SEOUL, South Korea, Feb. 14 /Xinhua-PRNewswire-FirstCall/ -- 2006
4Q Results Summary (Unit: KRW mm) 206 Q4 2006 Q3 QoQ 2005 Q4 YoY
Revenue 5,347 5,053 5.8% 5,513 -3.0% Operating Expenses 11,181
12,028 -7.0% 11,640 -3.9% Operating -5,834 -6,975 -- -6,127 --
Profit OP Margin -109.1% -138.0% -- -111.1% -- Ordinary Profit
-3,804 -7,546 -- -5,802 -- Ordinary Profit -71.1% -149.3% --
-105.2% -- Margin Net Income -10,876 -5,987 -- -4,151 -- Revenue
During 4th quarter, we recorded a 5.3 billion KRW revenue and 5.8
billion KRW operating loss. Due to the stabilization of MU domestic
revenue and the commercial launch of SUN on November 14, revenue
increased 6% from previous quarter, and 3% YoY. Total operating
expenses decreased 7% to 11.2 billion KRW due to the reduction of
marketing costs, and operating loss decreased 16% compared to
previous quarter. Ordinary loss decreased 49.5% due to the partial
disposal of GameOn shares, and net loss was 10.8 billion KRW due to
the write-off of deferred income tax of 7 billion KRW. 2006 Q4
Revenue Breakdown (Unit: KRW mm) 2006 Q4 2006 Q3 QoQ 2005 Q4 YoY
Revenue 5,347 5,053 5.8% 5,513 -3.0% Domestic 4,694 4,289 9.4%
4,526 3.7% Overseas 646 748 -13.6% 949 -31.9% Other 7 16 -56.3% 38
-81.6% Domestic revenue decreased 9% to 4.7 billion KRW. With
regular updates, MU has been showing signs of stabilization in
Korea, and we will try to keep the revenue at the current level.
Overseas royalty decreased 14% to 646 million KRW from previous
quarter and revenue, including mobile revenue decreased 56%.
Domestic Revenue Breakdown (Unit: KRW mm) 2006 Q4 2006 Q3 QoQ 2005
Q4 YoY MU 4,340 4,289 1.2% 4,526 -4.1% Individual 3,335 3,264 2.2%
3,402 -2.0% Internet Cafe 1,005 1,025 -2.0% 1,124 -10.6% Soul of
the Ultimate Nation (SUN) 354 -- -- -- -- Individual 255 -- -- --
-- Internet Cafe 99 -- -- -- -- Total 4,694 4,289 9.4% 4,256 3.7%
Individual revenue increased 2% to 3.3 billion KRW and internet
cafe revenue decreased 2% to 1 billion KRW. SUN's revenue,
including internet cafe revenue, was 354 million KRW. SUN internet
cafe revenue was slow due to the partial subscription model
(microtransaction model), and because the item mall opened in mid
December, revenue contribution from item shops was small for 4Q.
Overseas Royalty Revenue Breakdown (Unit: KRW mm) 2006 Q4 2006 Q3
QoQ 2005 Q4 YoY Overseas 646 748 -13.6% 949 -31.9% China 67 57
17.5% 90 -25.6% Taiwan 106 110 -3.6% 206 -48.5% Japan 390 467
-16.5% 564 -30.9% Thailand -- -- -- 66 -- Philippines 58 69 -15.9%
23 152.2% Vietnam 8 26 -69.2% -- -- U.S. 17 19 -10.5% -- --
Overseas royalty revenue decreased 14% QoQ. Regionally, China
increased 18%, and Taiwan, Japan, Philippines, Vietnam, US
decreased. Total Operating Costs (Unit: KRW mm) 2006 Q4 2006 Q3 QoQ
2005 Q4 YoY Total Operating Costs 11,181 12,028 -7.0% 11,640 -3.9%
Labor Costs 5,489 5,915 -7.2% 5,067 8.3% Depreciation 773 583 32.6%
866 -10.7% Commission Paid 1,485 1,570 -5.4% 1,201 23.6% Marketing
Expenses 881 1,492 -41.0% 1,782 -50.6% Sales Commission 254 173
46.8% 204 24.5% Other 2,299 2,295 0.2% 2,520 -8.8% Total Operating
Expenses Labor costs, which constitute 49% of our total operating
costs, decreased 7% to 5.5 billion KRW. As of end of 4th quarter,
our total headcount decreased to 646, from 668 end of third
quarter. YoY, headcount decreased by 30 people. Depreciation
increased 13% to 773 million KRW, due to the increase in equipment
for SUN's service. Sales Commission increased 46% to 254 million
KRW. Commission paid decreased 5% to 1.5 billion KRW. As a result
of minimizing unnecessary marketing expenses, marketing expenses
decreased 41% to 883 billion KRW. Other costs were 2.3 billion KRW,
which was similar to 3rd quarter. Non-operating Items (Unit: KRW
mm) 2006 Q4 2006 Q3 QoQ 2005 Q4 YoY Non-operating Income 2,030 -571
-- 325 524.6% Interest Income 975 973 0.2% 1,125 -13.3%
Profit(Loss) on Foreign Exchange -108 -85 -- -85 -- Gain on Equity
Method -1,192 -1,501 -- -802 -- Gain on disposal of Marketable
Securities 2,320 3 77233.3% 139 1569.1% Other 35 39 -10.3% -52 --
Interest income was 975 million KRW, which is similar to 3rd
quarter. Due to the gain of 2.3 billion KRW, from the disposal of
shares in our Japan partner, GameOn, non-operating income during
4th quarter was 2 billion KRW. As of end of 4Q, cash and cash
equivalents decreased by 6.5 billion KRW to 83 billion KRW. (end of
3Q: 89.5 billion KRW) Equity Method (Unit: KRW mm) 2006 Q4 2006 Q3
QoQ 2005 Q4 YoY 9Webzen -396 -436 -- -269 -- Webzen Taiwan -19 -278
-- -135 -- Webzen China -16 -11 -- -417 -- Webzen America -761 -776
-- 19 -- Total -1,192 -1,501 -- -802 -- We recognized a 1.2 billion
KRW loss on equity method from our overseas sudsidiaries. FY 2006
Earnings Summary (Unit: KRW mm) 2006 2005 YoY Revenue 21,950 29,015
-24.3% Operating Profit -30,115 -18,003 -- OP Margin -- -- --
Ordinary Profit -30,115 -16,444 -- Net Income -31,519 -13,205 --
Year 2006 revenue decreased 24% YoY to 22 billion KRW, and
operating loss was 30 billion KRW. FY 2006 Revenue Summary (Unit:
KRW mm) 2006 2005 YoY Revenue 21,950 29,015 -24.3% Domestic 17,886
23,762 -24.7% Individual 13,489 17,219 -21.7% Internet Cafe 4,397
6,543 -32.8% Overseas 3,994 4,881 -18.2% Other 70 372 -81.2%
Domestic revenue decreased 25% YoY to 17.9 billion KRW, and
overseas royalty revenue decreased 18% to 4 billion KRW. FY 2006
Expense Summary (Unit: KRW mm) 2006 2005 YoY Labor cost 24,186
19,599 23.4% (R&D cost) 9,027 8,021 12.5% Marketing cost 8,431
7,941 6.2% Commission paid 5,988 5,887 1.7% Depreciation 2,609
2,803 -6.9% Year 2006 Labor costs increased 23% to 24.2 billion
KRW. Marketing costs increased 7% to 8.4 billion KRW, associated
with MU and SUN marketing. Commission paid and depreciation during
2006 was 6 billion KRW, and 2.6 billion KRW respectively. Webzen
Inc. Non-consolidated Balance Sheet * The FY 2006 Q4 financials
have been prepared on an unaudited basis, and may be subject to
change during the independent auditing process * The FY 2006 Q4
financial statements are non-consolidated, and have been prepared
under the Korean General Accepted Accounting Principles) As of
31-Dec-06 30-Sep-06 31-Dec-05 KRW KRW KRW Assets I. Current Assets
99,658,502,314 102,039,180,901 134,032,699,865 (1) Quick Assets
99,658,502,314 102,039,180,901 134,032,699,865 Cash and cash
equivalents 76,238,563,962 65,035,126,135 118,107,261,444
Short-term financial instruments 4,445,690,286 21,950,035,707
2,270,052,194 Accounts receivable, net. 4,949,516,538 4,654,791,974
4,364,944,214 Short-term loans 962,392,920 938,709,650
1,188,773,620 Accrued income receivable 420,319,037 382,826,251
123,611,466 Non-trade receivable 64,741,816 69,839,939 48,180,328
Marketable securities 11,747,356,143 2,536,759,131 4,812,410,603
Advance payments 38,353,000 96,016,945 236,773,361 Prepaid income
taxes 538,892,220 408,474,280 706,861,305 Value added taxes -- --
-- Prepaid expenses 252,676,392 504,827,918 270,442,755 Other
current assets -- -- -- Deferred income tax debits -- 5,461,772,971
1,903,388,575 (2) Inventory -- -- -- 1. Goods -- -- -- II. Fixed
Assets 65,219,879,590 67,767,319,243 57,645,050,070 (1) Investments
41,257,926,154 42,901,164,638 34,296,263,543 Long-term financial
instruments -- -- -- Long-term loans 2,155,052,841 1,871,587,602
1,059,131,500 Investments in securities according to equity method
1,737,121,508 2,176,072,944 6,046,614,750 Available-for-sale
securities -- 535,665,682 535,665,682 Long-term prepaid expenses
18,382,683,300 15,332,175,800 7,247,951,381 Guarantee deposits
18,682,266,355 18,656,616,355 17,222,505,555 Other investments
300,802,150 300,802,150 300,802,150 Long-term deferred income tax
debits -- 4,028,244,105 1,883,192,525 (2) PP&E 11,221,639,851
12,047,322,707 11,806,355,288 Land 2,611,544,500 2,611,544,500
2,611,544,500 Buildings and auxiliary facilities 5,602,562,912
5,640,959,913 5,756,150,904 Equipment 2,561,237,036 3,250,882,680
3,017,003,089 Facilities 446,295,403 543,935,614 421,656,795 (3)
Intangible assets 12,740,313,585 12,818,831,898 11,542,431,239
Organization expenses -- -- -- Software 3,373,579,747 3,659,835,972
4,323,065,415 Goodwill -- -- -- Capitalized R&D costs
9,366,733,838 9,158,995,926 7,219,365,824 Other intangible assets
-- -- -- Total assets 164,878,381,904 169,806,500,144
191,677,749,935 I. Current Liabilities 7,269,155,752 8,256,755,180
8,610,099,605 Accounts payable 1,215,266,183 1,760,913,239
2,037,638,581 Accrued expenses 465,467,883 986,908,160 849,909,423
Accrued income taxes -- -- -- Withholdings 253,692,658 248,925,721
242,146,687 Deposits received 871,875,000 871,875,000 871,875,000
Withhold value added tax 213,494,404 85,204,833 1,507,437 Advances
received 103,019,641 101,121,176 95,018,396 Unearned revenues
4,084,039,983 3,754,927,884 4,172,407,865 Provision for sales
promotion -- 257 ,838,466 251,796,216 Provision for other estimated
liabilities 62,300,000 189,040,701 87,800,000 Short term deferred
income tax credits -- -- -- II. Fixed Liabilities 5,640,781,629
5,195,763,486 4,115,591,495 Accrued severance benefits
5,602,929,856 5,135,740,342 3,912,843,444 Long-term unearned income
27,851,773 50,023,144 192,748,051 Long term Deferred income tax
Credits -- -- -- Long-term accounts payable 10,000,000 10,000,000
10,000,000 Total Liabilities 12,909,937,381 13,452,518,666
12,725,691,100 I. Capital Stock 6,486,000,000 6,486,000,000
6,485,000,000 Common stock 6,486,000,000 6,486,000,000
6,485,000,000 II. Capital Surplus 135,466,502,809 135,466,502,809
135,405,721,645 Additional 135,466,502,809 135,466,502,809
135,405,721,645 paid-in capital III. Retained Earnings
22,298,261,066 33,174,883,944 54,045,173,788 Legal appropriated
retained earnings 322,500,000 322,500,000 322,500,000
Appropriated-Reserve for business rationalization 117,904,363
117,904,363 117,904,363 Appropriated-Reserve for future investments
442,699,142 442,699,142 442,699,142 Unappropriated retained
earnings to be carried forward 21,415,157,561 32,291,780,439
53,162,070,283 IV. Capital adjustments (12,282,319,352)
(18,773,405,275) (16,983,836,598) Capital Adjustment-Unrealized
gains on AFS 6,771,795,838 242,960,714 287,070,348 Capital
Adjustment-Unrealized losses on AFS -- -- -- Treasury Stock
(18,307,830,040) (18,307,830,040)(16,865,799,640) Stock option
719,780,537 742,067,170 474,087,134 Loss on investments in equity
method securities (1,453,391,587) (1,437,929,019) (879,194,440)
Gains on sale of treasury stock (12,674,100) (12,674,100) -- Total
shareholders' equity 151,968,444,523 156,353,981,478
178,952,058,835 Total liabilities and SE 164,878,381,904
169,806,500,144 191,677,749,935 Webzen Inc. Non-consolidated Income
Statement * The FY 2006 Q4 financials have been prepared on an
unaudited basis, and may be subject to change during the
independent auditing process * The FY 2006 Q4 financial statements
are non-consolidated, and have been prepared under the Korean
General Accepted Accounting Principles) Twelve months Three months
ended ended 31-Dec-06 30-Sep-06 31-Dec-06 KRW KRW KRW I. Sales
5,347,040,497 5,053,080,240 21,950,096,648 Online game
4,698,633,001 4,302,922,905 17,946,246,899 Royalty 648,407,496
750,157,335 4,003,849,749 Merchandise -- -- -- II. Cost of goods
sold 3,680,560,809 2,811,464,669 11,867,271,214 Online game
3,680,560,809 2,811,464,669 11,867,271,214 Merchandise -- -- --
III. Gross profit 1,666,479,688 2,241,615,571 10,082,825,434 IV.
Selling, general and administrative 7,500,893,218 9,216,608,370
40,198,233,214 Salaries expenses 1,776,681,632 1,773,865,533
7,032,136,024 Bonus (107,485,650) 241,599,174 513,950,330 Severance
benefits 262,547,595 243,100,518 893,280,743 Welfare benefits
251,881,377 264,164,424 993,075,250 Travel expenses 98,020,505
106,475,892 536,529,480 Entertainment expenses 55,988,308
61,209,270 326,229,870 Communication expense 19,320,794 20,815,439
155,196,550 Utility expenses 16,651,014 29,203,021 93,605,713 Taxes
and dues 98,317,059 122,887,382 403,727,971 Depreciation
162,327,204 159,728,425 600,146,376 Rental expense 60,555,600
60,587,980 253,194,355 Repairs expenses 150,000 -- 4,050,000
Insurance premium 46,948,533 49,446,402 195,012,235 Vehicle
maintenance expenses 14,541,874 16,402,829 66,282,649 Ordinary
research and development expenses 2,916,712,181 3,460,302,939
14,771,854,798 Freight expenses 4,741,356 4,055,233 22,902,212
Training expenses 32,019,393 22,185,641 110,175,095 Publication
expenses 10,743,419 9,604,384 37,696,575 Office supplies expenses
2,118,311 4,373,034 11,647,681 Supplies expenses 19,452,181
16,001,905 79,559,874 Commissions paid 563,264,058 702,140,054
3,110,960,217 Advertising expenses 881,391,404 1,491,867,541
8,430,713,595 Bad debt expenses 20,510,147 46,415,995 352,448,585
Sales commissions 254,107,072 172,922,395 808,728,024 Amortization
cost of intangible assets 40,328,012 40,149,100 160,548,366 Sample
expenses -- -- -- Compensation expenses assoc. w/stock options
(940,161) 97,103,860 234,580,646 V. Operating profit
(5,834,413,530) (6,974,992,799)(30,115,407,780) VI. Non-operating
income 3,349,958,906 1,035,918,330 6,693,484,725 Interest income
974,844,687 973,182,852 3,992,686,488 Gains on foreign currency
transaction 6,181,588 11,504,490 28,724,141 Income from commission
22,324,968 24,197,909 83,022,877 Gains on foreign currency
translation 9,380 8,761,063 9,380 Gains on valuation of forward
currency contracts -- -- -- Gains on disposition of PPE -- --
574,648 Equity income on investments -- -- -- Gains on available
for sale securities 2,320,561,588 3,446,250 2,535,124,319 Gains on
forward currency transactions -- -- -- Reversal of Compensation
Exp. associated with SO -- -- -- Miscellaneous income 26,036,695
14,825,766 53,342,872 VII. Non-operating expenses 1,319,755,744
1,607,058,263 6,692,970,616 Losses on foreign currency transaction
75,611,505 68,189,266 391,635,625 Donations 550,000 -- 550,000
Losses on foreign currency translation 38,114,656 37,166,049
138,032,069 Loss on disposal of tangible assets 7,908,189 92,490
15,284,766 Losses on forward currency transactions -- -- -- Losses
on disposal of available-for-sale securities -- -- 390,000 Losses
on valuation of intangible assets -- -- -- Miscellaneous losses
6,042,655 125,401 46,743,383 Losses on valuation of forward
currency contracts -- -- -- Additional Payment of Income Taxes --
-- -- Losses on disposition of PPE -- -- -- Equity losses on
investments 1,191,528,739 1,501,485,057 6,100,334,773 VIII. Profit
before extraordinary items (3,804,210,368)
(7,546,132,732)(30,114,893,671) IX. Extraordinary gains -- -- -- X.
Extraordinary losses -- -- -- XI. Income before income tax expenses
(3,804,210,368) (7,546,132,732)(30,114,893,671) XII. Income tax
expenses 7,0721,412,510 (1,559,329,145) 1,403,751,982 XIII. Net
income (loss) (10,876,622,878) (5,986,803,587)(31,518,645,653)
Forward-Looking Statements: Certain statements in this document may
include, in addition to historical information, "forward-looking
statements" within the meaning of the "safe- harbor" provisions of
the U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements can generally be identified by the use
of "estimate," "anticipate," "believe" "project," or "continue" or
the negative thereof or other similar words, although not all
forward-looking statements will contain these words. These
forward-looking statements are based on our current assumptions,
expectations and projections about future events. All actual
performance, financial condition or results of operations to be
materially different from those suggested by the forward-looking
statements, to collect, and in a timely manner, license fees and
royalty payments from or operate commercially successful online
games; our ability to compete access technological developments in
our industry; our ability to recruit and strategies; and economic
and political conditions globally. Investors should consider the
information contained in our submissions and filings with the
registration statement on Form F-1, as amended, and our annual
report on Form 20-F, together with such other documents and we may
submit to or file with the SEC from time to time, including on Form
6-K. The forward-looking statements reflect new, changing or
unanticipated events or circumstances. Contacts: Webzen Inc. 6th
Floor, Daelim Acrotel Building 467-6 Dogok-dong, Kangnam-Ku, Seoul,
Korea 135-971 Sung Ho Lee Investor Relations Tel: +82-2-3498-6818
Email: DATASOURCE: Webzen Inc. CONTACT: Sung Ho Lee of Webzen Inc.,
+82-2-3498-6818, or
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