KRAFTON, Inc. Consolidated Financial Statements: 2021

Key insights

6 takeaways

01
KRAFTON reported 2021 consolidated revenue of 1.89 trillion KRW, up from 1.67 trillion KRW in 2020, with mobile gaming contributing over 75% of total sales.See it on page 109
02
Net profit declined to 519.9 billion KRW due to a higher effective tax rate of 30.72% and increased share-based payment expenses.See it on page 8
03
The company significantly strengthened its balance sheet, reducing its debt-to-equity ratio from 41.60% to 22.28% while maintaining cash and cash equivalents exceeding 3 trillion KRW.See it on page 43
04
Strategic acquisitions of Unknown Worlds Entertainment, Thingsflow Inc., Dream Motion, and Between US Co. Ltd. drove goodwill to approximately 835 billion KRW, necessitating subsequent impairment charges.See it on page 110
05
Following its KOSPI listing, KRAFTON executed a 5-for-1 share split and diversified its investment portfolio into real estate and technology sectors.See it on page 79
06
Auditors identified the timing and cut-off of game and royalty revenue as a key audit matter, requiring precise data system management under KIFRS standards.See it on page 3

Summary

KRAFTON, Inc. demonstrated significant corporate expansion and financial growth during the 2021 fiscal year, a period marked by its successful listing on the KOSPI market. The company reported consolidated revenue of 1.89 trillion KRW, an increase from 1.67 trillion KRW in the previous year, with mobile gaming services serving as the primary revenue driver, accounting for over 75% of total sales. Despite this top-line growth, net profit saw a slight decline to 519.9 billion KRW, influenced by a rise in the effective tax rate to 30.72% and increased share-based payment expenses.

The company’s financial position strengthened considerably throughout 2021, characterized by a robust liquidity profile with cash and cash equivalents exceeding 3 trillion KRW. The debt-to-equity ratio improved significantly, dropping from 41.60% to 22.28%, reflecting a more conservative capital structure. This period of growth was heavily supported by strategic business combinations, including the acquisitions of Unknown Worlds Entertainment, Thingsflow Inc., Dream Motion, and Between US Co. Ltd. These activities led to a substantial increase in intangible assets, with goodwill rising to approximately 835 billion KRW, though the company subsequently recognized impairment charges where carrying amounts exceeded recoverable values.

Operating under KIFRS, the company maintained rigorous accounting standards, particularly regarding the complex recognition of game and royalty revenue. Auditors identified the timing and cut-off of these revenue streams as a key audit matter, necessitating precise data system management. Beyond core operations, KRAFTON executed a 5-for-1 share split and expanded its investment portfolio into diverse sectors, including real estate and technology firms. While the company remains exposed to market, credit, and liquidity risks, it employs proactive mitigation strategies, such as diversified currency holdings and systematic impairment testing, to ensure long-term financial stability amidst ongoing global economic uncertainties.