Operating Profit Increased 9.5% to 330.5 Billion KRW in Q1
Sales Up 23.6% to 2.2804 Trillion KRW
Introducing the Ultra-Large AI HyperClovaX This Summer
Naver posted an operating profit of 330.5 billion KRW in the first quarter of this year, up 9.5% compared to the same period last year. Despite a slowdown in advertising revenue, commerce and content performance drove growth. In the second half of this year, Naver plans to unveil its self-developed large-scale artificial intelligence (AI) 'HyperCLOVA X' and apply it across services beyond search.
On the 4th, Naver announced that its first-quarter revenue reached 2.2804 trillion KRW, a 23.6% increase compared to the same period last year. Operating profit recorded 330.5 billion KRW, up 9.5%.
Revenue by business segment was ▲ Search Platform 851.8 billion KRW ▲ Commerce 605.9 billion KRW ▲ Fintech 318.2 billion KRW ▲ Content 411.3 billion KRW ▲ Cloud 93.2 billion KRW.
Search Platform revenue recorded 851.8 billion KRW, a 0.2% increase compared to the same period last year. Display advertising decreased by 13.1% due to base effects from last year's Olympics and presidential election. On the other hand, search advertising grew by 5.3%, continuing a solid growth trend that outpaced the global search market growth.
Commerce revenue increased by 45.5% year-on-year to 605.9 billion KRW, supported by the consolidation effect of POSHMARK. In the first quarter, Naver Commerce's total transaction volume grew 19.7% to 11.6 trillion KRW, maintaining a steady growth trend. Even excluding the POSHMARK consolidation effect, performance increased by 13.2%.
POSHMARK rapidly improved profitability through efforts such as optimizing marketing costs and streamlining sales expenses. It achieved an early turnaround to positive EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which was originally targeted for 2024, starting this quarter. This contrasts with the shrinking U.S. peer C2C (consumer-to-consumer) secondhand market, as POSHMARK maintained solid transaction volume and revenue growth.
Fintech revenue was 318.2 billion KRW, up 15.8% year-on-year. In the first quarter, Naver Pay's payment volume grew 19.2% to 13.4 trillion KRW. External payment volume led overall growth with a 31.5% increase to 5.4 trillion KRW, while offline payment volume rose 68.4% to 810 billion KRW due to efforts to expand on-site payment merchants.
Content revenue recorded 411.3 billion KRW, a 94.0% increase compared to the same period last year. The global integrated transaction volume of webtoons grew 28.9% to 412.2 billion KRW, despite reduced marketing and operational scale-downs in certain regions, supported by the consolidation of eBookJapan.
Cloud and other revenues increased 1.2% year-on-year to 93.2 billion KRW. Among these, the B2B segment declined 9.1% quarter-on-quarter due to the off-season in the public sector but increased 6.6% year-on-year.
Naver plans to actively respond to the generative AI competition through its large-scale AI HyperCLOVA X. HyperCLOVA X is the largest-scale AI trained on the Korean language. Despite its high performance, operating costs are about one-quarter of competitors, aiming to compete with OpenAI's latest AI model GPT-4.
Naver will apply HyperCLOVA X to its search services. Internal beta testing will be conducted in the first half of this year, with user-facing services launched in the second half. Additionally, it will be applied to various services such as Knowledge iN, seller tools, and travel reservation service enhancements. In Japan, a project is underway to introduce AI-powered productivity tools for enterprise services.
Choi Soo-yeon, CEO of Naver, said, "As AI commercialization cases are rapidly emerging and paradigms are changing drastically, Naver aims to elevate user experience by applying HyperCLOVA X across services. We also plan to launch global B2B services, including AI-integrated productivity tools like LINE WORKS in Japan within this year."
Meanwhile, Naver announced a three-year (fiscal years 2022?2024) shareholder return plan on the same day. According to the new plan, Naver will pay out 15?30% of the average consolidated free cash flow (FCF) over the past two years as full cash dividends over the next three years. Separately, Naver plans to specially retire 3% of its currently held 8% treasury shares and retire 1% annually over the next three years.
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