Netmarble Q2 Operating Profit Falls 21% as New-Game Boost Fades, Costs Rise

Netmarble reports second-quarter revenue of $541.4 million

Operating profit of $57.9 million falls 21% from a year earlier

Company plans to launch three new titles in the second half

Netmarble Corp.'s operating profit fell more than 20% in the second quarter from a year earlier. Revenue increased on the back of some new titles and updates to existing games, but weak follow-through from releases in the first half and higher marketing costs weighed on profitability.

The South Korean game developer said on August 5 that consolidated second-quarter revenue was 749.2 billion won ($541.4 million) and operating profit was 80.1 billion won ($57.9 million). Revenue rose 4.4% from a year earlier, while operating profit fell 20.8%.

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

Overseas revenue also increased. Second-quarter overseas sales rose 22.6% from a year earlier to 580.8 billion won ($419.9 million). International markets accounted for 78% of total revenue. By region, North America represented the largest share at 39%, followed by South Korea at 22%, Europe at 13%, Southeast Asia at 10% and Japan at 9%.

Still, stronger sales did not lead to improved profitability. A number of titles launched in the first half failed to sustain their initial momentum, while a string of new releases pushed up marketing expenses. The rebound in revenue from existing games and the early performance of Sol: Enchant were not enough to offset the higher costs.

Netmarble is counting on new releases in the second half to drive an earnings rebound. 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 Netmarble would strengthen earnings stability in the second half by advancing its live-service operations and sustain growth through the development of differentiated new titles.

Yoo Ji-hee, Hankyung.com reporter, keephee@hankyung.com