Wemade swings to operating loss in Q1 due to increased costs

Wemade Co. headquarters in Seongnam, Gyeonggi Province [Courtesy of Wemade]

Wemade Co., a South Korean game company, swung to an operating loss for the first quarter of this year due to an increase in wage costs and commission payments amid slumping sales.

During an earnings call held on Wednesday, the company said it posted an operating loss of 46.8 billion won ($35.4 million) in the January-March period, compared to a profit of 5.3 billion won in the same period last year. Sales was 93.9 billion won, down by 28.3 percent from a year ago. Net loss was 28.5 billion won, swinging from a profit of 300 million won a year ago.

The company’s game sales accounted for 89 percent of the total revenue, with 83.9 billion won in the quarter, followed by royalty revenue of 6.1 billion won, WEMIX platform revenue of 2.5 billion and other revenue of 1.5 billion.

Game sales dropped by 28 percent compared to the previous year but increased by 9 percent compared to the previous quarter. Despite the natural decline in sales of existing games, first-quarter revenue increased from the previous three months thanks to the global release of its new blockchain game, MIR M, Wemade said.

The company also said that operating expenses increased by 12 percent on-year, totaling 140.7 billion won, but fell by 2 percent compared to the previous quarter.

Among the expenses, wage costs surged by 23 percent in the quarter, accounting for 39.3 percent of total expenses. Commission payments were 48.3 billion won, with advertising expenses 11.9 billion won, and communication expenses 11.8 billion won.

Despite the increase in server costs associated with the global release of MIR M, operating expenses were reduced compared to the previous quarter due to a decline in advertising costs, the company said.