GungHo Online Entertainment Consolidated Financial Results for the 3rd Quarter of FY 2020

Key insights

6 takeaways

01
GungHo reported Q3 2020 net sales of 25,444 million yen, an increase of 3,237 million yen over the previous quarter.See it on page 1
02
Operating income reached 6,710 million yen, experiencing a slight decline due to higher advertising spend for new game launches.See it on page 2
03
The Nintendo Switch title Ninjala, released in June 2020, surpassed 5 million global downloads by late October 2020.See it on page 7
04
Growth was driven by the sustained performance of the flagship title Puzzle & Dragons and the successful launch of Ragnarok Origin in South Korea by subsidiary GRAVITY Co., Ltd.See it on page 3
05
The company’s gross profit margin settled at 53.9%, impacted by shifts in sales distribution and the amortization of new game development costs.See it on page 1
06
GungHo is prioritizing long-term profitability by utilizing an online service model to extend the lifecycles of its smartphone games through continuous content updates.See it on page 3

Summary

GungHo Online Entertainment’s consolidated financial results for the third quarter of fiscal year 2020 demonstrate a period of revenue growth driven by the sustained performance of its flagship title, Puzzles & Dragons, and the successful launch of new gaming content. The company reported net sales of 25,444 million yen, representing a quarter-on-quarter increase of 3,237 million yen. This growth was supported by consistent monthly active user (MAU) levels for Puzzles & Dragons, bolstered by strategic collaboration and original in-game events, alongside the positive reception of new titles.

The company’s subsidiary, GRAVITY Co., Ltd., played a significant role in these results through the continued success of Ragnarok M: Eternal Love and the launch of Ragnarok Origin in South Korea. Additionally, the June 2020 release of the Nintendo Switch title Ninjala contributed to the company's expansion, reaching over 5 million global downloads by late October 2020. While net sales rose, operating income for the quarter was 6,710 million yen, a slight decrease from the previous quarter, largely due to increased advertising expenditures associated with the promotion of Ninjala and new GRAVITY titles.

The financial data reflects a shift in the company’s cost structure, with the gross profit margin settling at 53.9%, influenced by changes in sales distribution and the amortization of new game development. Despite these shifts, GungHo maintains a strong focus on long-term profitability by leveraging the online service model of its smartphone games. By continuously updating content and responding to user feedback, the company aims to extend the lifecycles of its titles, moving away from the traditional, shorter-term expectations of the mobile gaming market.