Record-high revenue not enough to keep Kakao in the black for 2023
Published: 15 Feb. 2024, 15:12
Updated: 08 Apr. 2024, 08:28
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- LEE JAE-LIM
- [email protected]
![Kakao's headquarters in Pangyo, Gyeonggi [YONHAP]](https://koreajoongangdaily.joins.com/data/photo/2024/04/08/2d1e9148-9db7-4f47-be03-a2723764a53a.jpg)
Kakao's headquarters in Pangyo, Gyeonggi [YONHAP]
Kakao posted record-high annual revenue of 8.1 trillion won ($6.1 billion) in 2023 thanks to its acquisition of K-pop agency SM Entertainment, but net profit turned to a tremendous loss of 1.5 trillion won due to increased costs at its subsidiaries.
Annual operating profit shrank 10.9 percent on year to 502 billion won, but still fared better than analysts' forecast of 476.6 billion won as compiled by market tracker FnGuide.
Revenue rose 14.2 percent to a record-high 8.11 trillion won, slightly below the market projection of 8.15 trillion won.
Net profit transformed into a deficit of 1.5 trillion won, missing the market expectation of 270-billion-won net profit.
Nearly 2 trillion won in expenses were incurred from the impairment of purchase price allocation (PPA) for acquired subsidiaries such as Tapas, Melon, Lionheart and SM Entertainment. PPA refers to a process where a company evaluates its investments made in mergers and acquisitions to understand the value of the assets and their effect on its financial statements.
“However, I just want to emphasize once more just because there was impairment loss doesn't mean that it signals any change in our strategic approach and direction nor outlook regarding our entertainment or game business," said Kakao's newly appointed chief financial officer, Choi Hey-ryung, at a conference call on Thursday. "Now, having said that, an important driver behind the reason why we decided to go with these impairments is because of the changes in value that we see coming out of changes in the operational backdrop and also because we applied a more conservative approach for our future investment processes."
For the fourth quarter, Kakao’s operating profit skyrocketed 108.6 percent on year to 189 billion won, above analysts' projection of 151.7 billion won.
Quarterly revenue jumped 23 percent to 2.17 trillion won, falling slightly short of analysts' expectations of 2.21 trillion won.
The surge in profit is due to well-rounded performances by its advertisement and commerce units.
Revenue for the platform unit during the October-December period spiked 17 percent to 1.1 trillion won, while the content realm posted a jump of 30 percent to 1.05 trillion won on the back of SM Entertainment’s music revenue.
Net losses persisted, amounting to 1.66 trillion won, blowing past the market consensus of 99 billion won.
Kakao CEO Hong Eun-taek also briefly mentioned the company's yet-to-be-unveiled large language model, KoGPT 2.0, which is still going through fine-tuning.
"KakaoBrain's KoGPT 2.0 is undergoing refinement and has arrived at a level where it can be applied to Kakao services," Hong said. "We are in the process of securing technologies and running tests within the community to ensure effective implementation."
BY LEE JAE-LIM [[email protected]]
with the Korea JoongAng Daily
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