Gravity Reports Third Quarter of 2023 Results and Business Updates

Seoul, Korea, Nov. 13, 2023 (GLOBE NEWSWIRE) -- Seoul, South Korea – November 13, 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 third quarter ended September 30, 2023, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

THIRD QUARTER 2023 HIGHLIGHTS

• Total revenues were KRW 176,145 million (US$ 130,685 thousand), representing a 26.3% decrease from the second quarter ended June 30, 2023 (“QoQ”) and a 72.1% increase from the third quarter ended September 30, 2022 (“YoY”).

• Operating profit was KRW 37,917 million (US$ 28,131 thousand), representing a 28.1% decrease QoQ and a 78.3% increase YoY.

• Profit before income tax expenses was KRW 41,208 million (US$ 30,572 thousand), representing a 25.2% decrease QoQ and a 68.8% increase YoY.

• Net profit attributable to parent company was KRW 28,961 million (US$ 21,486 thousand), representing a 35.7% decrease QoQ and an 80.2% increase YoY.

REVIEW OF THIRD QUARTER 2023 FINANCIAL RESULTS

Revenues

Online game revenues for the third quarter of 2023 were KRW 17,316 million (US$ 12,847 thousand), representing an 1.7% increase QoQ from KRW 17,025 million and a 10.1% decrease YoY from KRW 19,271 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Taiwan. Such increase was partially offset by decreased revenue from Ragnarok Online in Japan. The decrease YoY was largely due to decreased revenues from Ragnarok Online in Taiwan, Korea, Philippines, Singapore and Malaysia.

Mobile game revenues were KRW 155,467 million (US$ 115,344 thousand) for the third quarter of 2023, representing a 28.9% decrease QoQ from KRW 218,687 million and a 95.7% increase YoY from KRW 79,443 million. The decrease QoQ was resulted by decreased revenues from Ragnarok Origin in Southeast Asia, Taiwan, Hong Kong and Macau and Ragnarok X: Next Generation in Korea. The increase YoY was mainly due to initial revenue from Ragnarok Origin in Southeast Asia launched in April 6,2023 and Ragnarok X: Next Generation in Korea launched in January 5, 2023. This increase was partially offset by decreased revenues from Ragnarok X: Next Generation in Southeast Asia, Ragnarok Monster's Arena and Ragnarok M: Eternal Love in Southeast Asia.

Other revenues were KRW 3,362 million (US$ 2,494 thousand) for the third quarter of 2023, representing a 5.7% increase QoQ from KRW 3,182 million and an 8.2% decrease YoY from KRW 3,663 million.

Cost of Revenue

Cost of revenue was KRW 117,834 million (US$ 87,423 thousand) for the third quarter of 2023, representing a 30.0% decrease QoQ from KRW 168,309 million and a 97.0% increase YoY from KRW 59,829 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok Origin in Southeast Asia, Taiwan, Hong Kong and Macau and Ragnarok X: Next Generation in Korea. The increase YoY was primarily due to increased commission paid for mobile game services related to Ragnarok Origin in Southeast Asia launched in April 6, 2023 and Ragnarok X: Next Generation in Korea launched in January 5, 2023.

Operating expenses

Operating expenses were KRW 20,394 million (US$ 15,131 thousand) for the third quarter of 2023, representing a 14.0% increase QoQ from KRW 17,884 million and a 4.2% decrease YoY from KRW 21,277 million. The increase QoQ was mainly due to increased commission paid for payment gateway fees related to Ragnarok Online in Taiwan, increased R&D expense and increased advertising expenses for White Chord launched in Japan on August 29, 2023, Ragnarok Landverse launched in Southeast Asia (Thailand and Indonesia excluded), Middle East, India, Africa and Oceania on September 20, 2023 and Ragnarok 20 Heroes launched in Korea on October 12, 2023. The decrease YoY was mainly due to decreased advertising expenses for Ragnarok Monster's Arena in Thailand and Korea, Ragnarok Origin in North America and Korea and Ragnarok Online in Korea.

Profit Before Income Tax Expenses

Profit before income tax expenses was KRW 41,208 million (US$ 30,572 thousand) for the third quarter of 2023 compared with profit before income tax expense of KRW 55,097 million for the second quarter of 2023 and profit before income tax expenses of KRW 24,410 million for the third quarter of 2022.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 28,961 million (US$ 21,486 thousand) for the third quarter of 2023 compared with net profit attributable to parent company of KRW 45,016 million for the second quarter of 2023 and a net profit attributable to parent company of KRW 16,076 million for the third quarter of 2022.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 443,835 million (US$ 329,289 thousand) as of September 30, 2023.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,347.86 to US$ 1.00, the noon buying rate in effect on September 30, 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 officially received a foreign version number from Chinese government on August 29, 2023, and is preparing to be launched in China in the first quarter of 2024. Also, the global version of this game is being prepared to be launched in Central, South America, etc. in the first quarter of 2024

• Ragnarok X: Next Generation, an MMORPG mobile and PC game

Ragnarok X: Next Generation is preparing to be launched in China and the publisher of the game is Beihai Leyou Technology Co. Ltd, an affiliate of ZLONGAME.

• Ragnarok Begins, an Action Side-scrolling MMORPG mobile and PC game

Ragnarok Begins started its second CBT on November 1, 2023 and is preparing to be launched in South Korea in December 2023.

• Ragnarok V: Returns, a 3D MMORPG mobile and PC game

Ragnarok V: Returns will open its second CBT in South Korea and the first CBT in Thailand in the first half of 2024.

• Ragnarok 20 Heroes, an Action RPG mobile game

Ragnarok 20 Heroes launched in Korea on October 12, 2023.

Ragnarok Online IP-based Blockchain Games

• Ragnarok Landverse, an MMORPG blockchain PC game

Ragnarok Landverse launched in Southeast Asia (Thailand and Indonesia excluded), Middle East, India, Africa and Oceania on September 20, 2023.

• Ragnarok Poring Merge NFT, a Time Effective RPG blockchain mobile game

Ragnarok Poring Merge NFT is being prepared to be launched in Global in the first quarter of 2024.

Other IP-based games

• Wetory, a 3D Action Adventure Rogue-Like PC and console game

Wetory was released in global on October 26, 2023. The game was developed by PepperStons, a Korean game developer. and published by Gravity.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the third 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, 2023 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
IR Unit
Gravity Co., Ltd.
Email: ir@gravity.co.kr
Telephone: +82-2-2132-7800

Ms. Yiseo Shin 
IR Assistant Manager
Gravity Co., Ltd.
Email: ir@gravity.co.kr 
Telephone: +82-2-2132-7801

GRAVITY Co., Ltd.
Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

		As of
		31-Dec-22								30-Sep-23
		KRW				US$				KRW				US$
		(audited)				(unaudited)				(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			169,877				126,035				207,220				153,740
Short-term financial instruments			167,000				123,900				236,615				175,549
Accounts receivable, net			77,257				57,318				81,046				60,129
Other receivables, net			140				104				232				172
Prepaid expenses			3,332				2,472				2,990				2,218
Other current financial assets			3,370				2,500				4,125				3,060
Other current assets			791				587				5,749				4,265
Total current assets			421,767				312,916				537,977				399,133
Property and equipment, net			8,140				6,039				10,808				8,019
Intangible assets, net			3,869				2,870				5,029				3,730
Deferred tax assets			5,660				4,199				5,574				4,135
Other non-current financial assets			2,176				1,614				1,741				1,292
Other non-current assets			2,482				1,841				6,204				4,603
Total assets			444,094				329,479				567,333				420,912
Liabilities and Equity
Current liabilities:
Accounts payable			73,549				54,567				76,644				56,863
Deferred revenue			18,543				13,757				15,976				11,853
Withholdings			3,201				2,375				3,731				2,768
Accrued expense			2,041				1,514				1,630				1,209
Income tax payable			5,469				4,058				14,320				10,624
Other current liabilities			2,907				2,157				4,197				3,114
Total current liabilities			105,710				78,428				116,498				86,431
Long-term account payables			374				277				74				55
Long-term deferred revenue			30				22				381				283
Other non-current liabilities			4,968				3,686				3,994				2,962
Deferred tax liabilities			2,832				2,101				2,833				2,102
Total liabilities			113,914				84,514				123,780				91,833
Share capital			3,474				2,577				3,474				2,577
Capital surplus			27,098				20,104				27,098				20,104
Other components of equity			2,475				1,837				5,362				3,979
Retained earnings			296,480				219,963				406,923				301,903
Equity attributable to owners of the Parent Company			329,527				244,481				442,857				328,563
Non-controlling interest			653				484				696				516
Total equity			330,180				244,965				443,553				329,079
Total liabilities and equity			444,094				329,479				567,333				420,912

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,347.86 to US$ 1.00, the noon buying rate in effect on September 30, 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												Nine months ended
		30-Jun-23			30-Sep-22			30-Sep-23						30-Sep-22			30-Sep-23
		(KRW)			(KRW)			(KRW)			(US$)			(KRW)			(KRW)			(US$)
		(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues:
Online games			17,025			19,271			17,316			12,847			65,545			57,037			42,317
Mobile games			218,687			79,443			155,467			115,344			210,726			513,148			380,714
Other revenue			3,182			3,663			3,362			2,494			11,232			9,801			7,270
Total net revenue			238,894			102,377			176,145			130,685			287,503			579,986			430,301
Cost of revenue			168,309			59,829			117,834			87,423			155,658			391,628			290,555
Gross profit			70,585			42,548			58,311			43,262			131,845			188,358			139,746
Operating expenses:
Selling, general and administrative expenses			15,029			17,624			17,190			12,754			56,473			45,490			33,750
Research and development			2,852			3,745			3,964			2,941			9,933			9,738			7,225
Others, net			3			(92)			(760)			(564)			(263)			(806)			(598)
Total operating expenses			17,884			21,277			20,394			15,131			66,143			54,422			40,377
Operating profit			52,701			21,271			37,917			28,131			65,702			133,936			99,369
Finance income(costs):
Finance income			4,213			5,343			7,059			5,237			11,051			16,733			12,415
Finance costs			(1,817)			(2,204)			(3,768)			(2,796)			(5,249)			(8,138)			(6,038)
Profit before income tax			55,097			24,410			41,208			30,572			71,504			142,531			105,746
Income tax expense			10,070			8,312			12,223			9,068			21,663			32,092			23,809
Profit for the year			45,027			16,098			28,985			21,504			49,841			110,439			81,937
Profit attributable to:
Non-controlling interest			11			22			24			18			(131)			(4)			(3)
Owners of Parent company			45,016			16,076			28,961			21,486			49,972			110,443			81,940
Earnings per share
- Basic and diluted			6,478			2,313			4,168			3.09			7,191			15,894			11.79
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
Earnings per ADS
- Basic and diluted			6,478			2,313			4,168			3.09			7,191			15,894			11.79

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,347.86 to US$1.00, the noon buying rate in effect on September 30, 2023 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.