NEXON Co Ltd (NEXOF) (Q2 2026) Earnings Call Highlights: Record MapleStory Performance and ...

Negative Points

• Operating income declined 17% year-over-year in Q2, reflecting a shift in product mix with higher revenue-linked costs such as creator fees and user acquisition costs.

• The Dungeon&Fighter franchise experienced a significant 44% year-over-year revenue decline, with soft starts to new season updates in both PC and mobile versions.

• The FC franchise underperformed expectations, as the World Cup did not translate into the anticipated traffic lift, and technical issues in FC Mobile affected traffic and monetization.

• Q3 operating income outlook is expected to decline by 40% to 14% year-over-year, impacted by higher costs for new title promotions and a one-time cost related to stock option adjustments.

• ARC Raiders revenue is expected to normalize and decline sequentially in Q3, more than nine months after its initial launch.

• The company faces a challenging comparison for MABINOGI MOBILE, with Q3 revenue expected to decline year-over-year against a strong launch quarter in 2025.

Q & A Highlights

Q: Can you share your thinking on the timing and size of the special dividend of JPY415 per share, and how should we think about the cash balance going forward? Is there a line in the sand for excess cash? A: Shiro Uemura, CFO, explained that the special dividend, totaling approximately JPY324 billion, was driven by a stable revenue base from established franchises and a recent influx of JPY142 billion in gains from divesting investments, bringing cash reserves to JPY842 billion. After the payout, the cash balance will be around JPY500 billion, which management believes is sufficient for organic growth and future M&A opportunities. He noted that if excess capital accumulates again beyond strategic needs, the company would consider further progressive returns to shareholders.

Q: Regarding the Q3 guidance, is the cost increase a one-off aspect, and how do you plan to balance cost control with growth investment? A: Shiro Uemura, CFO, clarified that the cost increases are not one-off but reflect a change in the revenue mix. As high-performing titles like MapleStory Worlds and MapleStory: Idle RPG grow, variable costs such as creator fees and user acquisition costs rise proportionally. The guidance also includes upfront marketing investments for Q3 and Q4 launches. He emphasized that while the revenue mix changes, the company expects this to contribute to improved operating income margins over the long term.

Q: What is your analysis of the FC franchise's underperformance during the World Cup, and what initiatives will bring it back on track? A: Junghun Lee, President and CEO, stated that the anticipated World Cup traffic lift in Korea did not fully materialize due to lower-than-expected enthusiasm for the tournament. However, traffic and revenue have improved since the Team of the Season update in late June. For the remainder of 2026, the priority is strengthening traffic and engagement to rebuild a solid foundation rather than short-term revenue growth. He also highlighted the long-term agreement with EA as proof of shared confidence in the franchise's potential.

Q: What expectations do you have for the upcoming Frozen Trail update for ARC Raiders in terms of monetization and user acquisition? A: Patrick Soderlund, Executive Chairman, stated that Frozen Trail, scheduled for early October, is the largest content drop since launch, designed to re-energize the existing core and attract new players. He noted that the team has studied successful updates from similar games and believes the package is strong. The plan is to deliver two major updates per year, supplemented by smaller, more continuous updates on a weekly or bi-weekly basis.

Q: How do you view the recovery and sustainability of the Dungeon&Fighter user base, and what is your full-year outlook for the franchise? A: Junghun Lee, President and CEO, explained that the major seasonal updates in the first half of 2026 performed below expectations. The company is focused on two key areas: increasing the variety and volume of content in major updates and introducing new gameplay experiences, especially for mobile's casual user base. He noted that the development transition to Tencent is now yielding a denser content cadence. For the full year, PC service is expected to remain stable year over year, while mobile is expected to decline.

Q: Will the increase in content for Dungeon&Fighter lead to higher human resource costs, or will AI be used to manage costs? A: Junghun Lee, President and CEO, assured that the key creative team at Neople remains the same, and while the co-dev structure with Tencent adds workforce, AI solutions are being used to reduce mundane work like pixel art asset creation, allowing creative minds to focus on more creative tasks. He stated that investors should not be overly concerned about cost increases tied to content volume, as the process is being well managed.

Q: What is the expected revenue and operating income contribution from the Overwatch publishing deal with Blizzard Entertainment? A: Shiro Uemura, CFO, stated that Overwatch launched on August 12 with high awareness and a good start, but it is too early to quantify its contribution. The Q3 outlook includes only a modest contribution from the title, with plans to steadily grow it over time.

Q: How do you plan to leverage "contextual capital" to revive the Dungeon&Fighter franchise in the age of generative AI? A: Junghun Lee, President and CEO, defined contextual capital as the accumulated time and shared moments between development teams and player communities over decades. While AI can help with code and artwork, the context built by NEXON's long-running live service titles cannot be quickly replicated by competitors. The company is using this capital to produce content that closely matches player tastes and deliver it at greater speed, expecting a sustained long-term upward trajectory.

Q: Given the special dividend, what are the criteria for choosing between share buybacks and special dividends for future capital returns? A: Shiro Uemura, CFO, explained that using the same amount for a share buyback would take about 25 months to execute and cover 18% of outstanding shares, potentially impacting stock liquidity. A special dividend was chosen because it provides a quick and fair return to all shareholders without negatively affecting liquidity. The company will remain flexible, combining dividends and buybacks to achieve the most optimal capital return scenario while maintaining a minimum ROE of 10% and aiming for 15%.

Q: Can you elaborate on the Q2 performance of the MapleStory franchise and its outlook for Q3? A: Shiro Uemura, CFO, reported that the MapleStory franchise delivered a record quarter with 62% year-over-year revenue growth, driven by MapleStory Worlds (up 123% year over year) and MapleStory: Idle RPG. For Q3, the franchise is expected to sustain momentum with approximately 40% year-on-year growth, led by continued strength in MapleStory Worlds, which is expected to roughly double year on year, and ongoing contributions from MapleStory: Idle RPG.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .