GRAVITY REPORTS FIRST QUARTER OF 2020 RESULTS AND BUSINESS UPDATES

5/29, 12:10 PM (Source: GlobeNewswire)

Seoul, May 29, 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 first quarter ended March 31, 2020, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

FIRST QUARTER 2020 HIGHLIGHTS

  • Total revenues were KRW 73,260 million (US$ 60,102 thousand), representing a 2.2% increase from the fourth quarter ended December 31, 2019 (“QoQ”) and a 45.2% decrease from the first quarter ended March 31, 2019 (“YoY”).
  • Operating profit was KRW 10,356 million (US$ 8,496 thousand), representing a 475.7% increase QoQ and a 56.2% decrease YoY.
  • Profit before income tax expenses was KRW 11,250 million (US$ 9,229 thousand), representing a 595.7% increase QoQ and a 53.9 decrease YoY.
  • Net profit attributable to parent company was KRW 9,263 million (US$ 7,599 thousand), representing a 2,957.1% increase QoQ and a 53.1% decrease YoY.

REVIEW OF FIRST QUARTER 2020 FINANCIAL RESULTS

Revenues

Subscription revenues for the first quarter of 2020 were KRW 9,893 million (US$ 8,116 thousand), representing a 37.7 % increase QoQ from KRW 7,185 million and a 58.1% increase YoY from KRW 6,256 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online and Ragnarok Prequel in Taiwan. The increase YoY was largely due to increased revenues from Ragnarok Online and Ragnarok Prequel II in Taiwan.

Royalty and license fee revenues for the first quarter of 2020 were KRW 3,543 million (US$ 2,907 thousand), representing a 45.4% increase QoQ from KRW 2,436 million and a 4.8% decrease YoY from KRW 3,720 million. The increase QoQ was primarily due to increased revenue from Ragnarok Online in Japan. The decrease YoY resulted mainly from decreased revenue from Ragnarok Online in Japan.

Mobile game revenues were KRW 55,982 million (US$ 45,928 thousand) for the first quarter of 2020, representing a 1.3% decrease QoQ from KRW 56,714 million and a 53.4% decrease YoY from KRW 120,090 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok M: Eternal Love in Southeast Asia and Europe, and Ragnarok H5 in Korea. Such decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Taiwan and Ragnarok Tactics in Taiwan and Southeast Asia that was launched on February 25, 2020 and January 2, 2020, respectively. The decrease YoY was primarily due to revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America and Oceania and Korea. This decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Japan, Taiwan and Europe, Ragnarok Tactics in Taiwan, Southeast Asia and Thailand.

Other revenues were KRW 3,842 million (US$ 3,151 thousand) for the first quarter of 2020, representing 27.7% decrease QoQ from KRW 5,316 million and an 8.0% increase YoY from KRW 3,557 million

Cost of Revenue

Cost of revenue was KRW 48,874 million (US$ 40,096 thousand) for the first quarter of 2020, representing a 5.3% decrease QoQ from KRW 51,635 million and a 51.7% decrease YoY from KRW 101,237 million. The decrease QoQ was mainly due to decreased outsourcing fee, commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia and salaries. 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 14,030 million (US$ 11,510 thousand) for the first quarter of 2020, representing a 23.0% decrease QoQ from KRW 18,217 million and a 60.4% increase YoY from KRW 8,746 million. The decrease QoQ was mainly attributable to decreased advertising expenses related to G-star 2019, The Color of Dream Fantasy Latale, Ragnarok M: Eternal Love, Ragnarok H5 and Ragnarok Click H5. The increase YoY was mostly resulted from increased advertising expenses for Ragnarok Tactics in Taiwan, Southeast Asia and Korea, commission paid, and research and development expenses.

Profit before income tax expenses

Profit before income tax expenses was KRW 11,250 million (US$ 9,229 thousand) for the first quarter of 2020 compared with profit before income tax expense of KRW 1,617 million for the fourth quarter of 2019 and profit before income tax expenses of KRW 24,389 million for the first quarter of 2019.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 9,263 million (US$ 7,599 thousand) for the first quarter of 2020 compared with net profit attributable to parent company of KRW 303 million for the fourth quarter of 2019 and a net profit attributable to parent company of KRW 19,760 million for the first quarter of 2019.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 123,002 million (US$ 100,911 thousand) as of March 31, 2020.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,218.92 to US$ 1.00, the noon buying rate in effect on March 31, 2020 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online

Gravity Game Tech, a subsidiary in Thailand, opened Ragnarok online in Thailand on May 28, 2020 and the company announced 4th job change for Ragnarok online in Korea on May 27, 2020.

Ragnarok Online IP-based Games

  • Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin is scheduled to be launched in Korea in July 2020. The first closed beta test (CBT) has completed on May 13 with users’ positive feedbacks. The company is preparing its second CBT before the official launch.

  • Ragnarok X: Next Generation, a MMORPG mobile game

Ragnarok X: Next Generation is being prepared for the service in Taiwan, Hong Kong, and Macau in the second half of 2020.

  • Ragnarok Tactics, a SRPG mobile game

Ragnarok Tactics was launched in Korea on March 31, 2020. The game is scheduled to be launched in global market for June 2020 target.

  • Other Ragnarok Online IP-based games

Ragnarok H5 (locally named Ragnarok Frontier), an idle RPG game, was launched in Indonesia on March 31, 2020.

Other IP games

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

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of first 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, 2020 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

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GRAVITY Co., Ltd.
Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

     As of  
    31-Dec-19     31-Mar-20  
    KRW     US$     KRW     US$  
    (audited)     (unaudited)     (unaudited)     (unaudited)  
Assets                                
Current assets:                                
Cash and cash equivalents     79,428       65,163       82,502       67,685  
Short-term financial instruments     39,500       32,406       40,500       33,226  
Accounts receivable, net     32,253       26,460       40,748       33,430  
Other receivables, net     56       46       413       339  
Prepaid expenses     1,962       1,610       2,150       1,764  
Other current assets     2,664       2,186       3,869       3,173  
Total current assets     155,863       127,871       170,182       139,617  
Property and equipment, net     6,663       5,466       8,576       7,036  
Intangible assets     1,717       1,409       1,571       1,289  
Deferred tax assets     7,667       6,290       9,042       7,418  
Other non-current financial assets     1,770       1,452       1,771       1,453  
Other non-current assets     1,745       1,430       1,788       1,466  
Total assets     175,425       143,918       192,930       158,279  
Liabilities and Equity                                
Current liabilities:                                
Accounts payable     37,496       30,762       42,029       34,481  
Deferred revenue     10,748       8,818       10,389       8,523  
Withholdings     1,764       1,447       2,315       1,899  
Accrued expense     1,175       964       1,186       973  
Income tax payable     2,618       2,148       3,100       2,543  
Other current liabilities     1,986       1,629       2,781       2,282  
Total current liabilities     55,787       45,768       61,800       50,701  
Long-term deferred revenue     98       80       98       80  
Other non-current liabilities     3,774       3,096       4,430       3,634  
Total liabilities     59,659       48,944       66,328       54,415  
Share capital     3,474       2,850       3,474       2,850  
Capital surplus     27,128       22,256       27,128       22,256  
Other components of equity     274       225       1,577       1,294  
Retained earnings     84,668       69,461       93,931       77,060  
Equity attributable to owners of the Parent Company     115,544       94,792       126,110       103,460  
Non-controlling interest     222       182       492       404  
Total equity     115,766       94,974       126,602       103,864  
Total liabilities and equity     175,425       143,918       192,930       158,279  

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,218.92 to US$ 1.00, the noon buying rate in effect on March 31, 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  
    31-Dec-19     31-Mar-19     31-Mar-20  
    (KRW)     (US$)     (KRW)     (US$)     (KRW)     (US$)  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Revenues:                                                
Online games-subscription revenue     7,185       5,895       6,256       5,132       9,893       8,116  
Online games-royalties and license fees     2,436       1,998       3,720       3,052       3,543       2,907  
Mobile games     56,714       46,528       120,090       98,522       55,982       45,928  
Other revenue     5,316       4,361       3,557       2,918       3,842       3,151  
Total net revenue     71,651       58,782       133,623       109,624       73,260       60,102  
Cost of revenue     51,635       42,361       101,237       83,055       48,874       40,096  
Gross profit     20,016       16,421       32,386       26,569       24,386       20,006  
Operating expenses:                                                
Selling, general and administrative     15,491       12,709       6,665       5,468       11,007       9,030  
Research and development     2,845       2,334       1,877       1,540       2,872       2,356  
Others, net     (119 )     (98 )     204       167       151       124  
Total operating expenses     18,217       14,945       8,746       7,175       14,030       11,510  
Operating profit     1,799       1,476       23,640       19,394       10,356       8,496  
Finance income(costs):                                                
Finance income     631       518       1,062       871       1,551       1,272  
Finance costs     (813 )     (667 )     (313 )     (256 )     (657 )     (539 )
Profit before income tax     1,617       1,327       24,389       20,009       11,250       9,229  
Income tax expenses     1,334       1,095       4,627       3,796       2,004       1,644  
Profit for the period     283       232       19,762       16,213       9,246       7,585  
Profit attributable to:                                                
Non-controlling interest     (20 )     (17 )     2       2       (17 )     (14 )
Owners of Parent company     303       249       19,760       16,211       9,263       7,599  
Earning per share                                                
- Basic and diluted     44       0.04       2,844       2.33       1,333       1.09  
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     44       0.04       2,844       2.33       1,333       1.09  

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,218.92 to US$1.00, the noon buying rate in effect on March 31, 2020 as quoted by the Federal Reserve Bank of New York.

(1) Each ADS represents one common share.

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