Kakao Games net profit jumps but falls short of expectations

Kakao Games' Odin: Valhalla Rising [KAKAO GAMES]

Kakao Games reported a 54 percent on-year jump in net profit led by steady sales of its PC and mobile games, although it fell short of market expectations.

The company’s operating profit and revenue were also lower than analyst forecasts.

The game company, 43 percent owned by Kakao, said Tuesday its first quarter net profit was 28.3 billion won ($22.4 million).

This is lower than the 37.8-billion-won consensus compiled by FnGuide, which the company cited as coming from increased employee salaries and the costs that went into investments. Kakao Games did not disclose how much salary was raised.

“We believe that we did better than we expected, considering how we had no new titles and had to cover rising marketing and employee salaries,” the company said during a conference call. “The base effect from the investment in Lionheart Studios also came through.”

The January-to-March revenue came in at 266.3 billion won, rising by 105 percent compared to the previous year but still under the 277.8-billion-won consensus. Operating profit also soared by 170 percent to stand at 42.1 billion won, disappointing the 49.3-billion-won estimate.

The lower-than-anticipated numbers came mostly from its main title, Odin: Valhalla, performing weaker than anticipated.

The game, released last August in Korea and in March in Taiwan, has been seeing decreased revenue in Korea and “limited” profit in Taiwan because only a month’s performance was reflected on the first-quarter earnings report, according to the company.

Kakao Games will seek to improve its performance with updates to existing games, new releases and investment in new businesses such as blockchain technology.

“It’s true we saw decreased revenue with Odin, but it recovered when we made major updates,” the company said. “We can expect to see improvement [in earnings] with more updates.”

Uma Musume Pretty Derby, a Japanese mobile game developed by Cygames, will launch within the first half of this year.

“The game is a huge success in Japan and continues to perform well there, so we expect that it may become the No. 3 selling game in Korea.”

Kakao Games’ stock closed at 59,100 won Tuesday, 0.2 percent higher than the previous day.

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]