New releases mean strong quarter one earnings for game companies

Krafton and NCSoft reported consensus-beating net profit in the first quarter, working against unfavorable market conditions and waning investor sentiment. The two largest game companies in Korea each released new online games last November and ..

PUBG: New State from Krafton [KRAFTON]

Krafton and NCSoft reported consensus-beating net profit in the first quarter, working against unfavorable market conditions and waning investor sentiment.

The two largest game companies in Korea each released new online games last November and saw their sales fully reflected in their January-to-March performances.

Krafton, Korea’s largest game company by market cap, reported a consensus-beating 245.2 billion won ($190.9 million) of net profit during the January-to-March period, a 26 percent increase year on year.

During the same period, the company’s revenue also rose by 13.5 percent, reaching 523 billion won, the highest for any quarter. Operating profit jumped 37.3 percent on year, standing at 311.9 billion won.

Krafton rolled out PUBG: New State, the latest mobile version of its megahit PlayerUnknown’s Battlegrounds (PUBG) franchise, globally on Nov. 11. It became the most-downloaded game in 165 countries within four days of its release, topping the most-downloaded games chart in 163 countries on Apple’s iOS App Store, and in 63 countries on the Google Play Store.

Ninety-five percent of all revenue came from outside of Korea, according to the company.

“The Battlegrounds franchise saw balanced growth across all platforms,” the company said in a press release. “Mobile games performed especially well in India […] We expect sales to more than double in India this year.”

Lineage W from NCSoft [NCSOFT]

Lineage W from NCSoft [NCSOFT]

NCSoft’s net also climbed and beat market consensus thanks to Lineage W’s Asian launch on Nov. 4.

The company’s first-quarter net was 168.3 billion won, a 38 percent increase compared to the year prior and higher than the 159.8-billion-won consensus compiled by FnGuide.

Operating profit posted and 244.2 billion won, soaring by 123 percent compared to the first quarter of 2021. Revenue was 790.3 billion won, 54 percent more than the same period last year and also a record for any quarter.

NCSoft released its latest massively multiplayer online roleplaying game (Mmorpg) Lineage W in 12 countries across Asia in November, topping app store charts in eight countries during the pre-download period.

The company is aiming to expand its presence in the global gaming market. It will start by releasing Lineage W in North American and European countries by the end of this year, the company said.

“We have more plans for new games than ever before,” the company said in a conference call Friday. “In addition to the global launch of Lineage W, we plan to release Blade & Soul 2 in Asia. TL, another new project, will also roll out by the end of this year."

Despite the good results, the two companies’ stock prices have remained on a losing streak for months. Krafton’s shares have fallen by over 55 percent compared to November, and NCSoft's by 50 percent.

Investor sentiment has been worsening since the beginning of this year. The blockchain and metaverse bubbles started to burst in the local market and regulations related to play-to-earn (P2E) games show no signs of loosening.

“The time has ended when stock prices rise on just anticipation,” said an analyst who wished to remain anonymous. “It will be difficult for the companies to recover their stock unless they show actual results.”

Marvel Future Revolution from Netmarble [NETMARBLE]

Black Desert Mobile from Pearl Abyss [PEARL ABYSS]

Dungeon&Fighter Mobile from Nexon [NEXON]

Meanwhile, other game companies that didn't release any major titles last year have struggled in the first quarter.

Netmarble lost 51.8 billion won during the first quarter of 2022, turning deficit for the first time in 10 years. It reported operating loss of 11.9 billion won.

Revenue was 631.5 billion won, up 10.7 percent on year but short of the 728.3-billion-won consensus.

The weak earnings came from the absence of a major new title in the first quarter as well as a decrease in sales from existing games, the company said in a press release.

Netmarble has not had a major release since August when it launched Marvel Future Revolution, a mobile roleplaying game based on the famed Marvel Cinematic Universe.

“The ongoing Covid-19 pandemic has hampered our plans to release new games, which led to the sub-par performance,” CEO Kwon Young-sik said during a conference call Thursday. “We plan to prepare for a leap in the second quarter with diverse games as well as new businesses such as metaverse and blockchain.”

051604-Game

Pearl Abyss, the publisher of the Black Desert Mmorpg, saw its net plunge by 71.9 percent during this year’s first three months compared to the same period last year.

Net profit came in at 5.8 billion won, lower than the 9 billion won anticipated by the market. Operating profit slightly beat expectations, but still shrunk 60.4 percent compared to the first quarter of 2021. Revenue also decreased by 9.4 percent.

Net profit of Wemade, the developer and publisher of the Mir Mmorpg franchise, nosedived by 98 percent year on year during the last quarter, coming in at 400 million won. NHN, which specializes in casual mobile games, lost 4.5 billion won.

Nexon, a Korea-founded Tokyo-listed game company, also reported a 13 percent drop in its first-quarter net compared to 2021. It posted 40.3 billion yen ($314.1 million) in net profit for the first three months of this year.

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]