NEXON Co.,Ltd. Q3 FY2026 earnings call

• Transformation Initiative: Q3 results significantly exceeded expectations, with operating income nearly 30% above the high end of the guidance range. Costs came in below plan despite higher royalties, and headcount remained flat YoY as the company prioritizes retaining talent.
• Project Discipline: A new financial target-driven greenlight process has been implemented, resulting in the cancellation of six projects this year to redirect resources toward games with higher potential for lasting success.
• AI Strategy: AI is utilized to handle repetitive tasks (e.g., asset localization, code review) rather than replace developers. This allows teams to test more creative ideas faster; specific ROI metrics will be reported when available.
• MapleStory Success: The 'MapleStory Playbook' (expanding core IP into classic, idle, and world-based experiences) has validated its efficacy, driving massive growth over 20 years post-launch.
• FC Turnaround: FC ONLINE returned to solid growth following gameplay and progression improvements that set average playtime records.
• D&F Challenges: Execution issues in China have led to declines. NEXON and Tencent are aligning on long-term solutions focusing on live service optimization, content frequency, and community communication.
• Pipeline Updates: Arad: Idle RPG launch moved to H1 2027 for quality improvements. New titles including Project Overkill (D&F action RPG), Azur Promilia, and TEMPPAL: OVERGEARED are scheduled for late 2026 or 2027.

The MapleStory franchise generated record quarterly revenue, growing 72% year-over-year (YoY), driven by strong performance in Korea PC, Global PC (specifically MapleStory Classic in China/Taiwan/West), MapleStory: Idle RPG, and MapleStory Worlds. The FC Franchise exceeded outlooks with double-digit YoY growth, led by a record-breaking quarter for FC ONLINE due to gameplay improvements and successful promotions. Conversely, the Dungeon & Fighter franchise declined 33% YoY, falling below outlooks primarily due to underperformance of the September National Day update in China across both PC and Mobile platforms.

• Q4 Revenue: Expected to be between JPY 107.7 billion and JPY 118.9 billion, representing a 13% decrease to a 4% increase on an as-reported basis, or a 20% to 12% decrease on a constant currency basis YoY.
• Q4 Operating Income: Projected between JPY 4 billion and JPY 11.7 billion, reflecting a 44% decrease to a 63% increase on an as-reported basis.
• Q4 Net Income: Estimated between JPY 4.7 billion and JPY 10.6 billion, down 57% to up 2% on an as-reported basis compared to Q4 2025 which included significant finance income gains.
• MapleStory Outlook: Expects ~70% YoY growth in Q4, supported by strong updates in Korea and continued momentum from Global releases and Idle RPG.
• D&F Outlook: Expects YoY revenue decline for the franchise in Q4 as efforts focus on stabilizing the player base in China prior to major updates in early next year.
• FC Outlook: Anticipates double-digit YoY revenue growth for the franchise, driven by FC ONLINE and updates to FC MOBILE.
• ARC Raiders: Expects revenue to decline YoY against the launch quarter but remain broadly flat sequentially, with ongoing support via Frozen Trail update.

• Dungeon & Fighter Execution Risk: Significant reliance on the Chinese market where recent updates failed to reengage users, leading to declining MAUs and paying users. Structural changes in live service management are required to reverse this trend.
• Concentration Risk Mitigation: While diversifying, the company still faces volatility from single large franchises; however, the strategy aims to reduce vulnerability by expanding contributions from multiple titles and markets.
• Content Update Cadence: For premium titles like ARC Raiders, maintaining user acquisition and retention requires a disciplined cadence of major updates (targeting two per year) to avoid revenue drops between launches.
• Cost Structure Shift: As revenue mix shifts from highly profitable legacy PC titles in China to new global releases and mobile titles, revenue-linked costs (royalties, PG fees) are expected to rise, potentially impacting margins if not managed against revenue growth.

Q: Regarding the sustained decline in the Dungeon & Fighter franchise, is this due to aging players leaving, or other factors? Also, how do you view the potential of new titles like Project Overkill to turn around the franchise in China?

A: Junghun Lee attributed the decline to poor reception of the April season update and execution issues in live services rather than just aging demographics. He emphasized that NEXON and Tencent aligned on structural changes to optimize live operations, increase content frequency beyond one major update per year, and improve community communication. These measures, combined with new portfolio expansions like D&F Classic and Project Overkill, aim to stabilize and grow the distinctive brand presence in China.

Q: Will the strong growth momentum of the MapleStory franchise continue into fiscal 2027, or will it stabilize while other franchises contribute more?

A: Management expressed confidence that MapleStory will sustain its strong momentum into 2027, building on the success of MapleStory Classic and MapleStory Worlds. They highlighted a solid pipeline of high-quality content updates for the core PC service and plans to expand Classic experiences globally. Additionally, they noted that MapleStory: Idle RPG will prepare for regional expansion, ensuring the franchise continues to perform robustly alongside other portfolio pieces.

Q: What are the criteria for deciding promotion spending in Q4, given that marketing costs were below plan in Q3? How does ARC Raiders plan to secure further sales growth—by expanding the user base or focusing on existing paying users?

A: Shiro Uemura explained that Q3 marketing costs were lower because planned activities for new titles slipped into Q4, so robust spending is expected in Q4 to compensate. Patrick Soderlund addressed ARC Raiders, stating that since it is a premium title, all players are already paying users. The strategy involves attracting new paying players while providing reasons for existing players to continue engaging and purchasing DLC, supported by a cadence of at least two major high-quality updates annually.

Q: Why did ARPU increase while MAU declined across PC online games in Q3, and is this revenue driver sustainable without aggressive monetization?

A: CFO Shiro Uemura clarified that these KPIs represent an aggregate for all PC online titles, not necessarily each individual game. He explained that rising ARPU indicates vitalized in-game activity and engagement rather than risky, aggressive monetization tactics. The company maintains a policy against pushing hard monetization, suggesting the ARPU increase reflects healthier player engagement and economic activity within the games.