Q1 2013 investor presentation


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Q1 2013 investor presentation

  1. 1. © 2013 NEXON Co., Ltd. All Rights Reserved.NEXON Co., Ltd.Investor PresentationQ1 2013
  2. 2. © 2013 NEXON Co., Ltd. All Rights Reserved.2Q1 2013 Results
  3. 3. © 2013 NEXON Co., Ltd. All Rights Reserved.3Highlights First quarter performance exceeded high end of our outlook– ¥44.4 bn revenue, up 46% year-over-year, and up 26% on a constant currency basis– ¥20.7 bn operating income, up 24% year-over-year, 47% operating margin China performed better than expected due to successful content updates– Against a significant comp in Q1 2012 (up 89% year-over-year in Q1 2012)– Strong Dungeon&Fighter performance in China with solid user engagement: Lunar New Year update a hit Good start to the year in Korea– Against a significant comp in Q1 2012 (up 34% year-over-year in Q1 2012)– Successful launch of FIFA Online 3– Strong performance from key titles, especially Dungeon&Fighter and Sudden Attack Favorable currency trends– Additional benefit provided by weakening Japanese yen– ¥92.4/USD and ¥8.5/100KRW quarterly average versus initial rate assumption of ¥85.1/USD and ¥7.9/100KRW Implemented IFRS to provide globally comparable financial information
  4. 4. © 2013 NEXON Co., Ltd. All Rights Reserved.4Q1 Financial Results1 Nexon has voluntarily adopted IFRS beginning in the first quarter of the current fiscal year.2 The initial Q1 2013 outlook disclosed on February 13, 2013 was restated according to IFRS and disclosed on May 9, 2013.3 Net income refers to net income attributable to owners of the parent, as stated in Nexon’s consolidated financial results.(Unit: ¥ millions, except per share data)Q1 2012(IFRS)Q1 2013 Outlook(IFRS 2)Q1 2013(IFRS) YoY %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 33.1xOperating income 16,760 13,514 ~ 15,562 20,716 24%Net income 312,996 9,140 ~ 10,618 15,150 17%Earnings per share 30.26 20.98 ~ 24.38 34.77 15%Cash and cash equivalents 111,786 n/a n/a 110,510FX Rate100 KRW/JPY 7.03 7.94 7.94 8.53CNY/JPY 12.55 13.34 13.34 14.73USD/JPY 79.28 85.08 85.08 92.42Selected Consolidated Financial Data (IFRS)1
  5. 5. © 2013 NEXON Co., Ltd. All Rights Reserved.5Revenues and Operating Income(Unit: ¥ millions)30,37744,364-5,00010,00015,00020,00025,00030,00035,00040,00045,00050,000Q1 2012(IFRS)Q2 2012(J-GAAP)Q3 2012(J-GAAP)Q4 2012(J-GAAP)Q1 2013(IFRS)Revenues16,76020,716-5,00010,00015,00020,00025,000Q1 2012(IFRS)Q2 2012(J-GAAP)Q3 2012(J-GAAP)Q4 2012(J-GAAP)Q1 2013(IFRS)Operating income
  6. 6. © 2013 NEXON Co., Ltd. All Rights Reserved.1 Based on the region in which revenues originate; not a representation of our revenues according to Nexon entities.2 Others: United Kingdom, other Asian countries, and South American countries.3 Selected Performance data is not dependent on accounting methods. The selected performance above excludes the mobile business.4 ARPPU (Average Revenue per Paying User) is the average of monthly ARPPUs for the quarter.5 On a constant currency basis (using Q1 2012 currency exchange rates).(Unit: ¥ millions)Regional Revenue and Selected PerformanceQ1 2012(IFRS)Q1 2013(IFRS) YoY % Change(As-Reported)(ConstantCurrency)5(As-Reported)(ConstantCurrency)5Revenue by Region 1China ¥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 21,850 2,021 1,686 9% -9%Nexon Total 30,377 44,364 38,425 46% 26%Revenue by PlatformPC 30,151 36,877 30,981 22% 3%Mobile 226 7,487 7,444 33.1x 32.9xNexon Total 30,377 44,364 38,425 46% 26%FX Rate100 KRW/JPY 7.03 8.53 7.03CNY/JPY 12.55 14.73 12.55USD/JPY 79.28 92.42 79.28Selected Performance 3 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013MAU (millions) 82.8 77.4 78.8 68.3 71.5Pay Rate 10.9% 10.3% 9.6% 10.5% 11.5%ARPPU 4¥1,761 ¥1,521 ¥1,729 ¥1,683 ¥2,532ARPPU (constant currency) 5¥1,761 ¥1,478 ¥1,714 ¥1,531 ¥2,1316
  7. 7. © 2013 NEXON Co., Ltd. All Rights Reserved.7Regional Revenue Composition0%25%50%75%100%Q1 2012(IFRS)Q1 2013(IFRS)China50%China46%Korea29%Korea24%Japan10% Japan22%NA, 5%NA, 3%EU & Others, 6% EU & Others, 5%
  8. 8. © 2013 NEXON Co., Ltd. All Rights Reserved.2%47%55%- 7%- 2% - 1%0%10%20%30%40%50%60%Q1 2012 (IFRS)Operating MarginRevenue Mix Development &SupportRoyalty Other Q1 2013 (IFRS)Operating Margin8Q1 Operating MarginMargin Structure Shift Illustration 1 Lower-margin mobile business representing larger portion of revenues Higher development and support costs from new title launches Increase in PC-related royalty payments for titles under licensing contracts, such as FIFA Online 321 Chart is an approximation.2 Other consists of reclassified items from non-operating expenses and extraordinary losses under J-GAAP. This category decreased year-over-year due to the absence ofimpairment recorded in Q1 2012.
  9. 9. © 2013 NEXON Co., Ltd. All Rights Reserved.9IFRS Implications for Nexon (1)1 Net income attributable to owners of the parent, as stated in Nexon’s consolidated financial results.2 Under IFRS, a company is able to choose if the difference between book value and market value of investment securities, after tax effects, is recorded either asfinance income (cost) on the consolidated income statement or as other comprehensive income on the consolidated statement of comprehensive income. Income statement structure will change under IFRS Non Operating Income (Expense) is separated, with items that are not Financial Income (Cost) or Equity in Profit (Losses) of Affiliates includedin Other Income (Expense) No Ordinary Income under IFRS Unrealized gains (losses) from investment securities are recorded below the Net Income lineFor a detailed reconciliation of J-GAAP and IFRS, please refer to pages 24 to 46 of Nexon’s Consolidated Financial Results.J-GAAP Income Statement IFRS Income StatementRevenuesOperating IncomeOrdinary IncomeExtraordinary Income (Loss)RevenuesOperating IncomeOrdinary IncomeNet Income 1Gains (Losses) from Revaluation ofInvestment Securities 2Financial Income (Cost)Interest Tax ExpenseEquity in Profit (Losses) of Affiliates(+/-)(+/-)(-)(+/-)Other Comprehensive IncomeNon Operating Income (Expense)(+/-)Other Income (Expense)(+/-)Net Income(+/-)
  10. 10. © 2013 NEXON Co., Ltd. All Rights Reserved.10IFRS Implications for Nexon (2)Marked to marketDifferences recordedunder OtherComprehensiveIncomeJ-GAAP IFRSInvestment securitiesimpairment 1NO investment securitiesimpairment 1• Recorded at fair value on thebalance sheet• Changes recorded under OtherComprehensive Income• Investment securities recordedat fair value on the balancesheet• Impairment will hit the NetIncome line of the incomestatement• Investment securities recorded atfair value on the balance sheet• No changes to the Net Incomeline of the income statement1) Goodwill: - Under IFRS, goodwill is no longer amortized- Goodwill is tested for impairment quarterly, same as J-GAAP- Goodwill impairment impacts the Operating Income line2) Investment Securities: - Investment securities are marked to market, consistent with J-GAAP- Under IFRS, writeups and writedowns are recorded under OtherComprehensive Income1 Impairment refers to an impairment according to J-GAAP. Under IFRS, the difference between book value and fair value is recorded as other comprehensive income. Noimpairments are made on investment securities under IFRS.For a detailed reconciliation of J-GAAP and IFRS, please refer to pages 24 to 46 of Nexon’s Consolidated Financial Results.
  11. 11. © 2013 NEXON Co., Ltd. All Rights Reserved.Regional Highlights11
  12. 12. © 2013 NEXON Co., Ltd. All Rights Reserved.15,17520,40905,00010,00015,00020,00025,000Q1 2012(IFRS)Q2 2012(J-GAAP)Q3 2012(J-GAAP)Q4 2012(J-GAAP)Q1 2013(IFRS)China Revenues in China were ¥20.4 billion, an increase of 34%year-over-year (89% year-over-year increase in Q1 2012) Strong Dungeon&Fighter revenue from successful Lunar NewYear update Counter-Strike Online achieved double-digit year-over-yearrevenue growthChina – HighlightsYoY% change:As reported: +34%Constant Currency: +11%(Unit: ¥ millions)12
  13. 13. © 2013 NEXON Co., Ltd. All Rights Reserved.8,85710,58902,0004,0006,0008,00010,00012,000Q1 2012(IFRS)Q2 2012(J-GAAP)Q3 2012(J-GAAP)Q4 2012(J-GAAP)Q1 2013(IFRS)Korea13Korea – Highlights Revenues in Korea were ¥10.6 billion, an increase of 20% year-over-year (34% increase year-over-year in Q1 2012) Strong momentum from Q4 updates continued in Q1, especiallyDungeon&Fighter and Sudden Attack Successfully launched FIFA Online 3; currently top-rankedsports game in KoreaYoY% change:As reported: +20%Constant Currency: - 1%(Unit: ¥ millions)
  14. 14. © 2013 NEXON Co., Ltd. All Rights Reserved.02,0004,0006,0008,00010,00012,000Q1 2012(IFRS)Q2 2012(J-GAAP)Q3 2012(J-GAAP)Q4 2012(J-GAAP)Q1 2013(IFRS)Japan14Japan – Highlights Revenues for Japan were ¥9.9 billion, led by mobile businessperformance Three Kingdoms Guild Battle, launched in May 2012,continues to grow Popular browser title, Barbarossa, launched as a full nativeapp in Q4 contributed to revenues Launched key titles: FIFA World Class Soccer S 1 and CrystalCrusadeYoY% change:As reported: +221%Constant Currency: +221%(Unit: ¥ millions)PCMobile9,9271 © EA. gloops is the developer.3,0977,2172,710Three Kingdoms Guild Battle
  15. 15. © 2013 NEXON Co., Ltd. All Rights Reserved. Revenues in North America were ¥1.4 billion, an increase of 1% year-over-year Revenues in Europe and other regions were ¥2.0 billion, an increase of 9% year-over-year Weakening Japanese yen provided additional benefit Strategic investment in Robotoki, whose founder was the creative strategist behind the Call of Duty franchise1,3981,41802004006008001,0001,2001,4001,6001,8002,000Q1 2012(IFRS)Q2 2012(J-GAAP)Q3 2012(J-GAAP)Q4 2012(J-GAAP)Q1 2013(IFRS)North America1,8502,02102004006008001,0001,2001,4001,6001,8002,000Q1 2012(IFRS)Q2 2012(J-GAAP)Q3 2012(J-GAAP)Q4 2012(J-GAAP)Q1 2013(IFRS)Europe and others15North America / Europe and Others – HighlightsYoY% change:As reported: + 1%Constant Currency: -13%(Unit: ¥ millions)(Unit: ¥ millions)YoY% change:As reported: + 9%Constant Currency: - 9%
  16. 16. © 2013 NEXON Co., Ltd. All Rights Reserved.Q2 2013 Business Outlook16
  17. 17. © 2013 NEXON Co., Ltd. All Rights Reserved.17Q2 2013 Business Outlook1 Q2 2012 J-GAAP results reclassified to provide an approximation of IFRS.2 In most situations, the exchange rates of both the South Korean won and Chinese yuan are linked to the U.S. dollar.(Unit: ¥ millions, except per share data)Q2 2012(J-GAAP)Q2 2012(ReclassifiedJ-GAAP 1)Q2 2013(IFRS)Revenues ¥22,876 ¥22,877 ¥34,021 ~ ¥35,991PC 22,696 22,697 27,246 ~ 28,448Mobile 180 180 6,775 ~ 7,543Operating income 10,678 11,363 11,356 ~ 12,325Net income 6,768 7,377 8,393 ~ 8,890Earnings per share 15.63 17.04 19.22 ~ 20.36FX Rate Assumptions100KRW/JPY 7.00 7.00 8.53 8.53CNY/JPY 12.62 12.62 14.73 14.73USD/JPY 79.74 79.74 92.42 92.42Goodwill amortization: Q2 2012 goodwill amortization under J-GAAP was 0.6 billion yen.Currency sensitivity 2 : Based on the assumptions above, every one Japanese yen move against the U.S. dollarwould have an impact of 0.27 billion yen on revenue and 0.12 billion yen on operatingincome for the second quarter of 2013.
  18. 18. © 2013 NEXON Co., Ltd. All Rights Reserved.18Q2 2013 Operating Margin OutlookExpect operating margin of 33% to 34% due to: Lower-margin mobile business represents larger portion of revenues Investment in marketing for mobile and PC, with expected contributions from Q3 onward Royalty costs associated with new title launches, such as FIFA Online 3 Increase in PC-related development and support costs, primarily for new title launchesJ-GAAP results for Q2 – Q4 2012 with non-operating income (expense) and extraordinary gain (loss) reclassified above the operatingincome line, and with goodwill amortization added back to provide an approximation of results under IFRS33%50%- 6%- 5%- 3%- 3%0%10%20%30%40%50%60%Q2 2012OperatingMargin(ReclassifiedJ-GAAP)MarketingExpenseRevenue Mix Royalty Development& SupportQ2 2013Low-endOperatingMargin(IFRS)Margin Structure Shift Illustration 1,250%45%30%47%33%0%10%20%30%40%50%60%Q2 2012(ReclassifiedJ-GAAP)Q3 2012(ReclassifiedJ-GAAP)Q4 2012(ReclassifiedJ-GAAP)Q1 2013(IFRS)Q2 2013Low-end(IFRS)Operating Income Margin 21 This chart is an approximation.2 Q2 2012 J-GAAP results are reclassified to provide an approximation of IFRS.
  19. 19. © 2013 NEXON Co., Ltd. All Rights Reserved.19Q2 2013 PC Online Revenue Outlook China: Modest growth from key titles– Expect continued strength in Dungeon&Fighter– Counter-Strike Online remains our second largest title in China Korea: Year-over-year growth from new title launches and growth of key existing titles– Expect FIFA Online 3 to continue to grow– Expect continued strong performance of Sudden Attack and Dungeon&Fighter– Launching Pro Baseball 2K and Warface
  20. 20. © 2013 NEXON Co., Ltd. All Rights Reserved.20Q2 2013 Mobile Revenue Outlook Existing titles: Expect continued solid performance– Investing in marketing campaigns to support titles with high user retention– Joint promotional campaign with DeNA including Three Kingdoms Guild Battle (launched May 2012) and other key titles New titles: Native and browser apps launching in Japan and internationally– Guardian Break (Royal Tactics) as first native app in North America– Dragon Girls for Kakao in Korea– Jointly developed titles with DeNA on Mobage in JapanThree Kingdoms Guild Battle TV CommercialGuardian Break (Royal Tactics )
  21. 21. © 2013 NEXON Co., Ltd. All Rights Reserved.Q2 Q3Korea212013 Tier 1 Content Updates and LaunchesQ1 Q4ChinaLaunchesKoreaTier 1 Content Updates – Major TitlesFirst Half 2013 Second Half 2013China(Launched on Jan 17)
  22. 22. © 2013 NEXON Co., Ltd. All Rights Reserved.22Appendix
  23. 23. © 2013 NEXON Co., Ltd. All Rights Reserved.23Summary of Results and Key Operational Metrics(Unit: ¥ millions except per share data)Q1 2012J-GAAPQ2 2012J-GAAPQ3 2012J-GAAPQ4 2012J-GAAPQ1 2012IFRSQ1 2013IFRS YoY%(By Region)Korea ¥8,856 ¥6,251 ¥6,578 ¥7,057 ¥8,857 ¥10,589 20%China 15,175 10,737 11,404 11,074 15,175 20,409 34%Japan 3,096 2,826 3,231 10,037 3,097 9,927 221%North America 1,397 1,515 1,340 1,117 1,398 1,418 1%Europe and RoW 1,850 1,545 1,701 1,651 1,850 2,021 9%(By Platform)PC 30,151 22,696 23,567 23,867 30,151 36,877 22%Mobile 225 180 689 7,070 226 7,487 33.1xRevenue 30,377 22,876 24,256 30,937 30,377 44,364 46%Operating income 17,384 10,678 10,032 9,778 16,760 20,716 24%Net income 12,377 6,768 6,348 (94) 12,996 15,150 17%Earnings per share 28.82 15.63 14.63 (0.22) 30.26 34.77 15%Cash and cash equivalents 146,977 129,089 139,659 127,604 111,786 110,510FX rate100 KRW/JPY 7.03 7.00 6.98 7.10 7.03 8.53CNY/JPY 12.54 12.62 12.55 12.64 12.54 14.73USD/JPY 79.28 79.74 79.37 79.82 79.28 92.42Key Performance (excluding mobile)MAU 82.8 77.4 78.8 68.3 82.8 71.5Pay Rate 10.9% 10.3% 9.6% 10.5% 10.9% 11.5%ARPPU ¥1,761 ¥1,521 ¥1,729 ¥1,683 ¥1,761 ¥2,532ARPPU (constant currency) ¥1,761 ¥1,478 ¥1,714 ¥1,531 ¥1,761 ¥2,131For a detailed reconciliation of J-GAAP and IFRS, please refer to pages 24 to 46 of Nexon’s Consolidated Financial Results.
  24. 24. © 2013 NEXON Co., Ltd. All Rights Reserved.24COGS and SG&A(Unit: ¥ millions)1 Royalty costs include royalties paid to third-party developers for the right to publish their games.2 HR cost includes salaries, bonuses and benefits for our live game developers, who support post launch servicing, updating and support for our games.3 Other (COGS) primarily consists of depreciation and amortization of assets related to existing games, connection fees (mainly comprised of co-location and datacenter fees, Internetbandwidth and access fees), and the costs of purchasing and maintaining our servers and computer equipment.4 PG fees increased in Q4 2013 due to the consolidation of gloops, which resulted in increased carrier payment commission.5 Others includes mobile platform commission fees.6 Other income is a non J-GAAP financial measure consisting of rent income, other non-operating income, reversal of deferred revenues, gain on sale of properties, and gain onchange in equity. Q1 – Q4 2012 other income is provided for reference purposes.7 Other expense is a non-J-GAAP financial measure consisting of other non-operating expenses, loss on sale/disposal of properties, loss on impairment of tangible fixed assets, losson impairment of intangible assets, prior year adjustment (loss), loss on impairment of other fixed assets, loss on change in equity, and loss on liquidation of subsidiaries. Q1 – Q4other expense is provided for reference.FY2012 FY2012 FY2013Q1 Q2 Q3 Q4 Q1 Q1J-GAAP J-GAAP J-GAAP J-GAAP IFRS IFRSTotal Cost of Revenue ¥4,409 ¥3,813 ¥4,527 ¥5,800 ¥4,405 ¥7,831Royalty 11,568 933 1,433 1,488 1,569 2,673HR Cost (COGS) 21,615 1,646 1,690 2,337 1,624 2,875Other (COGS) 31,226 1,234 1,404 1,975 1,212 2,283Total SG&A 8,582 8,384 9,696 15,358 8,031 15,343HR Cost 1,858 1,962 2,019 2,687 1,912 3,004PG Fee 41,122 881 1,047 1,989 1,260 2,259R&D 591 767 644 562 587 659Marketing / Advertising expenses 1,023 869 1,856 2,429 1,023 1,878Depreciation and amortization 1,912 1,939 1,907 2,203 1,903 2,488Goodwill Amortization 592 608 671 1,372 - -Other 51,484 1,358 1,552 4,116 1,346 5,055Other Income 678 367 294 932 78 164Other Expense 71,259 292 131 2,723 1,259 638
  25. 25. © 2013 NEXON Co., Ltd. All Rights Reserved.25Balance Sheet(Unit: ¥ millions)Update5/7Q4 2012(IFRS)Q1 2013(IFRS)AssetCurrent AssetsCash and cash equivalents ¥84,736 ¥110,510Other current assets 70,428 60,294Total Current Assets 155,164 170,804Non-current assetsProperty, plant and equipment 10,527 12,593Intangible assets other than goodwill 30,800 30,060Goodwill 46,475 46,868Others 77,222 83,209Total Noncurrent Assets 165,024 172,730Total Assets 320,188 343,534LiabilitiesCurrent LiabilitiesIncome tax payable 9,491 12,771Current borrowings and current portion of non-current borrowings 11,505 11,479Other current liabilities 23,324 24,715Total Current Liabilities 44,320 48,965Non-current liabilitiesNon-current borrowings 42,670 38, 401Other non-current liabilities 10,953 10,440Total Noncurrent liabilities 53,623 48,841Total Liabilities 97,943 97,806EquityCapital stock 51,342 51,449Capital surplus 50,188 50,292Other equity interest 11,905 21,861Retained earnings 105,293 118,265Non-controlling interests 3,517 3,861Total equity 222,245 245,728Total Liabilities and Total Equity 320,188 343,534
  26. 26. © 2013 NEXON Co., Ltd. All Rights Reserved.26Key Cash Flow Statement(Unit: ¥ millions)Update5/7Q1 2012(IFRS)Q1 2013(IFRS)Net cash flows from (used in) operating activities ¥18,895 ¥2,424Net cash flows from (used in) investments (25,099) 26,557Net cash flows from (used in) financing activities (1,918) (6,663)Net increase (decrease) in cash and cash equivalents (8,122) 22,318Effects of exchange rate changes on the balance of cash held inforeign currencies2,309 3,456Cash and cash equivalents at the beginning of the period 117,599 84,736Cash and cash equivalents at the end of the period 111,786 110,510
  27. 27. © 2013 NEXON Co., Ltd. All Rights Reserved.0204060801001201401601801Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q(E)2008 2009 2010 2011 2012 201327Japanese Mobile MarketNative App RevenueBrowser App RevenueSource: Company and Credit Suisse data(Unit: ¥ billions)(Approx. 20%)(Approx. 80%)
  28. 28. © 2013 NEXON Co., Ltd. All Rights Reserved.This presentation is prepared to offer reference information about NEXON group to the investors. NEXON Co., Ltd. (“Nexon”) has not verified and wouldassume no responsibility for the accuracy, appropriation, or completeness thereof. This presentation does not contain all relevant information relating toNexon or the sale of its shares, including, without limitation, the information that would be stated under the captions “Risk Factors”, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” and “Business” in an annual report. Any investment decision with respect toany shares of Nexon should be made solely upon the basis of the information contained in the disclosure documents and is qualified in its entirety byreference to the detailed information appearing in the disclosure documents.This presentation includes non-GAAP financial measures, including but not limited to revenues, operating income and net income, as well as ratioscalculated on the basis thereof. These non-GAAP financial measures should not be considered in isolation or as a substitute for the most directlycomparable financial measures included in our consolidated financial statements and presented in accordance with IFRS.This presentation includes forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipate”,“assume”, “believe”, “estimate”, “expect”, “forecast”, “may”, “plan”, “potential”, “predict”, “seek”, “should”, or “will”, or by other similar terminology. Thesestatements discuss expectations, identify strategies, contain projections of Nexon’s financial condition or results of operations or state other forward-looking information. The forward-looking statements in this presentation are subject to various risks, uncertainties and assumptions about Nexon’sbusiness and results of operations. The expectations expressed in these forward-looking statements may not be achieved, and actual results could differmaterially from and be worse than expectations. Potential risks and uncertainties that could cause actual results to differ materially from expectationsinclude, without limitation:Continued growth and popularity of Nexon’s key titles;Nexon’s ability to maintain favorable relationships with key licensing partners;Nexon’s continued ability to offer games in China, through local partners or otherwise;Nexon’s ability to compete effectively in the online games industry;Nexon’s ability to address hacking, viruses, security breaches and other technical challenges;Fluctuations in currency exchange rates;Nexon’s ability to maintain and further develop its brand name;Effective acquisition of new companies, businesses, technologies and games from third parties and the possibility of recognizing impairmentlosses;Continued growth of the online games market, including the underlying infrastructure, and free-to-play/item-based revenue generation model;Nexon’s ability to adapt to new technologies;Nexon’s ability to enter into licensing arrangements for third-party titles on terms favorable to it;Effective defense of Nexon’s intellectual property; andLegislative, regulatory, accounting and taxation changes in the countries in which Nexon operates.Nexon does not intend, and disclaims any duty, to update or revise any forward-looking statements contained in this presentation to reflect newinformation, future events or otherwise. We caution you not to place undue reliance on the forward-looking statements contained in this presentation.28Disclaimer