U.S. Markets closed

GRAVITY REPORTS SECOND QUARTER OF 2019 RESULTS AND BUSINESS UPDATES

Seoul, Korea, Aug. 08, 2019 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (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 second quarter ended June 30, 2019, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

SECOND QUARTER 2019 HIGHLIGHTS

  • Total revenues were KRW 78,127 million (US$ 67,667 thousand), representing a 41.5% decrease from the first quarter ended March 31, 2019 (“QoQ”) and a 24.0% increase from the second quarter ended June 30, 2018 (“YoY”).
  • Operating profit was KRW 12,998 million (US$ 11,257 thousand), representing a 45.0% decrease QoQ and a 56.2% increase YoY.
  • Profit before income tax expenses was KRW 14,037million (US$ 12,158 thousand), representing a 42.4% decrease QoQ and a 62.4% increase YoY.
  • Net profit attributable to parent company was KRW 10,861 million (US$ 9,407 thousand), representing a 45.0% decrease QoQ and a 64.2% increase YoY.

REVIEW OF SECOND QUARTER 2019 FINANCIAL RESULTS

Revenues

Subscription revenues for the second quarter of 2019 were KRW 6,746 million (US$ 5,843 thousand), representing a 7.8 % increase QoQ from KRW 6,256 million and a 10.3% increase YoY from KRW 6,116 million. The increase QoQ was mainly attributable to increased revenue from Ragnarok Online in Taiwan. The increase YoY was largely due to increased revenues from Ragnarok online in Taiwan and Korea. Such increase was partially offset by decreased revenue from Ragnarok Prequel in Taiwan.

Royalty and license fee revenues for the second quarter of 2019 were KRW 2,832 million (US$ 2,452 thousand), representing a 23.9% decrease QoQ from KRW 3,720 million and a 11.7% decrease YoY from KRW 3,209 million. The decrease QoQ was primarily due to decreased revenue from Ragnarok Online in Japan. The decrease YoY resulted mainly from decreased revenues from Ragnarok Online in Thailand and Brazil.

Mobile game and application revenues were KRW 66,463 million (US$ 57,565 thousand) for the second quarter of 2019, representing a 45.1% decrease QoQ from KRW 121,147 million and a 28.3% increase YoY from KRW 51,789 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America, and Oceania, Taiwan, and Korea. Such decrease was partially offset by revenue from Ragnarok M: Eternal Love in Japan, which was launched on June 5, 2019. The increase YoY was primarily due to revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America, Oceania, and Japan. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love in Korea and Taiwan. RO: Idle Poring in global markets except for China and Japan, and Ragnarok R in Taiwan and Korea.
Character merchandising and other revenues were KRW 2,086 million (US$ 1,807 thousand) for the second quarter of 2019, representing 16.6% decrease QoQ from KRW 2,500 million and a 9.1% increase YoY from KRW 1,912 million.

Cost of Revenue

Cost of revenue was KRW 56,858 million (US$ 49,246 thousand) for the second quarter of 2019, representing a 43.8% decrease QoQ from KRW 101,237 million and a 31.8% increase YoY from KRW 43,150 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania, Taiwan, and Korea. The increase YoY was mostly from increased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania and salaries.

Operating Expenses

Operating expenses were KRW 8,271 million (US$ 7,164 thousand) for the second quarter of 2019, representing a 5.4% decrease QoQ from KRW 8,746 million and a 28.4% decrease YoY from KRW 11,553 million. The decrease QoQ was mainly attributable to decreased advertising expenses for Ragnarok M: Eternal Love in Korea. Such decrease was partially offset by increased commission paid and research and development expenses. The decrease YoY was mostly resulted from decreased advertising expenses for Ragnarok M: Eternal Love in Korea. Such decrease was partially offset by increased research and development expenses and salaries.

Profit before income tax expenses

Profit before income tax expenses was KRW 14,037 million (US$ 12,158 thousand) for the second quarter of 2019 compared with profit before income tax expense of KRW 24,389 million for the first quarter of 2019 and profit before income tax expenses of KRW 8,642 million for the second quarter of 2018.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 10,861 million (US$ 9,407 thousand) for the second quarter of 2019 compared with net profit attributable to parent company of KRW 19,760 million for the first quarter of 2019 and a net profit attributable to parent company of KRW 6,615 million for the second quarter of 2018.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 111,164 million (US$ 96,281 thousand) as of June 30, 2019.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,154.58 to US$ 1.00, the noon buying rate in effect on June 28, 2019 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online IP-based Games

  • Ragnarok M: Eternal Love, a MMORPG mobile game

Ragnarok M: Eternal Love (locally named Ragnarok Masters in Japan) has launched in Japan on June 5, 2019 by GungHo Online Entertainment Inc, (“GungHo”), the licensee of Ragnarok Online. Also, Gravity is preparing the service for Europe (except for some regions), Turkey and Russia in the third quarter of 2019.

  • Ragnarok Web MMORPG, a web browser-based 3D new version of game

Ragnarok web MMORPG has launched in Taiwan, Hong Kong and Macau on June 5, 2019.

  • Other Ragnarok Online IP-based games

Gravity is planning to launch RO Click H5, a HTML 5 version of idle game globally in September 2019.

A 3D Action MORPG mobile game, Ragnarok Spear of Odin, is expected to be launched in Taiwan, Hong Kong, and Macau in the second half of 2019. The game was developed by NeoCyon, our subsidiary in Korea.

Ragnarok Online

  • The company is scheduled to be re-launched Ragnarok Online in Indonesia in September 2019. The publisher of the game has changed from Gravindo to Gravity Game Link, a joint venture in Indonesia.

        
Other IP games

  •  The Color of Dream Fantasy Latele, a MMORPG mobile game, is expected to be launched in Japan during the second half of 2019.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of second quarter in 2019 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. ---------------------------------------------------

Based in Korea, 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 83 markets and countries. 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, 2018 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. Jin Lee
Ms. Minji Oh
IR Unit
Gravity Co., Ltd.
Email: ir@gravity.co.kr
Telephone: +82-2-2132-7800~1

#     #     #


GRAVITY Co., Ltd.
Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

    As of  
    31-Dec-18     30-Jun-19  
    KRW     US$     KRW     US$  
    (audited)     (unaudited)     (unaudited)     (unaudited)  
Assets                                
Current assets:                                
Cash and cash equivalents     86,051       74,530       88,664       76,793  
Short-term financial instruments     9,500       8,228       22,500       19,488  
Accounts receivable, net     60,664       52,542       34,817       30,156  
Other receivables, net     255       221       239       207  
Prepaid expenses     2,516       2,179       2,096       1,815  
Other current assets     1,182       1,024       2,390       2,070  
Total current assets     160,168       138,724       150,706       130,529  
Property and equipment, net     1,498       1,297       5,843       5,061  
Intangible assets     1,163       1,007       1,687       1,461  
Deferred tax assets     7,413       6,421       7,035       6,093  
Other non-current financial assets     1,494       1,294       1,554       1,346  
Other non-current assets     1,438       1,245       1,411       1,222  
Total assets     173,174       149,988       168,236       145,712  
Liabilities and Equity                                
Current liabilities:                                
Accounts payable     71,928       62,298       38,350       33,215  
Deferred revenue     16,476       14,270       12,421       10,758  
Withholdings     2,019       1,749       1,456       1,261  
Accrued expense     1,031       893       1,050       909  
Income tax payable     1,944       1,684       2,005       1,737  
Other current liabilities     123       106       2,135       1,849  
Total current liabilities     93,521       81,000       57,417       49,729  
Long-term deferred revenue     3,598       3,116       1,960       1,698  
Other non-current liabilities     503       436       2,401       2,080  
Total liabilities     97,622       84,552       61,778       53,507  
Share capital     3,474       3,009       3,474       3,009  
Capital surplus     27,141       23,506       27,140       23,506  
Other components of equity     138       120       277       240  
Retained earnings (Accumulated deficit)     45,405       39,326       76,026       65,847  
Equity attributable to owners of the Parent Company     76,158       65,961       106,917       92,602  
Non-controlling interest     (606 )     (525 )     (459 )     (397 )
Total equity     75,552       65,436       106,458       92,205  
Total liabilities and equity     173,174       149,988       168,236       145,712  

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,154.58 to US$ 1.00, the noon buying rate in effect on June 28, 2019 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     Six months ended  
    31-Mar-19     30-Jun-18     30-Jun-19     30-Jun-18     30-Jun-19  
    (KRW)     (KRW)     (KRW)     (US$)     (KRW)     (KRW)     (US$)  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Revenues:                                                        
Online games-subscription revenue     6,256       6,116       6,746       5,843       15,012       13,002       11,261  
Online games-royalties and license fees     3,720       3,209       2,832       2,452       7,828       6,552       5,675  
Mobile games and applications     121,147       51,789       66,463       57,565       103,185       187,610       162,492  
Character merchandising and other revenue     2,500       1,912       2,086       1,807       3,312       4,586       3,972  
Total net revenue     133,623       63,026       78,127       67,667       129,337       211,750       183,400  
Cost of revenue     101,237       43,150       56,858       49,246       88,934       158,095       136,929  
Gross profit     32,386       19,876       21,269       18,421       40,403       53,655       46,471  
Operating expenses:                                                        
Selling, general and administrative     6,665       9,470       5,733       4,966       23,297       12,398       10,738  
Research and development     1,877       1,742       2,432       2,106       3,616       4,309       3,732  
Others, net     204       341       106       92       347       310       268  
Total operating expenses     8,746       11,553       8,271       7,164       27,260       17,017       14,738  
Operating profit     23,640       8,323       12,998       11,257       13,143       36,638       31,733  
Finance income(costs):                                                        
Finance income     1,062       892       1,141       989       1,482       2,203       1,907  
Finance costs     (313 )     (573 )     (102 )     (88 )     (866 )     (415 )     (359 )
Profit before income tax     24,389       8,642       14,037       12,158       13,759       38,426       33,281  
Income tax expenses(profits)     4,627       2,042       3,208       2,779       3,635       7,835       6,786  
Profit for the year     19,762       6,600       10,829       9,379       10,124       30,591       26,495  
Profit attributable to:                                                        
Non-controlling interest     2       (15 )     (32 )     (28 )     (40 )     (30 )     (26 )
Owners of Parent company     19,760       6,615       10,861       9,407       10,164       30,621       26,521  
Earning per share                                                        
- Basic and diluted     2,844       952       1,563       1.40       1,463       4,407       3.80  
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       6,948,900  
Earning per ADS(1)                                                        
- Basic and diluted     2,844       952       1,563       1.40       1,463       4,407       3.80  

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,154.58 to US$1.00, the noon buying rate in effect on June 28, 2019 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common shares.