NC Corporation (KRX:036570) earned ₩173.9bn of operating income in the June quarter. A year earlier the same quarter produced ₩15.1bn. The whole of FY2025 produced ₩16.1bn. An earlier piece here asked what management would say about this at its September investor meetings. This one asks a narrower question: did the rebound come from selling more, or from spending less?
The answer is that it came from selling more, and that the company is now spending a great deal more too. Revenue doubled. Costs rose 62%. The gap between those two growth rates is the entire profit recovery. And a third of the new cost is a line that barely existed at NC before this quarter.
Quarterly revenue from DART starts at ₩401.9bn, ₩409.4bn and ₩360.3bn. It then runs ₩382.4bn, ₩360.0bn and ₩404.2bn. The final figures are ₩557.4bn and ₩770.5bn. This sequence runs from Q3 2024 to Q2 2026. For six quarters the company was stuck between ₩360bn and ₩410bn. Then it broke out twice in a row.
The Korean press coverage of the release breaks the June quarter down. Lineage Classic, a re-release of the company's original 1998 PC game, made ₩185.5bn. Total PC revenue was ₩343.8bn, up 216% year on year. It was the highest PC quarter in the company's history. Mobile-casual revenue is a new line. It was ₩169.7bn, or 22% of the total. That line is JustPlay, a global mobile game platform NC bought and consolidated for the first time this quarter.
Strip out JustPlay and NC's own revenue was about ₩600.8bn. That is still 57% above the year-earlier quarter and 8% above the March quarter. The rebound is real without the acquisition. The acquisition just makes it look bigger.
Operating costs were ₩596.6bn in the quarter, up 62% year on year and 34% quarter on quarter. Two lines explain most of it.
Labour was ₩260.0bn, up 36% from a year earlier and 7% from the March quarter. Working back from the 36% figure, the year-earlier quarter was about ₩191bn on ₩382.4bn of revenue. That is labour eating half of revenue. This quarter labour is 33.7% of revenue. The line went up, but revenue went up more. The release doesn't say why labour rose 36%. It could reflect headcount or performance bonuses tied to the rebound. Or it could reflect staff that came with JustPlay. Any of those would fit.
Marketing was ₩163.1bn. A year earlier it was about ₩23bn, so the increase is nearly sevenfold. This is the line to understand. The release splits it: ₩31.1bn for NC's existing business, ₩132.0bn for mobile-casual. So NC's own marketing barely moved. The ₩132.0bn is JustPlay buying users.
Put JustPlay's numbers side by side. Revenue ₩169.7bn. Marketing ₩132.0bn. That is a business where user acquisition costs 78 cents of every revenue dollar before any other expense. Casual mobile platforms work this way. They buy traffic through ad networks. They monetise it through ads and in-app purchases, and live on the spread. It is closer to a performance-marketing company than a game developer.
For NC this is new. The company's model has been a small number of titles with very high spend per player. Marketing was a fraction of revenue. It has now bolted on a business with the opposite shape. Consolidated margins will carry that shape from here.
Consolidated operating margin was 22.6% in the June quarter, against 20.3% in March. For a company that ran a 34.1% margin in FY2020, that is a recovery, not a return.
Rough arithmetic on the split uses the disclosed revenue and marketing lines. It assumes JustPlay's other costs are small. On that basis, it suggests the platform contributed something in the range of ₩20bn to ₩35bn of operating income. That was on its ₩169.7bn of revenue. That would put NC's own business near ₩140bn to ₩155bn of operating income on ₩600.8bn, a margin in the mid-20s. The company hasn't published a segment profit split, so treat those as bounds, not figures.
The point is that the rebound in NC's core came from Lineage Classic revenue landing on a cost base that grew more slowly. It did not come from cuts. Labour went up. Marketing on the core went up. The company is not shrinking to profitability. It is growing into it.
The cash flow statement is where the quarter looks weaker. Operating cash flow was ₩36.8bn against ₩173.9bn of operating income and ₩131.2bn of net income. The March quarter had converted well, ₩196.9bn of operating cash on ₩113.3bn of operating income. First-half operating cash was ₩233.8bn against ₩287.1bn of operating income, so the half looks fine. The June quarter alone does not.
Trade receivables rose to ₩238.4bn from ₩202.0bn in March and ₩130.3bn at the end of FY2024. Some of that is JustPlay's ad-network receivables arriving on the balance sheet. Some is timing. The quarterly filing doesn't separate them.
Cash and equivalents fell to ₩671.1bn from ₩1,055.9bn in March. Investing activities took out ₩396.9bn in the quarter. Intangible assets jumped from ₩257.4bn to ₩528.7bn. That is the acquisition landing as goodwill and intangibles. The company still has the cash, but ₩385bn of it turned into a mobile-casual platform in one quarter.
Current liabilities were ₩720.3bn against current assets of ₩2,236.4bn. There is no balance sheet problem. The company has decided to spend its cash pile on growth rather than sit on it. That is a change from the FY2024 posture. Cash was ₩1,260.5bn then and the company was losing money.
The company's market capitalisation was ₩4.8 trillion at Friday's close of ₩222,000. First-half net income was ₩283.6bn. Annualise it and the shares trade at about 8.4 times. Book equity was ₩3,582.0bn, so the price is 1.3 times book. The stock is 34% below its 52-week high of ₩338,000.
Eight times annualised earnings for a company whose revenue just doubled is cheap on its face. The market's hesitation is the same one this piece has. FY2025 net income of ₩347.4bn included a ₩347.4bn gain in the third quarter that had nothing to do with games. The June quarter's profit is operating. But a third of the revenue growth came from an acquisition whose economics look nothing like NC's. And the cash conversion in the quarter was poor.
Lineage Classic could fade. Re-released games spike and decay. ₩185.5bn in one quarter from a 1998 title is remarkable, and there is no reason to assume it holds. Management's plan for ten new titles by 2027 is the answer to that, but new titles at NC have a mixed record.
JustPlay's marketing could stop working. Performance marketing on mobile gets more expensive as platforms tighten tracking. A business spending 78% of revenue on user acquisition has no room if that ratio drifts to 90%.
Labour could keep rising. If the 36% increase was bonuses tied to the rebound, it repeats every good quarter. If it was headcount, it is permanent.
And the receivables build could be a sign of slower collection rather than acquisition timing. One quarter doesn't settle it.
The third-quarter report in November has two numbers that decide this. The first is operating cash flow against operating income. A second quarter below 50% conversion would say the June figure was not timing. The second is the marketing line split. If mobile-casual marketing stays near ₩130bn on flat revenue, JustPlay is buying growth it can't keep. If revenue rises and marketing holds, the platform has some retention.
Management's September meetings with Korean and Japanese institutions may give the segment split this piece had to estimate. If they publish JustPlay's operating income, the mid-20s core margin estimate here becomes checkable.
kstock reads DART every morning and writes up what moved — the contract, the buyback, the number that does not add up. The daily post and a Saturday roundup, by email.