KaKao

[Seoul, South Korea – November 10, 2016] Kakao Corp. (KOSDAQ 035720) today reported third quarter financial results under Korean-IFRS. Kakao’s consolidated revenue for the quarter was KRW 391.4 billion, with operating income of KRW 30.3 billion. 

Consolidated revenue for the third quarter increased 3.9% QoQ and 70.5% YoY. 

Revenue from Content, which began displaying significant growth last quarter, continued to drive growth in the company’s overall revenue. Revenue from game business increased 52.7% YoY to KRW 78.5 billion, thanks to positive performance from key new mobile channeling games such as ‘Sword and Magic for Kakao’ and growth in revenue from Kakao’s new mobile game publishing business. Revenue from music was KRW 95.5 billion, 5.5% increase QoQ resulting from Loen Entertainment’s growth in sales revenue. Other content revenue recorded KRW 24.4 billion, a 12.8% increase QoQ, following continued increase in revenue from Kakao Page and Daum Webtoon. In all, overall growth brought total content revenue to 198.4 billion, a 4.2% QoQ and 187.2% YoY. 

Revenue from advertising decreased 6.8% QoQ and 13.5% YoY to KRW 126.9 billion. The slight fall was due to the low season factor in the advertising market, as well as Kakao’s continued efforts to remove inefficient network ad traffic. 

Other revenue was KRW 66.1 billion. Popularity of the Kakao Friends Flagship Store Gangnam which opened this July, and continued growth in Kakao Talk Gift Store sales attributed to a 32.4% revenue increase QoQ. The addition of record distribution revenue following Loen Entertainment’s inclusion brought YoY growth to 377.6%. 

In the third quarter, increased marketing activities in the overall content sector including those for new game launches led to an increase in advertising expense, and increase in commission expenses across the game, content and commerce platforms brought the total operating cost to KRW 361.1 billion. 

In total, operating income for the third quarter increased 13.7% QoQ and 87% YoY to KRW 30.3 billion. Operating profit margin was 7.7%, and net income was KRW 13.6 billion. 

Throughout 2016, Kakao has established a structure for growth across all service sectors. Kakao Talk Channel, provided through the third tab in Kakao Talk, is currently frequented by 26 million users each month. The Daum mobile app recently adopted a new brand icon and revamped its news page, and is getting ready for more key updates. The game division continues to show strong performance, securing high quality games for the platform. Kakao’s self-published games such as 'Kung Fu Panda 3 for Kakao', 'Friends Sachunsung for Kakao', and 'Friends Popcorn for Kakao' continue to rise in popularity, and the recently launched 'Destiny Child for Kakao' soared to the top of both Google Play and the Apple App Store's Top Grossing rankings. Kakao Page continues to grow as a successful mobile paid content distribution platform, and is expected to surpass KRW 100 billion in gross sales volume for 2016. The second Kakao Friends Flagship Store which will open this November in Hongdae, is also expected contribute to improvement in Kakao’s overall performance.