Good morning and good evening. Thank you all for joining the conference call for the Netmarble earnings results. This conference will start with a presentation followed by a Q&A session. If you have a question, please press star and one on your phone during the Q&A. Now we will begin the presentation on Netmarble's second quarter of fiscal year 2026 earnings results.
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Good afternoon. This is Jiwon Lee, Head of the company's IR team. Thank you sincerely to all investors and analysts who have taken the time to attend our 2026 Q2 earnings conference call amidst your busy schedules. Present with us today are CEO Byung-gyu Kim, CFO Gi-Uk Do, and other members who will be available to answer questions following the earnings presentation. Please note that this presentation is prepared prior to the completion of our external audit.
Therefore, some details may be subject to change based on the audit results. I'll hand it over to our CFO, Gi-Uk Do to proceed with the earnings presentation.
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Good afternoon. This is CFO Gi-Uk Do. Let me begin by presenting our business results for the second quarter of 2026. Please refer to page two.
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Second quarter revenue reached KRW 749.2 billion, up 15% QoQ and up 4.4% YoY. EBITDA rose 33.5% QoQ, but fell 14.6% YoY to KRW 112 billion, and EBITDA margin was 14.9%. Revenue and EBITDA increased QoQ, reflecting the performance of new releases and revenue growth of existing games.
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The next page covers operating profit and net income. In Q2, operating profit was KRW 80.1 billion, net income was KRW 203.9 billion, and net income attributable to controlling shareholders was KRW 197.6 billion. Net income included a gain on the disposal of G-Tower.
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The following page provides an overview of our game portfolio. As of the end of the second quarter, revenue contribution by major titles was as follows, Marvel Contest of Champions accounted for 9% of revenue, followed by The Seven Deadly Sins: Origin, Lotsa Slots, Jackpot World, and Cash Frenzy at 7% each, and The Seven Deadly Sins: GRAND CROSS at 5%, demonstrating the continued diversification of our game portfolio. In Q2, the new titles that we launched, as well as our existing games, delivered strong live service performance.
Marvel Contest of Champions sustained its growth momentum through seasonal promotions. The Seven Deadly Sins: Origin benefited from a full- quarter revenue contribution, accounting for 7% of total revenue. In addition, The Seven Deadly Sins: GRAND CROSS achieved significant revenue growth, supported by retention improvement initiatives implemented since last year and its seventh anniversary update. Lastly, SOL: enchant, which launched in June, reached number one on Korea's two major app marketplaces. Going forward, we plan to sustain its long-term performance through geographic expansion and well-planned content updates.
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Next, breakdown of revenue by region and genre. In Q2, revenue by region was comprised of North America at 39%, Korea 22%, Europe 13%, Southeast Asia 10%, Japan 9%, and other regions at 7%. Overseas revenue ratio was 78%, down 1 percentage point quarter-over-quarter. In particular, the revenue contribution from Japan increased by 2 percentage points quarter-over-quarter, driven by the strong performance of titles based on The Seven Deadly Sins IP. Meanwhile, the revenue contribution from Korea also increased by 1 percentage point quarter-over-quarter following the launch of SOL: enchant. By genre, revenue was composed of RPG at 42%, casual games 35%, MMORPG 17%, and others 6%.
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The next page outlines our key cost structure. Q2 operating expenses amounted to KRW 669.1 billion, up 11.8% QoQ and up 8.5% YoY. Marketing expenses increased by 9.1% QoQ, primarily due to new title launches. Labor expenses increased 8.9% QoQ to KRW 182.5 billion, reflecting the full- quarter impact of salary increases. Finally, commission expense ratio increased by 0.6 percentage points QoQ to 31.4%, driven by an increased share of revenue from external IP games.
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Upcoming game lineup. In the second half, we plan to release three new titles: Solo Leveling: KARMA, Shangri-La Frontier: The Seven Colossi, and PROJECT AEGIS.
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During the first half of the year, we further reinforced our financial strength through new game launches and the strategic rebalancing of our asset portfolio. Looking ahead to the second half, we will continue to solidify our business fundamentals by enhancing the live services of our existing titles while expanding our lineup with differentiated new releases. We look forward to your continued interest and support.
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That concludes our earnings presentation. Happy to take any questions you may have. Thank you.
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Now Q&A session will begin. Please press star one, that is star and one, if you have any questions.
Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two. That is star and two on your phone.
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Currently, there are no participants with questions. Please press star one, star and one to give your question.
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The first question will be provided by Junhyun Kim from HSBC. Please go ahead with your question.
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If you can hear me, we welcome your question.
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Thank you very much for this opportunity to ask question. My question is related to what's happening recently. We have seen your share prices fall, and I think if I were to summarize the concern from the market, and this is actually centering around the growth of the company going forward. That's really as a result of the fact that the new titles that you have launched in the first half did not meet the market expectations. I know that you have new titles that you will be releasing in the second half, but those titles have less well-known IP. That's why in the marketplace at this present time, there is relatively low expectation in respect to the performance of the upcoming new title releases.
And so, if looking out to not only the second half of 2026, but also as we look out further to 2027 and 2028, I know that the company has made great efforts and has shown results in improving its financial strength through asset securitization, which is an encouraging sign. As you know, Netmarble is a company that has been able to drive strong growth as a result of being able to release multiple titles. And so, it would be very helpful if you could get additional color in respect to the titles that you will be releasing specifically, for example, in 2027, because at present, there is very little information available. If it's possible, could you give us additional information related to what is the current progress of game development?
If it's possible, can you also share with us the number of new titles that you plan to be launching in 2027? We'd like to actually hear more from the company related to your outlook about your future game pipeline.
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This is CEO Kim Byung-gyu, I want to just summarize the question that you have just posed. You mentioned that for Netmarble, historically, we've been able to continue to drive the growth of company by being able to release multiple titles. When we look at what we have been doing this year, you mentioned that the titles that we had planned for the first half have had more higher market expectations than what we'll be launching in the second half. Unfortunately, the performance of the titles that we did launch in the first half did not meet market expectations. You wanted to actually get additional information related to what we plan to do in the remainder of 2026 as well as 2027 and 2028.
Because of this lack of clarity in terms of what to expect going forward in the near term, you are stating that that's really one of the reasons why we have actually seen stagnant performance in our share prices. That's why you asked us if we can actually share the 2027 game release lineup in terms of what our outlook is, the overall status of development, and the number of titles that we are preparing. I do agree with what you have said. At the same time, to talk about the current status of development, the outlook, and the number of titles that we plan for 2027, I'm not sure by talking about this during this call, whether or not I'll be able to meet the expectations of the market.
We have been able to, and this was done preemptively, we have decided to actually downsize the game lineup that we are going to be releasing for the second half. That's because we wanted to actually strengthen and have a more tighter criteria in terms of the game launch for the company as well. Because when you are launching a large- scale new title, this actually requires significant resource input. We felt that at this time it was very much important for us to be quite efficient in how we decide to input these resources for the title releases.
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That is why, as I just mentioned, we preemptively made adjustments to the future game release lineup. I want to give you a little bit more context and background as to why the company has decided to do this. Fundamentally, as I've mentioned, we have decided that it's very important for us to efficiently utilize our resources in launching new titles. But that wasn't the ultimate reason for making such preemptive decision. The main reason was really the focus that we have to continue to enhance our live servicing of the existing games. What's quite important for the company is to make sure that we are able to extend the life of the PLC of the games that we have already released. Going back to the comment that you mentioned, the company has been able to significantly drive growth by launching multiple titles.
What that also entails is that because of all the games that we have released in the past, that we had to also do a very good management of the PLC of these titles so that we are able to expand the life of these titles. That was really the main driver, and we felt that by being able to improve our fundamentals in this area would actually be meeting the market expectations. And that's why, and that is the reason why we have decided to actually tighten the management of new title releases and at the same time continue to make sure that we're able to expand the PLC of existing titles.
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For Netmarble, the overall market assessment of the company was that our strength was being able to actually launch multiple titles, but at the same time, the market said that our weakness was having a short PLC. If I were to actually talk about The Seven Deadly Sins: GRAND CROSS , for example, it actually has been servicing for seven years and being able to actually produce a revenue of over KRW 100 billion in 2024, 2025 as well as in 2026. It's not just staying flat, but we're actually seeing revenue being increased on a year-by-year basis. For a mobile game to be able to be in service for seven years and still to be able to report more than KRW 100 billion in revenue, it's not something that is very common for mobile games.
We continue to see that we're able to generate additional revenue growth year by year with this title. And this, once again, is a testament to the fact that it has a very strong potential for a long extended PLC. This is an evidence that we have been able to secure as a company, and we want to actually be able to apply this to other live games that we have in place. For the focus for the company in the second half is to continue to drive revenue, but at the same time, be able to focus on extending the PLC of our game titles. But having said that, we will still continue on course with the planned regional expansions for Q3 and Q4.
Already regional expansions have been executed and will be on course to be able to follow the regional expansion plan that we have for the remainder of 2026. And so, by being able to actually adjust the new title release lineup in the second half, that's not going to be exactly equate to the decline in the revenue for the company as some people in the market may be concerned about. That's quite the contrary.
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Going back to your comment wanting additional color on the new title releases, I fully understand why you have asked this comment, I'll make sure that we actually set aside a separate time to be able to go through the pipeline with you.
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Next question please.
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The following question will be presented by Uihoon Chung from Eugene Investment & Securities. Please go ahead with your question.
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Thank you for the opportunity. I just have a short question related to spend side. I just want to get from the company any progress update in respect to the reduction in the market commission, and if you have a year-end target you can share, please provide that as well. And also, if it's possible, can you also give us a marketing expense guidance for the second half?
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Moving to your question related to the market commission. This is a question that was also asked in the previous quarter, no additional changes to actually report. As I've actually said before, the impact for this year will be quite limited. The actual full-scale impact will start to be felt from 2027. At this point in time, I don't think I can actually talk about specific numbers, but we'll see meaningful impact on the overall expense coming in starting from 2027. In respect to the marketing expense guidance, in the first half of this year, we had new title releases, and on an absolute basis, whether we're talking about the amount or the ratio, we had seen increases. However, I believe that as we move into the second half, we'll actually be performing as we have done in previous quarters.
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Next question, please.
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Currently, there are no participants with questions. Please press star one, star and one to give your question.
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If there are no further questions, we will conclude the 2026 Q2 earnings presentation. For any additional inquiries, please feel free to reach out to our IR team. Thank you once again for your participation.