Krafton Sees Revenue Growth but Operating Profit Decline at the Same Time... One-Off Costs in Q4 (Comprehensive)

Fourth-quarter operating profit down 98.9% year-on-year
"Employee welfare fund costs will not recur"
Shareholder return policy implemented..."More than 1 trillion won over three years"

Krafton surpassed 3 trillion won in revenue last year, while its operating profit declined. The company explained that this was due to one-off expenses stemming from increased investment and the relocation to its new Seongsu headquarters. Krafton also announced that it will implement a shareholder return policy of more than 1 trillion won over the next three years starting this year.

Krafton logo. Provided by Krafton.

On February 9, Krafton announced on a consolidated basis that it recorded 3.3266 trillion won in revenue last year. This represents a 22.8% increase year-on-year and marks the first time the company has exceeded the 3 trillion won mark. Last year, operating profit and net profit came to 1.0544 trillion won and 733.7 billion won, respectively. These figures represent declines of 10.8% and 43.7%, respectively, over the same period. Operating profit in the fourth quarter of last year was 2.4 billion won, down 98.9% from the same quarter a year earlier. Revenue and net loss for the same quarter were 919.7 billion won and 22.7 billion won, respectively.

By business segment, annual revenue came to 1.1846 trillion won for PC, 1.7407 trillion won for mobile, 42.8 billion won for console, and 358.5 billion won for other segments. In particular, the PC segment contributed to revenue growth, driven by a 16% year-on-year increase in PUBG intellectual property (IP). PC revenue in the fourth quarter of last year was 284.7 billion won, up 24% from the same quarter a year earlier. It is interpreted that inZOI, released in March last year, and the new title MIMESIS, unveiled in October, each sold more than 1 million copies and were reflected in revenue.

"Contribution to the Employee Welfare Fund recognized as four years of resources... Voluntary resignation costs to be reflected in the first quarter of this year"

Krafton explained that its operating profit in the fourth quarter of last year fell sharply because one-off expenses, including those related to the relocation to its new headquarters, were reflected. In preparation for the move to the new Seongsu headquarters, the company contributed 81.6 billion won to a joint employee welfare fund as resources to be used over the next four years. During a conference call on the day, Krafton Chief Financial Officer (CFO) Bae Donggeun said, "The contribution to the joint employee welfare fund is a system designed to create a stable working environment for employees and the organization in preparation for Krafton's relocation to its new Seongsu headquarters," adding, "This contribution is a one-off item that recognizes at once the resources expected over the next four years, and expenses of the same nature will not recur."

During the conference call, Krafton also addressed the costs arising from the "Voluntary Resignation Option Program" implemented in November last year. The Voluntary Resignation Option Program is a system that supports up to 36 months of monthly salary for employees seeking new career paths. At the time, Krafton stated that it was "an autonomous, choice-based program, not aimed at workforce reduction." CFO Bae said, "Those subject to the 'Voluntary Resignation Program' were processed as having resigned as of January 31," adding, "Related costs of around 40 billion won will be reflected in the first quarter of this year."

Krafton also expressed expectations for business opportunities derived from ADK, a Japanese advertising agency it acquired for 710 billion won in June last year. During the conference call, Krafton CEO Kim Changhan said, "Through the acquisition of ADK, we aim to create synergies in content by turning animation IP into games and by adapting games into animation," adding, "We are working to identify animations suitable for gamification and to leverage Krafton's capabilities to create global games."

Shareholder return policy of more than 1 trillion won..."More than 44% increase compared to the past three years"

Krafton Pangyo Headquarters

Starting this year, Krafton has decided to focus on expanding franchise IP with long life cycles and on AI-based innovation. It plans to evolve the PUBG IP into a "PUBG 2.0" gameplay platform and expand the IP domain with new titles such as the extraction shooter Black Budget, the top-down tactical shooter PUBG: Blindspot, and the console battle royale Valor. The company cited Subnautica 2, Palworld Mobile, Dinkum Together, and NO LAW as key upcoming titles.

Meanwhile, Krafton also announced that it will implement a shareholder return policy of more than 1 trillion won over the next three years. Specifically, it plans to pay a total of 300 billion won in cash dividends over three years, or 100 billion won annually, and to repurchase more than 700 billion won worth of its own shares over the same period and cancel them in full. During the conference call, CFO Bae said, "We plan to return a total of more than 1 trillion won to shareholders over the next three years starting this year, which is at least a 44% increase compared to the total shareholder returns of 693 billion won over the past three years (2023-2025)," adding, "We plan to use more than 700 billion won, excluding dividends, for share repurchases, and we will manage the timing and amount of repurchases flexibly, taking into account market conditions."