KaKao

Daum Kakao Reports Third Quarter 2014 Results

Revenue totaled KRW 221.8 billion, 20.7% increase YoY

 

 

[Seoul, South Korea - November 7, 2014] Daum Kakao Corp., a leading mobile lifestyle platform provider with all encompassing services spanning both web and mobile in Korea, today reported financial results of Daum Communications Corp. based on consolidated IFRS in the quarter ended September 30, 2014[1]. The company also disclosed the combined results of Daum Kakao along with Kakao Corp.’s standalone Q3 results on its website to provide investors with comprehensive information of the merged company.  

 

·   Daum Kakao’s combined revenue for the quarter (consolidated) was KRW 221.8 billion, up 20.7%, and operating profit was KRW 30.8 billion, down 6% YoY. The growth in revenue was mainly driven by continued increase in mobile ads revenue, record-high revenue from the Kakao game platform, and robust growth from the mobile commerce sector.

·   The operating profit reflects the one-off expense totaling KRW 20.3 billion, incurred in the merger process in the form of bonus payments, share-based compensations and other merger-related commission fees.

·   Revenue from advertising for the quarter was KRW 141.9 billion, an increase of 11.9% YoY. Despite weaker seasonality, increased revenue from the KakaoStory platform, among others, led to the growth.

·   Revenue from games was KRW 67.5 billion, a 34.9% increase YoY. This was mainly driven by growth in revenue from mobile role-playing games, despite revenue decrease from online board games and OnNet publishing.

·   Revenue from commerce was KRW 7.8 billion, a 90.7% increase YoY driven by robust growth of Kakao Gift Store and KakaoStyle.

·   Other revenue, including that from KakaoMusic, increased 66.8% YoY to KRW 4.7 billion.

·   Mobile revenue accounts for 47.9% of total revenue.

 

KRW 6.3 billion net loss in operating profits is the direct result of the company accounting for maximum costs through asset revaluation (based on IFRS) during the merger process in order to minimize future liabilities. Merger driven one-off cost for the quarter was KRW 51.7 billion (after-tax), and includes outstanding receivables from sales of Lycos and subsidiary’s asset revaluation. Daum Kakao explained that the decrease in profits does not affect the corporate value or the core profit model of the company.

 

Following the October 1st merger, Daum Kakao is developing new growth engines as a mobile lifestyle platform through its vision to “Connect Everything”.

 

Based on this strategy, Daum Kakao introduced a series of next generation services such as KakaoPick and KakaoPay, along with new advertising products to the KakaoStory platform. KakaoPick, a mobile commerce service based on KakaoTalk’s social network, is rapidly building a user base and is expected to lead the next mobile shopping trend. KakaoPay, a mobile payment option embedded into KakaoTalk, is revitalizing the mobile payment industry, with 1.2 million users just one month after launch.

 

Developed in partnership with 16 major Korean financial institutes, mobile banking service BankWalletKakao is expected to serve as a strong base in building a mobile lifestyle platform through its comprehensive offering of p2p money transfers, on and offline payment solutions and ATM compatibility. In addition, the company will continue to strengthen its search-related services by focusing on overall engineering and technology enhancements.

 

Kisu Kwon, Head of Business Planning Part of Daum Kakao said, “The third quarter consolidated results of Daum and Kakao combined reflect merger related one-off expenses, revaluation of assets, and conservative accounting,” and continued, “In the fourth quarter we plan to focus our energy on setting the foundation for a solid mobile lifestyle platform by maximizing synergy. We anticipate these efforts will lead to tangible results in our next quarter earnings.” [END]

 

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[Appendix 1] Daum Kakao Combined Earnings for 3Q 2014 (in millions (KRW))

 

Category	3Q'13	2Q'14	3Q'14	QoQ(%)	YoY(%)
Revenue	183,706	225,172	221,803	-1.5%	+20.7%
Ads	126,818	147,443	141,915	-3.7%	+11.9%
Game	50,022	62,574	67,464	+7.8%	+34.9%
Commerce	4,067	8,806	7,756	-11.9%	+90.7%
Other	2,799	6,349	4,668	-26.5%	+66.8%
Operating Expenses	150,977	163,065	191,044	+17.2%	+26.5%
Operating Profit	32,729	62,107	30,759	-50.5%	-6.0%
Operating Profit Margin (%)	17.8%	27.6%	13.9%	-13.7%p	-3.9%p
EBITDA	44,547	74,900	44,013	-41.2%	-1.2%
Net Profit	32,423	55,872	-6,316	-	-

 

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