Gravity Reports First Quarter of 2023 Results and Business Update

Seoul, Korea, May 11, 2023 (GLOBE NEWSWIRE) -- Seoul, South Korea – May 11, 2023 – GRAVITY Co., Ltd. (NasdaqGM: GRVY) (“Gravity” or “Company”), a developer and publisher of online and mobile games based in South Korea, today announced its unaudited financial results for the first quarter ended March 31, 2023, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

FIRST QUARTER 2023 HIGHLIGHTS

• Total revenues were KRW 164,947 million (US$ 126,513 thousand), representing an 6.3% decrease from the fourth quarter ended December 31, 2022 (“QoQ”) and an 86.2% increase from the first quarter ended March 31, 2022 (“YoY”).

• Operating profit was KRW 43,318 million (US$ 33,225 thousand), representing a 11.1% increase QoQ and a 94.1% increase YoY.

• Profit before income tax expenses was KRW 46,226 million (US$ 35,456 thousand), representing a 20.4% increase QoQ and a 99.1% increase YoY.

• Net profit attributable to parent company was KRW 36,466 million (US$ 27,969 thousand), representing a 9.9% increase QoQ and a 121.9% increase YoY.

REVIEW OF FIRST QUARTER 2023 FINANCIAL RESULTS

Revenues

Online game revenues for the first quarter of 2023 were KRW 22,696 million (US$ 17,408 thousand), representing a 4.3% decrease QoQ from KRW 23,711 million and a 5.8% increase YoY from KRW 21,447 million. The decrease QoQ was mainly attributable to decreased revenues from Ragnarok Online in Taiwan and Thailand. Such decrease was partially offset by increased revenue from Ragnarok Online in Japan. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and Korea.

Mobile game revenues were KRW 138,994 million (US$ 106,607 thousand) for the first quarter of 2023, representing a 6.1% decrease QoQ from KRW 148,046 million and a 119.8% increase YoY from KRW 63,241 million. The decrease QoQ resulted primarily decreased revenues from Ragnarok Origin in Taiwan, Hong Kong and Macau. Such decrease was partially offset by increased revenues from Ragnarok X: Next Generation in Korea which was launched on January 5, 2023. The increase YoY was due to increased revenues from Ragnarok Origin in Taiwan, Hong Kong and Macau and Ragnarok X: Next Generation in Korea. This increase was partially offset by decreased revenues from Ragnarok Origin in the United States and Canada, and Ragnarok X: Next Generation in Southeast Asia.

Other revenues were KRW 3,257 million (US$ 2,498 thousand) for the first quarter of 2023, representing a 25.3% decrease QoQ from KRW 4,358 million and a 16.9% decrease YoY from KRW 3,919 million.

Cost of Revenue

Cost of revenue was KRW 105,485 million (US$ 80,906 thousand) for the first quarter of 2023, representing a 5.6% decrease QoQ from KRW 111,707 million and a 133.1% increase YoY from KRW 45,254 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok Origin in Taiwan, Hong Kong and Macau and Ragnarok M: Eternal Love. The increase YoY was primarily due to increased commission paid for mobile game services related to Ragnarok Origin in Taiwan, Hong Kong, Macau and Ragnarok X: Next Generation in Korea.

Operating Expenses

Operating expenses were KRW 16,144 million (US$ 12,382 thousand) for the first quarter of 2023, representing a 36.4% decrease QoQ from KRW 25,402 million and a 23.3% decrease YoY from KRW 21,037 million. The decrease QoQ was mainly due to decreased advertising expenses for Ragnarok Origin in the United States and Canada and Ragnarok Monster’s Arena in Korea and Southeast Asia and salaries. The decrease YoY was mainly due to decreased advertising expenses for Ragnarok: The Lost Memories and Ragnarok Origin in the United States and Canada, and Ragnarok Online in Philippines, Singapore and Malaysia.

Profit Before Income Tax Expenses

Profit before income tax expenses was KRW 46,226 million (US$ 35,456 thousand) for the first quarter of 2023 compared with profit before income tax expense of KRW 38,378 million for the fourth quarter of 2022 and profit before income tax expenses of KRW 23,220 million for the first quarter of 2022.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 36,466 million (US$ 27,969 thousand) for the first quarter of 2023 compared with net profit attributable to parent company of KRW 33,190 million for the fourth quarter of 2022 and a net profit attributable to parent company of KRW 16,431 million for the first quarter of 2022.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 374,229 million (US$ 287,030 thousand) as of March 31, 2023.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,303.80 to US$ 1.00, the noon buying rate in effect on March 31, 2023 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATES

Ragnarok Online IP-based Games

• Ragnarok Origin, an MMORPG mobile and PC game

Ragnarok Origin was launched in Southeast Asia on April 6, 2023. The game is being prepared to be launched in global in the fourth quarter of 2023.

• Ragnarok X: Next Generation, an MMORPG mobile game

Ragnarok X: Next Generation was launched in Korea on January 5, 2023.

• Ragnarok M: Eternal Love, an MMORPG mobile game

Ragnarok M: Eternal Love aims to be launched in Vietnam in the fourth quarter of 2023.

• Ragnarok Poring Merge NFT, a blockchain mobile game

Ragnarok Poring Merge NFT was designed as a blockchain game based on P2E systems. The game is prepared to be launched in Global in the fourth quarter of 2023.

• Other Ragnarok Online IP-based games

Ragnarok: The Lost Memories, a Cinematic Newtro Story RPG mobile and PC game, is scheduled to be launched in Taiwan, Hong Kong and Macau in May 2023.

Ragnarok V: Returns, an MMORPG mobile and PC game, will cease the service in Oceania on May 25, 2023 for service renewal. It is preparing to provide a renewal version of mobile, PC and Steam services. The game has been developed by Gravity NeoCyon, Inc., Gravity’s subsidiary in Korea.

Ragnarok Landverse was designed as a blockchain game based on P2E systems. Ragnarok Landverse, an MMORPG PC game, is aiming to be launched in the second half of 2023.

Other IP-based games

WITH: Whale In The High, a Healing Idle mobile game, is scheduled to be released in global in the second quarter of 2023. The game is developed by SKYWALK, a mobile game developer, and will be published by Gravity. Gravity entered into a publishing agreement with SKYWALK on December 1, 2022.

Expansion of Game Service

Gravity NeoCyon, Inc. and ME2ON co-developed a blockchain RPG game called, X Heroes: NFT War. X Heroes: NFT War is published by ME2ON, and the game was released in global (except for Korea and China) on April 25, 2023. Gravity NeoCyon, Inc. Gravity’s subsidiary in Korea, entered into a business agreement with a mobile social casino game company, ME2ON on October 14, 2022.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the first quarter in 2023 and Gravity’s business plan. The presentation can be found on the Company’s website under the IR Archives section at http://www.gravity.co.kr/en/ir/pds/list.asp. Korean and Japanese versions of the presentation are also provided on the website.

About GRAVITY Co., Ltd. ---------------------------------------------------
Gravity is a developer and publisher of online and mobile games. Gravity's principal product, Ragnarok Online, is a popular online game in many markets, including Japan and Taiwan, and is currently commercially offered in 91 markets. For more information about Gravity, please visit http://www.gravity.co.kr.

Forward-Looking Statements:
Certain statements in this press release 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 1995. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe”, “project,” or “continue” or the negative thereof or other similar words, although not all forward-looking statements contain these words. Investors should consider the information contained in our submissions and filings with the United States Securities and Exchange Commission (the “SEC”), including our annual report for the fiscal year ended December 31, 2022 on Form 20-F, together with such other documents that we may submit to or file with the SEC from time to time, on Form 6-K. The forward-looking statements speak only as of this press release and we assume no duty to update them to reflect new, changing or unanticipated events or circumstances.

Contact:
Mr. Heung Gon Kim
Chief Financial Officer
Gravity Co., Ltd.
Email: kheung@gravity.co.kr

Ms. Jeesun Lim
IR Unit
Gravity Co., Ltd.
Email: ir@gravity.co.kr
Telephone: +82-2-2132-7800

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GRAVITY Co., Ltd.
Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

		As of
		31-Dec-22								31-Mar-23
		KRW				US$				KRW				US$
		(audited)				(unaudited)				(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			169,877				130,294				177,924				136,466
Short-term financial instruments			167,000				128,087				196,305				150,564
Accounts receivable, net			77,257				59,255				68,981				52,908
Other receivables, net			140				107				624				479
Prepaid expenses			3,332				2,556				3,014				2,312
Other current financial assets			3,370				2,585				3,744				2,872
Other current assets			791				607				573				439
Total current assets			421,767				323,491				451,165				346,040
Property and equipment, net			8,140				6,243				7,464				5,725
Intangible assets, net			3,869				2,967				3,818				2,928
Deferred tax assets			5,660				4,341				5,226				4,008
Other non-current financial assets			2,176				1,669				2,708				2,077
Other non-current assets			2,482				1,904				3,918				3,005
Total assets			444,094				340,615				474,299				363,783
Liabilities and Equity
Current liabilities:
Accounts payable			73,549				56,411				60,515				46,414
Deferred revenue			18,543				14,222				17,261				13,239
Withholdings			3,201				2,455				3,541				2,716
Accrued expense			2,041				1,565				1,877				1,440
Income tax payable			5,469				4,195				10,976				8,418
Other current liabilities			2,907				2,230				2,833				2,173
Total current liabilities			105,710				81,078				97,003				74,400
Long-term account payables			374				287				376				288
Long-term deferred revenue			30				23				381				292
Other non-current liabilities			4,968				3,810				3,409				2,615
Deferred tax liabilities			2,832				2,172				2,833				2,173
Total liabilities			113,914				87,370				104,002				79,768
Share capital			3,474				2,665				3,474				2,665
Capital surplus			27,098				20,784				27,098				20,784
Other components of equity			2,475				1,898				6,121				4,695
Retained earnings			296,480				227,397				332,946				255,366
Equity attributable to owners of the Parent Company			329,527				252,744				369,639				283,510
Non-controlling interest			653				501				658				505
Total equity			330,180				253,245				370,297				284,015
Total liabilities and equity			444,094				340,615				474,299				363,783

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,303.80 to US$ 1.00, the noon buying rate in effect on March 31, 2023 as quoted by the Federal Reserve Bank of New York.

GRAVITY Co., Ltd.
Consolidated Statements of Comprehensive Income

(In millions of KRW and thousands of US$ except for share and ADS data)

		Three months ended
		31-Dec-22												31-Mar-22												31-Mar-23
		(KRW)						(US$)						(KRW)						(US$)						(KRW)						(US$)
		(unaudited)						(unaudited)						(unaudited)						(unaudited)						(unaudited)						(unaudited)
Revenues:
Online games			23,711							18,186						21,447						16,450						22,696						17,408
Mobile games			148,046							113,550						63,241						48,505						138,994						106,607
Other revenue			4,358							3,342						3,919						3,006						3,257						2,498
Total net revenue			176,115							135,078						88,607						67,961						164,947						126,513
Cost of revenue			111,707							85,678						45,254						34,709						105,485						80,906
Gross profit			64,408							49,400						43,353						33,252						59,462						45,607
Operating expenses:
Selling, general and administrative expenses			21,141							16,215						17,642						13,531						13,271						10,179
Research and development			3,864							2,964						3,232						2,479						2,922						2,241
Others, net			397							304						163						125						(49)						(38)
Total operating expenses			25,402							19,483						21,037						16,135						16,144						12,382
Operating profit			39,006							29,917						22,316						17,117						43,318						33,225
Finance income(costs):
Finance income			4,902							3,760						1,608						1,233						5,461						4,189
Finance costs			(5,530)							(4,241)		)				(704)						(540)						(2,553)						(1,958)
Profit before income tax			38,378							29,436						23,220						17,810						46,226						35,456
Income tax expense			5,161							3,959						6,889						5,284						9,799						7,517
Profit for the year			33,217							25,477						16,331						12,526						36,427						27,939
Profit attributable to:
Non-controlling interest			27							21						(100)						(77)						(39)						(30)
Owners of Parent company			33,190							25,456						16,431						12,603						36,466						27,969
Earning per share
- Basic and diluted			4,776							3.66						2,365						1.81						5,248						4.03
Weighted average number of shares outstanding
- Basic and diluted			6,948,900							6,948,900						6,948,900						6,948,900						6,948,900						6,948,900
Earning per ADS(1)
- Basic and diluted			4,776							3.66						2,365						1.81						5,248						4.03

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,303.80 to US$1.00, the noon buying rate in effect on March 31, 2023 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.