Netmarble Corp (XKRX:251270) Q4 2024 Earnings Call Highlights: Navigating Challenges with Strategic Game Launches

Despite a net loss due to asset impairments, Netmarble Corp (XKRX:251270) focuses on global expansion and new game releases to drive future growth.

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Feb 14, 2025
Summary
  • Annual Revenue: KRW2,663.8 billion, up 6.5% year over year.
  • Annual EBITDA: KRW370 billion, up KRW216.5 billion year over year.
  • Annual EBITDA Margin: 13.9%, an increase of 9.2 percentage points year over year.
  • Q4 Revenue: KRW649.0 billion, up 0.3% quarter over quarter, down 2.5% year over year.
  • Q4 EBITDA: KRW73.4 billion, down 28.6% quarter over quarter, up 19.3% year over year.
  • Q4 EBITDA Margin: 11.3%.
  • Q4 Operating Income: KRW35.2 billion.
  • Q4 Net Loss: KRW166.7 billion, due to impairments of intangible assets.
  • Q4 Revenue by Region: 46% North America, 17% Korea, 15% Europe, 9% Southeast Asia, 6% Japan, 7% other regions.
  • Q4 Revenue by Genre: 40% casual games, 39% RPG, 13% MMORPG, 8% others.
  • Q4 Operating Expenses: KRW613.8 billion, up 5.5% quarter over quarter, down 5.1% year over year.
  • Q4 Commissions: KRW231.6 billion, up 3% quarter over quarter, down 8.6% year over year.
  • Q4 Personnel Expenses: KRW178.7 billion, down 0.2% quarter over quarter, down 2.2% year over year.
  • Q4 Marketing Expenses: KRW120.5 billion, up 15.2% quarter over quarter, down 5.6% year over year.
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Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Annual revenue for 2024 increased by 6.5% year over year, reaching KRW2,663.8 billion.
  • EBITDA for 2024 rose significantly by KRW216.5 billion year over year, with an EBITDA margin rate of 13.9%, up 9.2 percentage points.
  • Netmarble plans to launch nine new titles in 2025, including high-profile games like Game of Thrones: Kingsroad and Seven Deadly Sins: Origin.
  • The company has a diversified game portfolio, with multiple titles contributing to revenue, ensuring a balanced income stream.
  • Overseas revenue share increased to 83%, indicating strong international market performance.

Negative Points

  • Q4 revenue decreased by 2.5% year over year, despite a slight quarter-over-quarter increase.
  • Q4 EBITDA dropped by 28.6% quarter over quarter due to higher marketing expenses.
  • The company recorded a net loss of KRW166.7 billion in Q4, primarily due to impairments of intangible assets.
  • Operating expenses in Q4 increased by 5.5% quarter over quarter, impacting profitability.
  • There is no specific target for mergers and acquisitions, indicating potential missed opportunities for strategic growth.

Q & A Highlights

Q: What are the main focuses for Netmarble's game development strategies, and which of the nine new titles has the highest expectations?
A: CEO Yeong Sik Gwon stated that Netmarble's main development strategy remains focused on genre and platform diversification, as well as global market expansion. All nine new titles are highly anticipated, and the company is committed to ensuring their success.

Q: Could you explain the impairment of intangible assets and its impact on financials?
A: CFO Gi-Wook Do explained that the majority of the impairment is related to Sinex, which has undergone impairments for three consecutive years. The company does not anticipate large-scale impairments in the future, and foreign exchange rate risks have been mitigated by converting liabilities to Korean won.

Q: How is Netmarble managing costs, and are there any changes to the dividend policy or plans for M&A?
A: CEO Yeong Sik Gwon mentioned that app commissions have decreased, and the company is launching games on both mobile and PC platforms to save costs. Personnel expenses have stabilized post-COVID, and marketing costs are controlled but may increase with new launches. CFO Gi-Wook Do stated that the dividend policy remains unchanged, and while there are no specific M&A targets, the company is open to opportunities.

Q: What differentiates the game "Seven Deadly Sins: Origin" from other open-world subculture games, and how will "Solo Leveling: ARISE" be launched on Steam?
A: CEO Yeong Sik Gwon highlighted that "Seven Deadly Sins: Origin" will focus on a unique interpretation of its IP to fit the open-world theme, aiming for long-term player engagement. "Solo Leveling: ARISE" will have a separate build for Steam, targeting users with differentiated content and an improved business model.

Q: What is the size of the impairment due to intangible assets this quarter, and how does it relate to Phoenix's PPA amortization?
A: CFO Gi-Wook Do stated that the total impairment size is KRW260 billion, primarily due to Sinex, offset by gains from the disposal of hyper shares. The PPA amortization of Sinex also impacted the quarter's impairments, but a reduction in impairments will decrease future amortization fees.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.