NCSoft, Krafton Q2 OP off nearly 50% on qtr, Netmarble turns red

South Korean game majors commonly delivered dismal results for the second quarter as revenue failed to catch up with jump in labor and marketing costs, while claiming to win back confidence with new releases and updates in the second half.

In its earnings guidance for the April to June period disclosed on Friday, NCSoft reported an operating profit of 123 billion won ($94.3 million) on a consolidated basis, plunging 49.64 percent on quarter although gaining 9.04 percent on year.

Sales fell 20.38 percent on quarter but rose 16.85 percent on year to 629.3 billion won. Mobile game sales came to 475.2 billion won and PC games 95.9 billion won.

Sales of Lineage M, NC's mobile MMORPG game, surged more than 22 percent compared to the previous quarter thanks to updates, while Guild Wars 2, a free-to-play game, jumped by 70 percent compared to the previous year on the release of its third expansion in February.

[Source: NCSoft]

Total operating expenses declined by 7 percent from the previous quarter but climbed 19 percent on year to 56.3 billion. Labor costs were up 11.1 percent on year, amounting to 26.6 billion won, and marketing costs 7.8 percent to 59.9 billion won.

Shares of NCSoft fell 3.70 percent at 390,000 won as investors were unconvinced by its sanguine outlook for the second half.

NCSoft claimed new games in various genres such as MMORPG game Throne and Liberty, Battle Royale game Project R, interactive movie game Project M, and RPG game Blade & Soul were in the making.

Other Kospi-listed big game labels were no different.

Krafton reported in a regulatory filing on Thursday that its second quarter operating profit came to 162.3 billion won, dropping by 48 percent on quarter and 6.8 percent on year.

Revenue for the April-June period stood at 423.7 billion won, off 19 percent on quarter and 7.8 percent on year. Net income came to 194 billion won, plunging 20.9 percent on quarter but rising 37.3 percent from a year earlier.

Overseas sales accounted for 94 percent of the total revenue in the second quarter.

Still, net profit for first half at 439.2 billion won was its best six-month period record.

By revenue, mobile game sales recorded 319.7 billion won, losing 9.7 percent from the previous year. Sales for PC games rose 11 percent compared to last year to 88.5 billion won. Krafton’s PC and consoles sector saw its average revenue per user (ARPU) rise 20 percent compared to the previous quarter and continues to attract more than 80,000 new users each day.

[Source: Krafton]

Krafton also tantalized investors with development plans.

“While we focused on new user retention during the second quarter, we will focus on preparing a business model with innovative new updates that will increase sales during the second half,” said Krafton's Chief Financial Officer Bae Dong-keun.

Krafton shares were up 1.14 percent at 266,500 won,

Netmarble on Thursday reported a loss of 34.7 billion won from operation in the second quarter despite sales gain of 4.6 percent on quarter and 14.4 percent on year to 660.6 billion won.

By region, overseas sales came to 558.5 billion won, domestic sales 102.1 billion won.

Sales of casual games recorded 47 percent, RPG and MMORPG 22 percent each, and other games 9 percent.

Operating expenses surged 23.9 percent on year to 695.3 billion won as labor costs climbed 22.7 percent on year and marketing costs 43.8 percent due to the hiring of new game developers and the release of new products.

Netmarble specified six new games including blockchain games such as “Everybody's Marble: Metaworld,” “Monster Arena Ultimate Battle,” and “King of Fighters: Arena,” as well as “Overprime,” “BTS Dream: TinyTAN House,” and “Charlotte's Table ” in the pipeline for the second half.

Shares of Netmarble were off 6.07 percent at 68,100 won.

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