62        12.62           14.73         14.73
USD/JPY               79.74        79.74           92.42         92.42

Footnote:
^1Numbers are rounded down based on J-GAAP methods.
^2Q2 2012 J-GAAP results reclassified to provide an approximation of IFRS.



Conference Call and Webcast

Nexon’s management will host two conference calls to discuss the Company’s
financial results and outlook. A conference call for Japanese domestic
investors will be held at 4:30 p.m. JST / 3:30 a.m. EDT and will be conducted
in Japanese. A conference call for international investors will be held at
9:30 p.m. JST / 8:30 a.m. EDT the same day and will be conducted in English.
Dial-in information for both conference calls is available on Nexon’s Investor
Relations website.

A replay and transcripts of each respective call will also be available on
Nexon’s Investor Relations website a few days following the calls.

Shareholder Letter and Financial Statements

Please visit the Investor Relations section of Nexon’s website at
http://ir.nexon.co.jp/en/ to view management’s first quarter 2013 letter to
shareholders and financial statements.

About NEXON Co., Ltd. http://company.nexon.co.jp/

NEXON Co., Ltd. (“Nexon”) (3659.TO) is a worldwide leader in free-to-play
online games. Founded in Korea in 1994, Nexon developed one of the world's
first graphics-based massively multiplayer online games. Nexon also pioneered
the concept of microtransactions and the free-to-play business model, setting
a new standard in which play is free, and users have the option to purchase
in-game items to enhance their experience. Nexon currently services nearly 60
online games in more than 100 countries and since its founding, Nexon has
generated more than 1.4 billion player registrations. The Company is
headquartered in Tokyo, Japan and its shares are listed on the Tokyo Stock
Exchange.

Contact:

NEXON Co., Ltd.
Owen Mahoney, Chief Financial Officer
+813-3523-7910