NEXON Co., Ltd. (“Nexon”) (3659.TO), a worldwide leader in free-to-play online games, today announced financial results for its third quarter ended September 30, 2012.

“We are pleased to have exceeded our operating income forecast for the quarter, despite revenue being slightly below our expectations, and to have announced several key strategic developments,” said Seungwoo Choi, President and Chief Executive Officer. “Importantly, during the quarter, we continued to take aggressive steps to capitalize on the rapid evolution of the games market on the PC and mobile platforms. We launched a closed beta for Counter-Strike Online 2 and an open beta for Epic of the Three Kingdoms. Today, we announced that we will be launching Dota 2 (“Defense of the Ancients 2”) in Korea and Japan with our partner Valve Corporation. Additionally, the development of FIFA Online 3 has been proceeding rapidly and we are on track to launch the game at the end of the fourth quarter. We believe our current pipeline is the most promising slate of games we’ve had yet, ensuring we are well-positioned for growth in 2013 and beyond.”

Continued Choi, “We also recently announced a transformational transaction with the acquisition of mobile game developer, gloops, Inc. ('gloops'). We believe this acquisition makes Nexon the largest mobile game developer in the world by revenue, based on publicly-available information, and it creates tremendous opportunities for us. We are particularly focused on combining Nexon’s popular IP and global footprint with gloops’ world-class mobile development capabilities to create strong mobile franchises and expand gloops’ business around the world.”

Third Quarter Fiscal 2012 Financial Highlights

• Total revenues were ¥24,256 million, flat versus the third quarter of 2011 (an increase of 3% on a constant currency basis) and slightly below management’s previous outlook.
• Operating income was ¥10,032 million, a decrease of 8% over the third quarter of 2011 and 8.5% above management’s previous outlook. Operating income margin was 41.4%, which was higher than expected. This was driven by revenue mix, which was higher in China and lower in some other regions, as well as our decision to push back certain launch marketing expenses into the fourth quarter of 2012.
• Net income for the quarter was ¥6,348 million, a decrease of 12% over the third quarter of 2011.
• Adjusted net income for the quarter was ¥6,791 million, a decrease of 10% over the third quarter of 2011.
• Basic earnings per share were ¥14.63. Adjusted earnings per share were ¥15.65.
• Revenue by region is shown below:

Footnotes:
¹ The above table represents a breakdown of our revenue based on the region in which revenues originate. It is not a presentation of our revenues according to Nexon entities.
² Others: United Kingdom, other Asian countries, and South American countries.
³ Constant currency percent change is the growth rate had the currency rate not changed from Q3 2011. Rates used: 1,355 Korean won/100 Japanese yen, 12.39 Japanese yen/Chinese yuan and 80.66 Japanese yen/U.S. dollar.

Business Outlook for Fourth Quarter and Full Year 2012

Nexon revised its outlook for the remainder of 2012, reflecting the consolidation of gloops and a revision to management’s forecast for Nexon’s core business.

For the full year 2012, the Company expects revenues of ¥104.9 billion to ¥108.2 billion, of which ¥6.2 billion to ¥6.7 billion is from gloops. Management anticipates operating income of ¥44.4 billion to ¥47.2 billion, of which ¥0.7 billion to ¥1.0 billion is from gloops.

For your reference, gloops’ business outlook is as follows:

Footnote:
¹ Adjusted net income is a non-GAAP measure that excludes the non-cash amortization of goodwill (and negative goodwill in the case of acquisitions occurring before April 1, 2010) related to our acquisitions, which is required under Japanese GAAP. We provide this information to investors for the purpose of comparing our net income with that of companies that do not amortize goodwill or negative goodwill associated with acquisitions in their financial results, including those reporting in accordance with U.S. GAAP.
² Nexon group business outlook includes the impact of amortization resulting from consolidation of gloops.
³ The exchange rate assumptions used in Nexon’s business outlook are as follows: 1,431.98 Korean won/100 Japanese yen, 12.55 Japanese yen/Chinese yuan and 79.31 Japanese yen/U.S. dollar.

Conference Call and Webcast

Nexon management will host a conference call in English on November 8, 2012 at 10:30 p.m. Japan Standard Time (JST) / 8:30 a.m. Eastern Standard Time (EST) for analysts and investors to discuss Nexon’s financial results and outlook. The call can be accessed via live audio webcast on Nexon’s Investor Relations website at http://ir.nexon.co.jp/en/.

A transcript of the conference call will also be available on Nexon’s Investor Relations website a few days after the live webcast.

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 third quarter letter to shareholders and related 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 more than 60 online games in more than 100 countries and since its founding, Nexon has generated more than 1.3 billion player registrations. The company is headquartered in Tokyo, Japan and its shares are listed on the Tokyo Stock Exchange.