Japan's Line Corp swings to first-half profit as ad revenue soars
today Jul 27, 2016
Japan's Line Corp on Wednesday said soaring advertising revenue helped it swing into profit in the first half of the year, in the messaging app maker's first public earnings report since its billion-dollar stock market listing.
Line enjoyed a stellar debut on both the Tokyo and New York exchanges this month after the tech world's biggest initial public offering of the year, as investors brushed off concern of slowing user growth and the mountain Line would have to climb to challenge leaders such as Facebook Inc's WhatsApp.
Ahead of listing, Line said it had singled out advertising as a future growth driver. On Wednesday, it said ad sales grew 76 percent in the first half from a year earlier, and that their share of overall revenue grew to 37 percent from 28 percent.
In particular, game- and cosmetics-related adverts made up half of ad-based revenue, Line said.
"The advertising business has grown to be the largest pillar for Line," Chief Executive Takeshi Idezawa said at an earnings briefing. "The performance was stronger than we'd expected."
Line booked net profit of 2.6 billion yen ($24.3 million) for January-June compared with a net loss of 5.3 billion yen in the same period a year earlier.
Revenue climbed 19.8 percent to 67.3 billion yen. In its communications segment - which includes sales of emojis and electronic stickers - revenue grew 14.1 percent.
But revenue from content, which includes games, fell 5 percent, and the segment's proportion to overall revenue dipped.
Competition in mobile gaming took a significant step up at the beginning of the second half of the year with the release of blockbuster Pokemon GO, backed by Nintendo Co Ltd (7974.T). But Idezawa said the game posed no threat to Line.
"Pokemon GO and its popularity is a positive factor for the industry," he said.
Line's eponymous messaging app had 220 million monthly active users globally at the end of June, a rise of 4.1 percent from a year prior. In its four biggest markets of Japan, Taiwan, Thailand and Indonesia, users grew 20.8 percent to 157 million.
For the three months through September, Line said it would remain profitable as it "aggressively" marketed new games. Marketing expenses would therefore rise and could have a "temporary impact" on operating profit, it said.
Ahead of the earnings announcement, Line's shares closed up 3.4 percent versus a 1.7 percent gain in the benchmark index N.225. The shares listed in Tokyo on July 15 and have since risen over 25 percent from their initial public offering price.
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