Netmarble 4Q 2018 Earnings Results

Key insights

6 takeaways

01
Netmarble reported a significant financial downturn in 4Q 2018, with revenue falling 20.9% year-over-year to 487.1 billion KRW and operating profit dropping 59% to 38.0 billion KRW.See it on page 2
02
Profitability was negatively impacted by 25.8 billion KRW in one-off impairment costs related to intangible assets and goodwill, alongside a lack of new title releases.See it on page 5
03
Overseas markets generated 68% of total revenue, with North America remaining the primary international contributor at 33%, followed by Japan at 12% and Europe at 10%.See it on page 6
04
While overall operating costs decreased, labor costs rose 17.4% year-over-year due to increased headcount for ongoing development projects.See it on page 8
05
Key revenue drivers for the quarter included established titles such as Lineage 2 Revolution, MARVEL Contest of Champions, and Cookie Jam, supplemented by the release of Blade & Soul Revolution.See it on page 7
06
The company is shifting focus to 1Q 2019 growth, with upcoming launches planned for The Seven Deadly Sins: Grand Cross, King of Fighters: All Star, and Yokai Watch: Medal Wars.See it on page 9

Summary

Netmarble’s fourth-quarter 2018 earnings results reflect a period of contraction, characterized by a decline in both revenue and profitability. The company reported quarterly revenue of 487.1 billion KRW, representing a 20.9% decrease year-over-year and a 7.4% decline quarter-over-quarter. Operating profit fell significantly to 38.0 billion KRW, a 59% drop from the previous year, while net profit reached 14.6 billion KRW. This downward trend is attributed to the limited release of new titles during the quarter and diminished performance from existing games, compounded by 25.8 billion KRW in one-off impairment costs related to intangible assets and goodwill.

The company’s revenue remains geographically diversified, though overseas markets accounted for 68% of total revenue, a slight decline from the previous quarter. North America remains the largest international market at 33%, followed by Japan at 12% and Europe at 10%. The game portfolio maintains a balanced distribution across genres, with RPGs, MMORPGs, and casual games comprising the bulk of the company’s offerings. Key revenue drivers include established titles such as Lineage 2 Revolution, MARVEL Contest of Champions, and Cookie Jam, alongside the newer release, Blade & Soul Revolution.

Operating costs decreased overall, though labor costs rose by 17.4% year-over-year due to increased headcount for ongoing projects. Conversely, marketing expenditures were reduced as the company streamlined its launch schedule. Looking ahead to the first quarter of 2019, the company is prioritizing the expansion of its pipeline, with pre-registrations and launches scheduled for titles including The Seven Deadly Sins: Grand Cross, King of Fighters: All Star, and Yokai Watch: Medal Wars.