GungHo Online Entertainment FY2013 Q2 Financial Results

Key insights

7 takeaways

01
GungHo Online Entertainment reported a 945.5% year-over-year increase in consolidated net sales to 74,621 million yen for Q2 2013.See it on page 4
02
Quarterly net profit surged by 2,507.8% year-over-year to 28,179 million yen, driven primarily by the mobile consumer division.See it on page 4
03
The mobile segment generated 71,359 million yen in sales, fueled by the success of 'Puzzle & Dragons,' which reached 16 million domestic downloads by June 2013.See it on page 4
04
The PC online business segment declined to 3,362 million yen in sales and recorded a 37 million yen loss, highlighting a shift in user preference toward mobile platforms.See it on page 4
05
Total assets grew significantly to 72,853 million yen by the end of the quarter, up from 25,085 million yen at the end of the previous fiscal year.See it on page 7
06
The company implemented a 10-for-1 stock split effective July 1, 2013, to improve stock liquidity and expand its investor base.See it on page 12
07
GungHo maintains a policy of not providing full-year earnings forecasts due to the volatility of the content industry and reporting requirements for its subsidiary, Gravity Co., Ltd.See it on page 1

Summary

GungHo Online Entertainment’s financial results for the second quarter of the fiscal year ending December 31, 2013, demonstrate a period of extraordinary growth driven by the rapid expansion of the mobile gaming market. The company reported a consolidated net sales figure of 74,621 million yen, representing a 945.5% increase compared to the same period in the previous year. Operating profit surged to 45,154 million yen, while quarterly net profit reached 28,179 million yen, marking a 2,507.8% increase year-over-year.

The company’s performance is heavily segmented between its legacy PC online business and its high-growth mobile consumer division. The mobile consumer segment served as the primary catalyst for financial success, generating 71,359 million yen in sales and 45,808 million yen in segment profit, largely due to the sustained popularity of the smartphone title "Puzzle & Dragons," which surpassed 16 million domestic downloads by the end of June 2013. Conversely, the PC online business experienced a decline, with sales falling to 3,362 million yen and a segment loss of 37 million yen, reflecting a broader industry shift as users migrate from PC platforms to mobile and handheld devices.

Financially, the company maintained a strong position with total assets rising to 72,853 million yen, up from 25,085 million yen at the end of the previous fiscal year. This increase was primarily attributed to the substantial rise in cash and deposits resulting from mobile application revenue. Due to the volatile nature of the content industry and the reporting policies of its NASDAQ-listed subsidiary, Gravity Co., Ltd., the company maintains a policy of not disclosing full-year earnings forecasts, opting instead for timely quarterly disclosures. The period also saw the implementation of a 10-for-1 stock split, effective July 1, 2013, aimed at improving stock liquidity and broadening the investor base.