Netmarble 1Q 2018 Earnings Results

Key insights

6 takeaways

01
Netmarble experienced a significant financial contraction in 1Q 2018, with revenue falling 26.2% year-over-year to 507.4 billion KRW and operating profit dropping 62.9% to 74.2 billion KRW.See it on page 2
02
Net profit rose 50.6% quarter-over-quarter to 78.9 billion KRW, primarily fueled by non-operating income from dividend payouts from NcSoft.See it on page 5
03
The company maintains a geographically diversified revenue stream, with 68% of total revenue generated overseas, led by North America (32%) and Korea (32%).See it on page 6
04
Revenue is balanced across three core genres: MMORPGs (37%), RPGs (33%), and casual games (24%).See it on page 7
05
Management attributed the poor operational performance to a deceleration in existing game assets and the delayed launch of new titles.See it on page 8
06
Marketing expenditures decreased by 37.4% quarter-over-quarter, while the company prepared for a 2Q 2018 release schedule including titles like 'Fishing Strike', 'Harry Potter: Hogwarts Mystery', and 'Iron Throne'.See it on page 8

Summary

Netmarble’s first-quarter 2018 earnings report details a period of financial contraction characterized by declining revenue and operating profit. The company reported quarterly revenue of 507.4 billion KRW, representing a 26.2% decrease year-over-year and a 17.6% decline quarter-over-quarter. Operating profit similarly fell to 74.2 billion KRW, a 62.9% year-over-year drop, resulting in an operating profit margin of 14.6%. Management attributed these results primarily to the delayed launch of new titles and a deceleration in the performance of existing game assets.

Despite the decline in core operational metrics, net profit saw a significant recovery, rising to 78.9 billion KRW—a 50.6% increase over the previous quarter. This growth was largely driven by non-operating income, specifically dividend payouts from NcSoft. The company maintained a stable overseas revenue share of 68%, with a geographically diversified portfolio spanning North America (32%), Korea (32%), Japan (14%), and Southeast Asia (10%).

The company’s game portfolio remains balanced across genres, with MMORPGs (37%), RPGs (33%), and casual games (24%) serving as the primary drivers. Six major titles, including Lineage2Revolution and MARVEL Contest of Champions, each contributed at least 5% to total revenue. While marketing expenditures decreased by 37.4% quarter-over-quarter due to the aforementioned release delays, labor costs saw a slight uptick. Looking ahead to the second quarter of 2018, the company shifted its focus toward a robust release schedule, including the global launches of Fishing Strike and Harry Potter: Hogwarts Mystery, alongside preparations for upcoming titles such as Iron Throne and Blade & Soul Revolution.