Gravity Reports Second Quarter of 2020 Results and Business Updates

Published

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 LeeMs. 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     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.

GRAVITY Co., Ltd.

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