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Gravity Reports First Quarter of 2019 Results and Business Updates

By GlobeNewswire,  May 13, 2019, 06:30:00 AM EDT


Seoul, May 13, 2019 (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, 2019, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

FIRST QUARTER 2019 HIGHLIGHTS

  • Gravity has announced that recorded the highest quarterly revenues and operating profit since it listed in NASDAQ in 2005.
  • Total revenues were KRW 133,623 million (US$ 117,595 thousand), representing a 18.0% increase from the fourth quarter ended December 31, 2018 ("QoQ") and a 101.5% increase from the first quarter ended March 31, 2018 ("YoY").
  • Operating profit was KRW 23,640 million (US$ 20,804 thousand), representing a 79.9% increase QoQ and a 390.5% increase YoY.
  • Profit before income tax expenses was KRW 24,389million (US$ 21,463 thousand), representing an 82.7% increase QoQ and a 376.6% increase YoY.
  • Net profit attributable to parent company was KRW 19,760 million (US$ 17,390 thousand), representing a 32.0% increase QoQ and a 456.8% increase YoY.

REVIEW OF FIRST QUARTER 2019 FINANCIAL RESULTS

Revenues

Subscription revenues for the first quarter of 2019 were KRW 6,256 million (US$ 5,506 thousand), representing a 28.2 % increase QoQ from KRW 4,880 million and a 29.7% decrease YoY from KRW 8,896 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Korea and Taiwan, and Ragnarok Prequel in Taiwan. The decrease YoY was largely due to decreased revenues from Ragnarok Prequel in Taiwan and Ragnarok Online in Korea and Taiwan.

Royalty and license fee revenues for the first quarter of 2019 were KRW 3,720 million (US$ 3,274 thousand), representing a 34.4% increase QoQ from KRW 2,768 million and a 19.5% decrease YoY from KRW 4,619 million. The increase QoQ was primarily due to increased revenue from Ragnarok Online in Japan. The decrease YoY resulted mainly from decreased revenues from Ragnarok Online in Japan, Thailand, and Brazil.

Mobile game and application revenues were KRW 121,147 million (US$ 106,615 thousand) for the first quarter of 2019, representing a 17.7% increase QoQ from KRW 102,916 million and a 135.7% increase YoY from KRW 51,396 million. The increase QoQ resulted primarily from increased revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America, and Oceania, which was launched on October 31, 2018 and on January 9, 2019, respectively. Such increase was partially offset by decreased revenues from Ragnarok M: Eternal Love in Taiwan and Korea. The increase YoY was primarily due to revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America, and Oceania. This increase was partially offset by decreased revenue from Ragnarok M: Eternal Love in Taiwan and Korea, 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 2,500 million (US$ 2,200 thousand) for the first quarter of 2019, representing 6.3% decrease QoQ from KRW 2,668 million and a 78.6% increase YoY from KRW 1,400 million

Cost of Revenue

Cost of revenue was KRW 101,237 million (US$ 89,094 thousand) for the first quarter of 2019, representing a 10.9% increase QoQ from KRW 91,304 million and a 121.1% increase YoY from KRW 45,784 million. The increase QoQ was mainly due to increased commission paid for mobile game services related to Ragnarok M: Eternal love in North, South America and Oceania. The increase YoY was mostly from increased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North, South America and Oceania.

Operating Expenses

Operating expenses were KRW 8,746 million (US$ 7,697 thousand) for the first quarter of 2019, representing a 0.5% decrease QoQ from KRW 8,787 million and a 44.3% decrease YoY from KRW 15,707 million. The decrease QoQ was mainly attributable to decreased salaries and research and development expenses. Such decrease was partially offset by increased advertising expenses. The decrease YoY was mostly resulted from decreased advertising expenses for Ragnarok M: Eternal Love and RO: Idle Poring in Korea.

Profit before income tax expenses

Profit before income tax expenses was KRW 24,389 million (US$ 21,463 thousand) for the first quarter of 2019 compared with profit before income tax expense of KRW 13,351 million for the fourth quarter of 2018 and profit before income tax expenses of KRW 5,117 million for the first quarter of 2018.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 19,760 million (US$ 17,390 thousand) for the first quarter of 2019 compared with net profit attributable to parent company of KRW 14,967 million for the fourth quarter of 2018 and a net profit attributable to parent company of KRW 3,549 million for the first quarter of 2018.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 127,330 million (US$ 112,057 thousand) as of March 31, 2019.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,136.30 to US$ 1.00, the noon buying rate in effect on March 29, 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

Gravity is preparing for the service in Japan during 2019 after the launch of Ragnarok M: Eternal Love in North America, South America, and Oceania on January 9, 2019. The game will be published by GungHo Online Entertainment Inc, ("Gungho") the licensee of Ragnarok Online in Japan and Gungho will make an official announcement of the game release in May.

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

Ragnarok web MMORPG is scheduled to be launched in Taiwan, Hong Kong, and Macau in the second quarter of 2019. Gravity will start pre-registration for Ragnarok Web 3D on May 23, 2019.

  • Other Ragnarok Online IP-based games

RO Click H5, a HTML 5 version of idle game, has launched in Korea on April 9, 2019. Gravity is collaborating with KT Corporation for co-marketing of 5G game. Gravity is also planning to launch this game globally in 2019.

A 3D Action MORPG mobile game, Ragnarok Spear of Odin, is expected to be launched in Taiwan, Hong Kong, and Macau in 2019. The game was developed by NeoCyon, our Korean based subsidiary and Gravity also is preparing the other games based on Ragnarok Online IP.

Other IP games

  • A MORPG mobile game, RO X Dawn Break, will be launched in Indonesia on May 14, 2019. The game is published by Gravity Game Link, a joint venture in Indonesia.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company's recent business updates, results of first 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. Sang Eun Sung

IR Manager

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-18     31-Jun-19  
    KRW     US$     KRW     US$  
    (audited)     (unaudited)     (unaudited)     (unaudited)  
Assets                                
Current assets:                                
Cash and cash equivalents     86,051       75,729       111,830       98,416  
Short-term financial instruments     9,500       8,361       15,500       13,641  
Accounts receivable, net     60,664       53,387       50,691       44,610  
Other receivables, net     255       224       250       220  
Prepaid expenses     2,516       2,214       1,846       1,625  
Other current assets     1,182       1,040       1,672       1,471  
Total current assets     160,168       140,955       181,789       159,983  
Property and equipment, net     1,498       1,319       5,148       4,531  
Intangible assets     1,163       1,024       1,022       899  
Deferred tax assets     7,413       6,524       6,978       6,141  
Other non-current financial assets     1,494       1,315       1,497       1,317  
Other non-current assets     1,438       1,265       1,597       1,406  
Total assets     173,174       152,402       198,031       174,277  
Liabilities and Equity                                
Current liabilities:                                
Accounts payable     71,928       63,300       75,127       66,115  
Deferred revenue     16,476       14,500       14,395       12,668  
Withholdings     2,019       1,777       2,178       1,917  
Accrued expense     1,031       907       1,037       913  
Income tax payable     1,944       1,711       2,640       2,324  
Other current liabilities     123       108       1,926       1,694  
Total current liabilities     93,521       82,303       97,303       85,631  
Long-term deferred revenue     3,598       3,167       2,647       2,330  
Other non-current liabilities     503       443       2,490       2,191  
Total liabilities     97,622       85,913       102,440       90,152  
Share capital     3,474       3,057       3,474       3,058  
Capital surplus     27,141       23,885       27,140       23,885  
Other components of equity     138       122       244       214  
Retained earnings (Accumulated deficit)     45,405       39,958       65,165       57,348  
Equity attributable to owners of the Parent Company     76,158       67,022       96,023       84,505  
Non-controlling interest     (606 )     (533 )     (432 )     (380 )
Total equity     75,552       66,489       95,591       84,125  
Total liabilities and equity     173,174       152,402       198,031       174,277  

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,136.30 to US$ 1.00, the noon buying rate in effect on March 29, 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  
    31-Dec-18     31-Mar-18     31-Mar-19  
    (KRW)     (US$)     (KRW)     (US$)     (KRW)     (US$)  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Revenues:                                                
Online games-subscription revenue     4,880       4,295       8,896       7,829       6,256       5,506  
Online games-royalties and license fees     2,768       2,436       4,619       4,065       3,720       3,274  
Mobile games and applications     102,916       90,571       51,396       45,231       121,147       106,615  
Character merchandising and other revenue     2,668       2,348       1,400       1,232       2,500       2,200  
Total net revenue     113,232       99,650       66,311       58,357       133,623       117,595  
Cost of revenue     91,304       80,352       45,784       40,292       101,237       89,094  
Gross profit     21,928       19,298       20,527       18,065       32,386       28,501  
Operating expenses:                                                
Selling, general and administrative     5,921       5,211       13,827       12,169       6,665       5,865  
Research and development     2,642       2,325       1,874       1,649       1,877       1,652  
Others, net     224       197       6       5       204       180  
Total operating expenses     8,787       7,733       15,707       13,823       8,746       7,697  
Operating profit     13,141       11,565       4,820       4,242       23,640       20,804  
Finance income(costs):                                                
Finance income     533       469       590       519       1,062       934  
Finance costs     (323 )     (284 )     (293 )     (258 )     (313 )     (275 )
Profit before income tax     13,351       11,750       5,117       4,503       24,389       21,463  
Income tax expenses(profits)     (1,606 )     (1,413 )     1,593       1,402       4,627       4,072  
Profit for the period     14,957       13,163       3,524       3,101       19,762       17,391  
Profit attributable to:                                                
Non-controlling interest     (10 )     (9 )     (25 )     (22 )     2       1  
Owners of Parent company     14,967       13,172       3,549       3,123       19,760       17,390  
Earning per share                                                
- Basic and diluted     2,154       1.90       511       0.45       2,844       2.50  
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     2,154       1.90       511       0.45       2,844       2.50  

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,136.30 to US$1.00, the noon buying rate in effect on March 29, 2019 as quoted by the Federal Reserve Bank of New York.

(1) Each ADS represents one common share.

Source: GRAVITY Co., Ltd.

This article appears in: News Headlines

Referenced Stocks: GRVY










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