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Line Posts Profit Boosted by Ads in First Report Since IPO

  • The mobile messaging service grew users to 220 million
  • Naver-owned company is focusing on main markets and ads

Line Corp. posted a profit in its first earnings report since ushering in the year’s biggest technology debut, as monthly active users rose just 4 percent to 220 million.

Japan’s largest mobile messaging service announced 2.56 billion yen ($24.3 million) of net income in the six months through June, from a loss of 5.3 billion yen a year earlier. Its June-quarter operating profit came to 8 billion yen versus a 4.7 billion yen loss a year earlier, based on Bloomberg’s calculations off previously reported figures.

Wednesday’s results offered a first full glimpse at its financial health since raising $1.3 billion in July from investors in Japan and the U.S. Line, which is controlled by South Korea’s Naver Corp., lost money in two of the past three years as it focused on sustaining user growth at the expense of profitability. The messaging service is focusing on its main markets of Japan, Taiwan, Thailand and Indonesia, and pivoting toward advertising.

The company said it’s not issuing full-year forecasts but expects to record a profit in the current quarter.

“It is expected to deliver year-on-year profit growth and that will start to become more important as time goes by,” Atul Goyal, an analyst at Jefferies Group, said before the release. “The focus now is on MAU in its core markets, growth in its advertisement business and its game revenues.”

Analysts estimates aren’t yet available as most research houses haven’t initiated coverage, but are expected to do so in coming weeks. After jumping as much as 52 percent above the IPO price of 3,300 yen, Line’s shares have since pared gains as euphoria surrounding the launch wore off. On Wednesday, it closed 25 percent above that level in Tokyo.

Strong sales in advertisements and stickers outweighed weakness in games. Ad sales jumped 76 percent in the first half from the same period a year ago, while stickers expanded by 14 percent. The content division, which includes games and music, saw a 5 percent drop in revenue.

Line continued to solidify its presence in its core four markets, with monthly active users rising 21 percent to 157 million in the June quarter. Total users rose at a slower pace of 4.1 percent to 220 million, highlighting the company’s focus away from rapid global growth and toward its core markets.

Line debuted in 2011 and pioneered the business model of selling stickers and other digital knick-knacks that people buy and share while chatting on smartphones. But user growth tapered off as Facebook Inc.’s Messenger and WhatsApp and Tencent Holdings Ltd.’s WeChat mounted a challenge. Longer term, the company said proceeds from the offering will be used to expand across Asia and, eventually, the U.S., according to the prospectus.

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