U.S. Markets closed

GRAVITY REPORTS THIRD QUARTER OF 2020 RESULTS AND BUSINESS UPDATES

  • Oops!
    Something went wrong.
    Please try again later.
·12 min read
  • Oops!
    Something went wrong.
    Please try again later.

Seoul, South Korea, Nov. 13, 2020 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (Nasdaq GM: 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 third quarter ended September 30, 2020, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

THIRD QUARTER 2020 HIGHLIGHTS

  • Total revenues were KRW 131,795 million (US$ 113,034 thousand), representing a 49.0% increase from the second quarter ended June 30, 2020 (“QoQ”) and a 69.9% increase from the third quarter ended September 30, 2019 (“YoY”).

  • Operating profit was KRW 34,356 million (US$ 29,465 thousand), representing a 110.6% increase QoQ and a 236.0% increase YoY.

  • Profit before income tax expenses was KRW 33,675 million (US$ 28,881 thousand), representing a 106.2% increase QoQ and a 200.3% increase YoY.

  • Net profit attributable to parent company was KRW 25,281 million (US$ 21,682 thousand), representing a 93.1% increase QoQ and a 182.4% increase YoY.

REVIEW OF THIRD QUARTER 2020 FINANCIAL RESULTS

Revenues

Subscription revenues for the third quarter of 2020 were KRW 29,159 million (US$ 25,008 thousand), representing a 19.3% increase QoQ from KRW 24,448 million and a 176.0% increase YoY from KRW 10,564 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Thailand that was re-launched on May 28, 2020 and Brazil. Such increase was partially offset by decreased revenues from Ragnarok H5 in Indonesia and Ragnarok Online in Taiwan. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and United States.

Royalty and license fee revenues for the third quarter of 2020 were KRW 2,674 million (US$ 2,293 thousand), representing a 40.0% decrease QoQ from KRW 4,459 million and a 3.5% increase YoY from KRW 2,583 million. The decrease QoQ was primarily due to temporarily generated revenue from collaboration event with Garena’s Free Fire items based on Ragnarok Online IP in previous quarter. The increase YoY resulted mainly from increased revenue from Ragnarok Online in Japan. Such increase was partially offset by decreased revenue from Ragnarok Online in Thailand.

Mobile game revenues were KRW 95,531 million (US$ 81,933 thousand) for the third quarter of 2020, representing a 76.1% increase QoQ from KRW 54,249 million and a 59.0% increase YoY from KRW 60,086 million. The increase QoQ resulted primarily from increased revenues from Ragnarok Origin in Korea that was launched on July 7, 2020 and Ragnarok M: Eternal Love in Southeast Asia. Such increase was partially offset by decreased revenues from Ragnarok Tactics in Korea and Taiwan, Ragnarok H5 in Indonesia, and Ragnarok M: Eternal Love in Korea and Taiwan. The increase YoY was primarily due to revenues from Ragnarok Origin in Korea that was launched on July 7, 2020, Ragnarok M: Eternal Love in Taiwan. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love in Japan, Southeast Asia, North America, South America and Oceania, and Korea.

Other revenues were KRW 4,431 million (US$ 3,800 thousand) for the third quarter of 2020, representing a 16.4% decrease QoQ from KRW 5,302 million and a 2.3% increase YoY from KRW 4,333 million

Cost of Revenues

Cost of revenue was KRW 74,107 million (US$ 63,558 thousand) for the third quarter of 2020, representing a 45.0% increase QoQ from KRW 51,098 million and a 32.2% increase YoY from KRW 56,058 million. The increase QoQ was mainly due to increased commission paid for mobile game services related to Ragnarok Origin in Korea that was launched on July 7, 2020. The increase YoY was mostly from increased commission paid for mobile game services related to Ragnarok Origin in Korea that was launched on July 7, 2020.

Operating Expenses

Operating expenses were KRW 23,332 million (US$ 20,011 thousand) for the third quarter of 2020, representing a 10.9% increase QoQ from KRW 21,047 million and a 106.8% increase YoY from KRW 11,282 million. The increase QoQ was mainly attributable to increased research and development expenses 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 in Korea, commission paid for payment gate way fees related to Ragnarok Online in Thailand, research and development expenses, and salaries.

Profit before income tax expenses

Profit before income tax expenses was KRW 33,675 million (US$ 28,881 thousand) for the third quarter of 2020 compared with profit before income tax expense of KRW 16,335 million for the second quarter of 2020 and profit before income tax expenses of KRW 11,213 million for the third quarter of 2019.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 25,281 million (US$ 21,682 thousand) for the third quarter of 2020 compared with net profit attributable to parent company of KRW 13,095 million for the second quarter of 2020 and a net profit attributable to parent company of KRW 8,952 million for the third quarter of 2019.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 171,800 million (US$ 147,345 thousand) as of September 30, 2020.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,165.97 to US$ 1.00, the noon buying rate in effect on September 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 is being prepared for launch in Japan in 1st half of 2021.

  • Ragnarok X: Next Generation, a MMORPG mobile game

Ragnarok X: Next Generation was launched in Taiwan, Hong Kong and Macau on October 15, 2020 and is being prepared for launch in Southeast Asia in 1st half of 2021.

  • The Labyrinth of Ragnarok, an Idle MMORPG mobile game

The Labyrinth of Ragnarok was launched in Philippines, Singapore and Malaysia on October 14, 2020. This game is being prepared for launch in Thailand and Indonesia in December 2020.

  • Other Ragnarok Online IP-based games

The Lost Memories: a Song of Valkyrie, a Story RPG mobile game, is expected to be launched in Thailand in 1st half of 2021. The game was developed by NeoCyon, Inc., our subsidiary in Korea.

Action RO2: Spear of Odin, a 3D Action MORPG mobile game, is expected to be launched in Indonesia, Malaysia, Philippines, Singapore and Australia in 1st half of 2021. 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 fourth quarter of 2020. The game is published by Gravity Interactive, Inc., a subsidiary in the United States.

Tera Classic, a MMORPG mobile game, has started pre-registration and will be launched in Japan in January 2021. The game is published by Gravity Game Arise, Inc., a subsidiary in Japan.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of third 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. Hye Ji An
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-Sep-20

KRW

US$

KRW

US$

(audited)

(unaudited)

(unaudited)

(unaudited)

Assets

Current assets:

Cash and cash equivalents

79,428

68,122

116,800

100,174

Short-term financial instruments

39,500

33,877

55,000

47,171

Accounts receivable, net

32,253

27,662

55,570

47,660

Other receivables, net

56

48

0

0

Prepaid expenses

1,962

1,683

2,782

2,386

Other current assets

2,664

2,285

1,137

975

Total current assets

155,863

133,677

231,289

198,366

Property and equipment, net

6,663

5,715

7,201

6,176

Intangible assets

1,717

1,473

1,733

1,486

Deferred tax assets

7,667

6,576

7,885

6,763

Other non-current financial assets

1,770

1,518

1,777

1,524

Other non-current assets

1,745

1,494

5,255

4,508

Total assets

175,425

150,453

255,140

218,823

Liabilities and Equity

Current liabilities:

Accounts payable

37,496

32,159

56,668

48,602

Deferred revenue

10,748

9,218

15,194

13,031

Withholdings

1,764

1,513

3,463

2,970

Accrued expense

1,175

1,008

1,182

1,014

Income tax payable

2,618

2,245

3,325

2,852

Other current liabilities

1,986

1,703

2,629

2,255

Total current liabilities

55,787

47,846

82,461

70,724

Long-term deferred revenue

98

84

5,037

4,320

Other non-current liabilities

3,774

3,237

3,368

2,889

Total liabilities

59,659

51,167

90,866

77,933

Share capital

3,474

2,979

3,474

2,979

Capital surplus

27,128

23,266

27,110

23,251

Other components of equity

274

235

896

768

Retained earnings

84,668

72,616

132,307

113,474

Equity attributable to owners of the Parent Company

115,544

99,096

163,787

140,472

Non-controlling interest

222

190

487

418

Total equity

115,766

99,286

164,274

140,890

Total liabilities and equity

175,425

150,453

255,140

218,823

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,165.97 to US$ 1.00, the noon buying rate in effect on September 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

Nine months ended

30-Jun-20

30-Sep-19

30-Sep-20

30-Sep-19

30-Sep-20

(KRW)

(KRW)

(KRW)

(US$)

(KRW)

(KRW)

(US$)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Revenues:

Online games-subscription revenue

24,448

10,564

29,159

25,008

23,566

63,500

54,461

Online games-royalties and license fees

4,459

2,583

2,674

2,293

9,135

10,676

9,156

Mobile games

54,249

60,086

95,531

81,933

245,189

205,762

176,473

Other revenue

5,302

4,333

4,431

3,800

11,426

13,575

11,643

Total net revenue

88,458

77,566

131,795

113,034

289,316

293,513

251,733

Cost of revenues

51,098

56,058

74,107

63,558

214,153

174,079

149,300

Gross profit

37,360

21,508

57,688

49,476

75,163

119,434

102,433

Operating expenses:

Selling, general and administrative expenses

17,643

8,984

18,042

15,474

21,382

46,692

40,046

Research and development

3,254

2,349

4,550

3,902

6,658

10,676

9,156

Others, net

150

(51

)

740

635

259

1,041

893

Total operating expenses

21,047

11,282

23,332

20,011

28,299

58,409

50,095

Operating profit

16,313

10,226

34,356

29,465

46,864

61,025

52,338

Finance income(costs):

Finance income

627

1,353

822

705

3,556

3,000

2,573

Finance costs

(605

)

(366

)

(1,503

)

(1,289

)

(781

)

(2,765

)

(2,371

)

Profit before income tax

16,335

11,213

33,675

28,881

49,639

61,260

52,540

Income tax expenses

3,293

2,357

8,390

7,196

10,192

13,687

11,739

Profit for the year

13,042

8,856

25,285

21,685

39,447

47,573

40,801

Profit attributable to:

Non-controlling interest

(53

)

(96

)

4

3

(126

)

(66

)

(57

)

Owners of Parent company

13,095

8,952

25,281

21,682

39,573

47,639

40,858

Earning per share

- Basic and diluted

1,884

1,288

3,638

3.10

5,695

6,856

5.9

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

1,884

1,288

3,638

3.10

5,695

6,856

5.9

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,165.97 to US$1.00, the noon buying rate in effect on September 30, 2020 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.