NHN's Q1 Revenue Increases 15% Year-on-Year to 520.5 Billion KRW... Operating Profit Decreases 38%

[Asia Economy Reporter Seungjin Lee] NHN's sales in the first quarter of 2022 grew by 15% compared to the same period last year, but operating profit decreased by nearly 40% due to increased labor costs and marketing expenses.

Operating Profit Declines Due to Expansion of Technical Staff and Marketing Expenses

NHN announced on the 10th that its sales in the first quarter of this year amounted to 520.5 billion KRW, an increase of 15.2% compared to the same period last year. Operating profit was 15.5 billion KRW, down 38.2% from the same period last year. Net profit turned to a loss of 4.5 billion KRW.

The decline in operating profit was influenced by increased labor costs, commerce-related commission fees, and marketing expenses. NHN, which has been steadily expanding its technical workforce, reportedly implemented a higher-than-usual annual salary increase rate in the first quarter of this year compared to the typical annual raises conducted every first quarter.

An NHN official explained regarding the decrease in operating profit, "Commerce sales were stronger than expected, reflecting related commission fees," and added, "Marketing expenses for Webboard and Payco also contributed to the decline in operating profit."

NHN Q1 Earnings

Strong Performance in Payco and Commerce Divisions... Webboard Games Achieve Record High Sales

Looking at sales by division in the first quarter, the gaming division recorded 108.8 billion KRW, a 2.5% decrease compared to the same period last year due to factors such as decreased PC caf? sales amid the resurgence of COVID-19. However, mobile webboard games achieved their highest sales ever since service launch, growing 4% year-on-year.

The payment and advertising division recorded 209.2 billion KRW, up 15.5% year-on-year, driven by increased Payco transaction volume and growth in overseas transaction amounts of NHN Korea Cyber Payment. In particular, the scale of 'Payco Points' payments grew 2.9 times year-on-year due to the use of the Payco Points Plus physical card, while corporate welfare solutions, Campus Zone, and Payco Order have led to increased offline transaction volumes.

The commerce division recorded 104.7 billion KRW, up 35.3% year-on-year, supported by the effects of the Chinese Lunar New Year and the March Women's Day events in the first quarter, despite uncertain external conditions and a high base from the previous quarter's Singles' Day. The technology division recorded sales of 63.7 billion KRW, up 42.3% year-on-year, reflecting a mix of seasonal off-peak effects in the public sector and business growth due to increased recognition of NHN Techorus's MSP business in Japan.

The content division recorded 47.0 billion KRW, up 10.2% year-on-year, driven by new sales effects such as drama OST sales from NHN Bugs and self-produced concerts by NHN Link, despite the off-season effect from the previous quarter's peak performance season for NHN Link.

"Focusing on P&E Games This Year, Aiming to Become a Top-Tier Cloud Provider"

NHN has reorganized the organizational structure of its gaming and cloud divisions to enhance long-term growth and competitiveness of its core businesses. NHN Bigfoot, which was integrated and reorganized in February to strengthen the gaming business, is preparing new lineups including the global launch of 'Guns Up Mobile,' 'Double A Poker,' 'Wemix Sports' targeting global users, and the 'Uparu NFT Project.' The company plans to grow beyond being the number one mobile webboard game operator in Korea to become a global P&E (Play & Earn) game specialist developer.

Additionally, NHN Cloud, which launched as an independent corporation on the 1st of last month, is expected to leap forward as a global top-tier cloud provider by leveraging its technological competitive edge and linking with new AI business, from its position as a leading player in Korea's public cloud transition projects. Recently, it finalized the site for a public cloud data center in Suncheon, Jeollanam-do, and plans to actively expand investments for building data centers in key regions such as Gimhae and Gwangju, as well as recruiting top talent.

Furthermore, NHN Doorey, which is accelerating growth in the collaboration tools market, and NHN Edu, a leading company in the edutech market, have recently secured external investments of 20 billion KRW and 32 billion KRW respectively, securing future growth engines.

Jung Woo-jin, CEO of NHN, stated, "This year, we plan to focus on external growth by proactively investing in research and development and aggressive marketing to respond preemptively to the changed external environment related to COVID-19 following the full lifting of social distancing measures." He added, "NHN will take a step closer to becoming a global top-tier tech company by focusing on entering the P&E market in the gaming business, securing users and improving the structure of Payco, and strengthening market dominance in the cloud business."

This content was produced with the assistance of AI translation services.