Netmarble 4Q 2019 Earnings Results

Key insights

6 takeaways

01
Netmarble reported a 4Q 2019 net loss of 6.3 billion KRW, driven by 52.4 billion KRW in one-off non-operating costs, including 27.4 billion KRW in foreign exchange losses and 25.0 billion KRW in investment asset valuation adjustments.See it on page 2
02
Quarterly revenue reached 551.8 billion KRW, marking an 11.0% sequential decline, while operating profit fell 40.5% quarter-over-quarter to 50.2 billion KRW due to the underperformance of new game titles.See it on page 4
03
Overseas markets remain the primary revenue engine, contributing 72% of total quarterly revenue, with North America accounting for 30% and Japan for 15%.See it on page 6
04
The company’s revenue is heavily concentrated in RPG and MMORPG genres, which represent 39% and 25% of total revenue respectively, supported by key titles like Marvel Contest of Champions and Lineage 2 Revolution.See it on page 7
05
Despite the quarterly downturn, year-over-year performance showed growth, with revenue increasing 13.3% and operating profit rising 32.1% compared to 4Q 2018.See it on page 4
06
Netmarble’s 1H 2020 strategy focuses on stabilizing performance through the global launch of new titles, specifically Seven Deadly Sins, A3: Still Alive, and Marvel Realm of Champions.See it on page 9

Summary

Netmarble’s fourth-quarter 2019 earnings results reflect a period of financial contraction characterized by a decline in revenue and operating margins compared to the previous quarter. The company reported quarterly revenue of 551.8 billion KRW, representing a 13.3% year-over-year increase but an 11.0% decline from the third quarter. Operating profit reached 50.2 billion KRW, a 32.1% year-over-year improvement but a 40.5% decrease sequentially. This downturn was primarily attributed to the underperformance of new titles released during the period.

The company experienced a net loss of 6.3 billion KRW for the quarter, shifting from profitability in previous periods. This bottom-line result was heavily impacted by one-off non-operating losses, specifically 27.4 billion KRW in foreign exchange losses and 25.0 billion KRW related to the fair valuation of investment assets. Despite these challenges, the company maintained a diversified revenue stream, with overseas markets accounting for 72% of total revenue, led by North America at 30% and Japan at 15%.

Operational costs remained significant, with commissions, labor, and marketing expenses constituting the primary expenditures. The game portfolio showed a balanced distribution across genres, with RPGs and MMORPGs representing 39% and 25% of revenue, respectively. Key revenue drivers included titles such as Marvel Contest of Champions and Lineage 2 Revolution. Looking ahead, the company outlined a strategic pipeline for the first half of 2020, focusing on global launches for titles including Seven Deadly Sins, A3: Still Alive, and Marvel Realm of Champions to drive future growth and stabilize performance.