Netmarble 1Q 2019 Earnings Results

Key insights

7 takeaways

01
Netmarble experienced a 54.3% year-over-year decline in operating profit to 33.9 billion KRW, resulting in an operating profit margin of 7.1%.See it on page 5
02
Quarterly revenue fell to 477.6 billion KRW, representing a 5.9% decrease year-over-year and a 2.0% decline quarter-over-quarter.See it on page 6
03
Net profit surged 189.7% quarter-over-quarter to 42.3 billion KRW, despite the contraction in operating performance.See it on page 5
04
Overseas revenue accounted for 60% of total earnings, with North America remaining the largest international market at 30% of total revenue.See it on page 6
05
Labor costs rose 15.2% to 113.9 billion KRW, while marketing expenditures dropped 15.9% year-over-year due to a lack of new title launches.See it on page 8
06
Revenue remains balanced across genres, with MMORPGs (32%), RPGs (30%), and casual games (26%) serving as the primary contributors.See it on page 7
07
The company plans to drive growth in the second quarter of 2019 through the global launches of The Seven Deadly Sins: Grand Cross, Yokai Watch: Medal Wars, and BTS World.See it on page 9

Summary

Netmarble’s first-quarter 2019 earnings report details a period of financial contraction characterized by declining revenue and operating margins. The company recorded quarterly revenue of 477.6 billion KRW, representing a 5.9% decrease year-over-year and a 2.0% decline quarter-over-quarter. Operating profit fell significantly to 33.9 billion KRW, a 54.3% drop compared to the same period in the previous year, resulting in an operating profit margin of 7.1%. Despite these operational headwinds, net profit reached 42.3 billion KRW, marking a substantial 189.7% increase over the previous quarter.

The company’s revenue streams remain geographically diverse, though the proportion of overseas revenue decreased to 60% as domestic performance strengthened following the launch of Blade & Soul Revolution. North America remains the largest international market, accounting for 30% of total revenue. The game portfolio maintains a balanced distribution across genres, with MMORPGs, RPGs, and casual games comprising 32%, 30%, and 26% of revenue, respectively. Key titles such as Lineage 2 Revolution, MARVEL Contest of Champions, and Blade & Soul Revolution continue to serve as primary revenue drivers.

Operating costs for the quarter totaled 443.7 billion KRW. While marketing expenditures declined by 15.9% year-over-year due to the absence of new title launches, labor costs rose by 15.2% to 113.9 billion KRW. Additionally, commission expenses increased as a percentage of revenue, driven by the growth of external intellectual property game services. Looking ahead to the second quarter of 2019, the company aims to revitalize growth through the scheduled global launches of several high-profile titles, including The Seven Deadly Sins: Grand Cross, Yokai Watch: Medal Wars, and BTS World.