Netmarble Q2 Operating Profit Falls 21% as Marketing Costs Rise

Netmarble reports second-quarter revenue of $541 million

Operating profit falls 21% to $57.9 million

Company plans to launch three new titles in the second half

Netmarble’s operating profit fell more than 20% in the second quarter from a year earlier. Revenue rose on the back of a new game launch and updates to existing titles, but weak staying power from some first-half releases and higher marketing spending hurt profitability.

The company said on August 5 that consolidated second-quarter revenue totaled 749.2 billion won ($541 million), while operating profit came to 80.1 billion won ($57.9 million). Revenue rose 4.4% from a year earlier, while operating profit declined 20.8%.

Revenue growth was driven by Sol: Enchant, a massively multiplayer online role-playing game released in June, and an update to The Seven Deadly Sins: Origin. Sol: Enchant rose to No. 1 on Google Play’s top-grossing chart shortly after launch, making it the strongest-performing new title released in the first half.

Overseas sales also increased. Netmarble posted 580.8 billion won ($419.6 million) in overseas revenue in the second quarter, up 22.6% from a year earlier. International business accounted for 78% of total revenue. By region, North America contributed the largest share at 39%, followed by South Korea at 22%, Europe at 13%, Southeast Asia at 10% and Japan at 9%.

Still, revenue growth did not lead to better profitability. Several titles released in the first half failed to maintain their initial momentum, while a string of new launches lifted marketing costs. A rebound in sales from older games and Sol: Enchant’s early success was not enough to offset the increase in expenses.

Netmarble is counting on new releases in the second half to revive earnings. The company plans to launch three titles: Solo Leveling: Karma, Shangri-La Frontier: The Seven Strongest Species and Project Aegis. Solo Leveling: Karma and Shangri-La Frontier: The Seven Strongest Species are scheduled to be unveiled at the Tokyo Game Show in September.

Chief Executive Officer Kim Byung-kyu said the company would strengthen earnings stability in the second half by improving its live-service operations and continue growth through the development of differentiated new titles.

Yu Ji-hui, Hankyung.com reporter keephee@hankyung.com