Naver reports $164.1 million net, short of expectations

The internet company said on Monday that Naver Webtoon will try to go public in the next few years on the U.S. stock exchange.

Naver headquarters building in Seongnam, Gyeonggi [YONHAP]

Naver reported a lower-than-expected net profit of 231.6 billion won ($164.1 million) in the third quarter, down 28.3 percent on year.

The figure fell short of the analyst consensus of 245.3 billion won, compiled by FnGuide.

The internet company said on Monday that Naver Webtoon will try to go public in the next few years on the U.S. stock exchange.

In the July-September period, slowing growth in its advertisement revenue, caused by recession woes, weighed down its profit. Naver also cited equity loss and the strong dollar for the lower-than-expected net.

“Aside from the decline in operating profit, a decrease in the equity profit related to Z Holdings and the exchange loss coming from foreign loans that Naver issued affected the profit,” said Kim Nam-sun, Naver’s chief financial officer, during an online conference call Monday.

Operating profit came in at 330.2 billion won, down 5.6 percent but above the expectation of 326.2 billion won. The figure took a downturn for the first time in a year and a half.

Sales rose 19.1 percent to a record 2.06 trillion won, slightly missing the consensus of 2.08 trillion won.

Naver hopes to "list its webtoon business on the U.S. stock exchange in a few years,” said Naver CEO Choi Soo-yeon during the conference call. Choi explained that over half of its content revenue is already coming from outside Korea.

Naver Webtoon has been mulling going public on the Nasdaq since 2021.

In the third quarter, the search business made up for 43.6 percent of market sales, or 896.2 billion won, which is up 8.0 percent on year. During the same period last year, it saw a 16.2-percent year-on-year growth.

Naver said that considering the unfavorable market situation, its performance was comparatively stronger than its big tech rivals thanks to a stable business model based on its search engine.

“Despite the decline in the operating profit during the slow season, which includes the Chuseok harvest holiday period, and the monetary tightening in the macro environment, Naver’s search platform grew 8 percent on year,” said Choi. “In particular, the search advertising business fared much better than other search platforms in North America, with on-year growth of over 10 percent.”

Alphabet, which controls Google, reported a 26.5 percent drop in the quarterly net profit to $69.1 billion due to falling advertising revenue from YouTube. Kakao, its domestic rival, also saw an 84 percent decline in its net to 137.2 billion won, hampered by lower advertising revenue and weak game sales.

On year, Naver’s commerce sales increased 19.4 percent to 458.3 billion won, with a total trading volume of 10.5 trillion won. Its fintech business, which includes the Naver Pay payment service, grew 22.5 percent to 296.2 billion won. Its content business jumped 77.3 percent to 311.9 billion won, while business-to-business services including cloud computing shrank 1.5 percent to 94.8 billion won.

Moreover, Naver’s business-to-business services will be reorganized under Naver Cloud, according to Choi. The goal is to expand the company’s foothold in the Japanese cloud service market.

On the company's $1.6-billion acquisition of PoshMark, a U.S. online fashion commerce service, in October, Naver said that it expects a turnaround in two or three years. PoshMark recorded a loss of $98 million in 2021.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]