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Gravity Reports Second Quarter of 2020 Results and Business Updates

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Seoul, Aug. 07, 2020 (GLOBE NEWSWIRE) -- 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 second quarter ended June 30, 2020, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

SECOND QUARTER 2020 HIGHLIGHTS

  • Total revenues were KRW 88,458 million (US$ 73,684 thousand), representing a 20.7% increase from the first quarter ended March 31, 2020 (“QoQ”) and a 13.2% increase from the second quarter ended June 30, 2019 (“YoY”).

  • Operating profit was KRW 16,313 million (US$ 13,588 thousand), representing a 57.5% increase QoQ and a 25.5% increase YoY.

  • Profit before income tax expenses was KRW 16,335million (US$ 13,606 thousand), representing a 45.2% increase QoQ and a 16.4% increase YoY.

  • Net profit attributable to parent company was KRW 13,095 million (US$ 10,907 thousand), representing a 41.4% increase QoQ and a 20.6% increase YoY.

REVIEW OF SECOND QUARTER 2020 FINANCIAL RESULTS

Revenues

Subscription revenues for the second quarter of 2020 were KRW 24,448 million (US$ 20,365 thousand), representing a 147.1% increase QoQ from KRW 9,893 million and a 262.4% increase YoY from KRW 6,746 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Thailand that was re-launched on May 28, 2020 and Ragnarok H5 in Indonesia that was launched on March 31, 2020. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and Taiwan and Ragnarok H5 in Indonesia.

Royalty and license fee revenues for the second quarter of 2020 were KRW 4,459 million (US$ 3,714 thousand), representing 25.9% increase QoQ from KRW 3,543 million and a 57.5% increase YoY from KRW 2,832 million. The increase QoQ was primarily due to increased revenue from collaboration event with Garena’s Free Fire items based on Ragnarok Online IP. Such increase was partially offset by decreased revenue from Ragnarok Online in Japan. The increase YoY resulted mainly from increased revenue from collaboration event with Garena’s Free Fire items based on Ragnarok Online IP.

Mobile game revenues were KRW 54,249 million (US$ 45,189 thousand) for the second quarter of 2020, representing a 3.1% decrease QoQ from KRW 55,982 million and a 16.6% decrease YoY from KRW 65,013 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok M: Eternal Love in Taiwan and Japan, and Ragnarok Tactics in Taiwan. Such decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Southeast Asia, Ragnarok H5 in Indonesia, and Ragnarok Tactics in Korea. The decrease YoY was primarily due to revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America and Oceania. This decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Taiwan and Europe, Ragnarok Tactics in Korea and Taiwan, and Ragnarok H5 in Indonesia.

Other revenues were KRW 5,302 million (US$ 4,416 thousand) for the second quarter of 2020, representing 38.0% increase QoQ from KRW 3,842 million and a 49.9% increase YoY from KRW 3,536 million

Cost of Revenues

Cost of revenue was KRW 51,098 million (US$ 42,564 thousand) for the second quarter of 2020, representing a 4.6% increase QoQ from KRW 48,874 million and a 10.1% decrease YoY from KRW 56,858 million. The increase QoQ was mainly due to increased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania, Ragnarok H5 in Indonesia, and Ragnarok Tactics in Korea. The decrease YoY was mostly from decreased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania.

Operating Expenses

Operating expenses were KRW 21,047 million (US$ 17,532 thousand) for the second quarter of 2020, representing a 50.0% increase QoQ from KRW 14,030 million and a 154.5% increase YoY from KRW 8,271 million. The increase QoQ was mainly attributable to increased advertising expenses for Ragnarok Origin in Korea, Ragnarok Online in Thailand, Sacred Blade in Japan, Ragnarok H5 in Indonesia, and commission paid for payment gate way fees related to Ragnarok Online in Thailand. The increase YoY was mostly resulted from increased advertising expenses for Ragnarok Origin and Ragnarok Tactics in Korea, Ragnarok Online in Thailand, Sacred Blade in Japan, Ragnarok H5 in Indonesia, commission paid for payment gate way fees related to Ragnarok Online in Thailand, salaries and research and development expenses.

Profit before income tax expenses

Profit before income tax expenses was KRW 16,335 million (US$ 13,606 thousand) for the second quarter of 2020 compared with profit before income tax expense of KRW 11,250 million for the first quarter of 2020 and profit before income tax expenses of KRW 14,037 million for the second quarter of 2019.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 13,095 million (US$ 10,907 thousand) for the second quarter of 2020 compared with net profit attributable to parent company of KRW 9,263 million for the first quarter of 2020 and a net profit attributable to parent company of KRW 10,861 million for the second quarter of 2019.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 131,566 million (US$ 109,593 thousand) as of June 30, 2020.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,200.50 to US$ 1.00, the noon buying rate in effect on June 30, 2020 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online IP-based Games

  • Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin was launched in Korea on July 7, 2020 and ranked as the fourth in top grossing of Google Play games and the fourth in top grossing of Apple’s App Store games after its launching. Gravity signed a publishing contract with GungHo Online Entertainment, Inc. for Japan service. The game is being prepared to launch in Japan.

  • Ragnarok X: Next Generation, a MMORPG mobile game

Gravity signed a joint publishing contract with ByteDance Ltd., a multinational content platform company, for Ragnarok X: Next Generation in Taiwan, Hong Kong, Macau, and Southeast Asia. The game is expected to be launched in Taiwan, Hong Kong and Macau in the second half of 2020.

  • Ragnarok Tactics, a SRPG mobile game

Ragnarok Tactics was launched in global market on June 18, 2020.

  • Other Ragnarok Online IP-based games

Action RO2: Spear of Odin, a 3D Action MORPG mobile game, is expected to be launched in Indonesia, Malaysia, Philippines, Singapore and Oceania in 2020. The game was developed by NeoCyon, Inc., our subsidiary in Korea.

Other IP games

Tactical Warfare, a First-Person Shooter (FPS) game, has started pre-registration and will be launched in North, Central and South America in the third quarter of 2020. The game is published by Gravity Interactive, Inc., a subsidiary in the United States.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of second quarter in 2020 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 93 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, 2019 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

# # #


GRAVITY Co., Ltd.
Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

As of

31-Dec-19

30-Jun-20

KRW

US$

KRW

US$

(audited)

(unaudited)

(unaudited)

(unaudited)

Assets

Current assets:

Cash and cash equivalents

79,428

66,162

94,066

78,356

Short-term financial instruments

39,500

32,903

37,500

31,237

Accounts receivable, net

32,253

26,866

48,910

40,741

Other receivables, net

56

47

265

221

Prepaid expenses

1,962

1,634

2,892

2,409

Other current assets

2,664

2,219

2,558

2,131

Total current assets

155,863

129,831

186,191

155,095

Property and equipment, net

6,663

5,550

7,893

6,575

Intangible assets

1,717

1,430

1,899

1,582

Deferred tax assets

7,667

6,387

10,246

8,535

Other non-current financial assets

1,770

1,474

1,785

1,487

Other non-current assets

1,745

1,454

2,050

1,707

Total assets

175,425

146,126

210,064

174,981

Liabilities and Equity

Current liabilities:

Accounts payable

37,496

31,234

43,914

36,580

Deferred revenue

10,748

8,953

12,834

10,691

Withholdings

1,764

1,469

2,366

1,971

Accrued expense

1,175

979

1,185

987

Income tax payable

2,618

2,181

2,577

2,147

Other current liabilities

1,986

1,654

2,788

2,322

Total current liabilities

55,787

46,470

65,664

54,698

Long-term deferred revenue

98

82

343

286

Other non-current liabilities

3,774

3,143

4,058

3,380

Total liabilities

59,659

49,695

70,065

58,364

Share capital

3,474

2,894

3,474

2,894

Capital surplus

27,128

22,597

27,110

22,582

Other components of equity

274

228

1,875

1,562

Retained earnings

84,668

70,527

107,026

89,151

Equity attributable to owners of the Parent Company

115,544

96,246

139,485

116,189

Non-controlling interest

222

185

514

428

Total equity

115,766

96,431

139,999

116,617

Total liabilities and equity

175,425

146,126

210,064

174,981

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,200.50 to US$ 1.00, the noon buying rate in effect on June 30, 2020 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-20

30-Jun-19

30-Jun-20

30-Jun-19

30-Jun-20

(KRW)

(KRW)

(KRW)

(US$)

(KRW)

(KRW)

(US$)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Revenues:

Online games-subscription revenue

9,893

6,746

24,448

20,365

13,002

34,341

28,606

Online games-royalties and license fees

3,543

2,832

4,459

3,714

6,552

8,002

6,666

Mobile games

55,982

65,013

54,249

45,189

185,103

110,231

91,821

Other revenue

3,842

3,536

5,302

4,416

7,093

9,144

7,616

Total net revenue

73,260

78,127

88,458

73,684

211,750

161,718

134,709

Cost of revenues

48,874

56,858

51,098

42,564

158,095

99,972

83,275

Gross profit

24,386

21,269

37,360

31,120

53,655

61,746

51,434

Operating expenses:

Selling, general and administrative expenses

11,007

5,733

17,643

14,696

12,398

28,650

23,865

Research and development

2,872

2,432

3,254

2,711

4,309

6,126

5,103

Others, net

151

106

150

125

310

301

251

Total operating expenses

14,030

8,271

21,047

17,532

17,017

35,077

29,219

Operating profit

10,356

12,998

16,313

13,588

36,638

26,669

22,215

Finance income(costs):

Finance income

1,551

1,141

627

522

2,203

2,178

1,814

Finance costs

(657

)

(102

)

(605

)

(504

)

(415

)

(1,262

)

(1,051

)

Profit before income tax

11,250

14,037

16,335

13,606

38,426

27,585

22,978

Income tax expenses

2,004

3,208

3,293

2,743

7,835

5,297

4,412

Profit for the year

9,246

10,829

13,042

10,863

30,591

22,288

18,566

Profit attributable to:

Non-controlling interest

(17

)

(32

)

(53

)

(44

)

(30

)

(70

)

(58

)

Owners of Parent company

9,263

10,861

13,095

10,907

30,621

22,358

18,624

Earning per share

- Basic and diluted

1,333

1,563

1,884

1.6

4,407

3,217

2.7

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

1,333

1,563

1,884

1.6

4,407

3,217

2.7

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,200.50 to US$1.00, the noon buying rate in effect on June 30, 2020 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.