Naver reports 151.4 billion won in first-quarter net profit

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Naver reports 151.4 billion won in first-quarter net profit

Published: 21 Apr. 2022, 15:45

Naver's headquarters in Bundang, Gyeonggi [NEWS1]

Naver reported 151.4 billion won ($122 million) in net profit in the first quarter, significantly lower than the market consensus of 356 billion won compiled by FnGuide.

On year, the net was down 99 percent, though mainly for accounting reasons, as the company booked a 14.9 trillion won extraordinary gain due to a merger of Japanese subsidiary in the first quarter of 2021.

In the first quarter of 2022, revenue rose 23.1 percent to 1.85 trillion won, while operating profit stood at 301.8 billion won, up 4.5 percent compared to the same period a year earlier. Both figures fell short of market expectations.

The IT company blamed increased labor costs and marketing expenses for the lower-than-expected profit. Labor costs rose 15.2 percent on year, while marketing expenses were up 30 percent.

"We aggressively hired in 2020 and 2021, and as a result, the total number of Naver employees increased 18 percent in the first quarter compared to the previous year," Naver chief financial officer Kim Nam-sun said during a conference call Thursday morning. "If we control the number of new hires to the level that we used to before, the profit will obviously increase."

Naver agreed to increase the annual salary of employees by 10 percent earlier in the month.

By business sector, the sales in the content business, which includes webtoons, the Zepeto metaverse and camera app-focused Snow, rose 66 percent in the first quarter to 217 billion won, driven by growth of Naver Webtoon.

Transaction volume for Naver Webtoon rose 31 percent on year. Currently operating in North America, Europe and Asia, the webtoon service has 180 million monthly active users worldwide, of which 15 million are from the United States, according to the company.

Fintech-related revenues rose 31.1 percent to 274.8 billion won, with more stores using Naver Pay and the user base for payment services growing. Total transactions on Naver Pay reached 11.2 trillion won in the first quarter.

Sales of the commerce business, mainly online shopping, grew 28.3 percent to 416.1 billion won in the January-to-March period. A growing number of users of Kream, a sneaker resale site, helped, the company explained.

Revenues from search engine-based advertising grew 12 percent to 843.2 billion won on year on an influx of new advertising clients.

The cloud business reported growth of 15.3 percent on year, with sales of 94.2 billion won.

CEO Choi Soo-yeon emphasized that Naver will focus on expanding its content services in overseas markets.

"Around 10 percent of the total revenue comes from overseas for now, excluding revenue related to Line service, and we'd like to increase that to 20 percent," Choi said.

Earlier in the month, Naver announced an ambitious goal of attracting 1 billion global users and achieving annual sales of 15 trillion won by 2026.

BY SARAH CHEA [chea.sarah@joongang.co.kr]