SEOUL, South Korea, Oct. 14, 2008 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (Nasdaq:GRVY), an online game developer and publisher based in South Korea, today announced its unaudited financial results for the second quarter ended June 30, 2008, prepared in accordance with generally accepted accounting principles in the United States.
Revenues for the second quarter ended June 30, 2008 was KRW 12,662 million (US$10,597 thousand), representing a 1.1% increase from KRW 12,529 million for the first quarter ended March 31, 2008 ("QoQ") and a 34.6% increase from KRW 9,408 million for the second quarter ended June 30, 2007 ("YoY").
REVIEW OF FINANCIAL RESULTS
Revenues
Royalty and licensing fee revenues for the second quarter ended June 30, 2008 were KRW 6,742 million (US$5,643 thousand), representing a 2.2% decrease QoQ from KRW 6,897 million but a 19.8% increase YoY from KRW 5,627 million. The decrease QoQ was primarily due to the decrease in Japan revenues while the increase YoY was resulted from the increase in Japan revenues. The weakening of the Korean Won by approximately 27% against the Japanese Yen from 2007 to 2008 also contributed to the increase in YoY royalty revenues.
Subscription revenues for the second quarter of 2008 were KRW 3,082 million (US$2,579 thousand), representing a 7.8% increase QoQ and a 67% increase YoY compared to KRW 2,860 million and KRW 1,846 million, respectively. The increases QoQ and YoY are primarily driven by the increase in Korea revenues due to the increased revenues from the micro-transaction model resulted from opening free-to-play servers in May 2008. The increased QoQ is also partly driven by commercialization of Requiem in the United States and Canada in June 2008. The increase YoY is partly attributed to commercialization of Emil Chronicle Online, Pucca Racing and Requiem in August, September and October 2007, respectively, in Korea.
Mobile game revenues were KRW 2,076 million (US$1,737 thousand) for the second quarter of 2008, representing a 46.1% increase QoQ from KRW 1,421 million and a 48.7% increase YoY from KRW 1,396 million. The increases QoQ and YoY are principally due to the revenues from the newly released mobile games.
Character merchandising, animation and other revenue was KRW 762 million (US$638 thousand) for the second quarter of 2008, representing a 43.6% decrease QoQ from KRW 1,351 million and a 41.4 % increase YoY from KRW 539 million. The decrease QoQ is primarily due to the sale of mobile phone accessories by NEOCYON, a subsidiary of the Company, to LG Electronics in the first quarter of 2008, which did not recur in the second quarter of 2008. The increase YoY is mainly resulted from the sale of data cables by NEOCYON to LG Electronics in the second quarter of 2008.
Cost of Revenues and Operating Expenses
Cost of revenues were KRW 7,505 million (US$6,281 thousand) for the second quarter of 2008, representing no significant change QoQ from KRW 7,504 million and a 75.2% increase YoY from KRW 4,283 million. GRAVITY's increased cost of revenues YoY was primarily attributed to i) higher salaries of head quarters from the commercialization of new games and of L5 games Inc., which was established in October 2007; ii) the amortization of development-related costs from the commercialization of Emil Chronicle Online, Pucca Racing and Requiem in August, September and October of 2007, respectively; and iii) higher rent expenses of GRAVITY Interactive, Inc., L5 Games Inc. and GRAVITY EU SASU.
Operating expenses were KRW 5,881 million (US$4,922 thousand) for the second quarter of 2008, representing a 12.4% decrease QoQ from KRW 6,711 million and a 26.3% decrease YoY from KRW 7,977 million. The decrease in operating expenses QoQ is mainly due to the decrease of rent expense of headquarter office in Seoul. The company moved to a new office on February 1, 2008 and the lease agreement of the old office expired on March 16, 2008. The rent expenses for both old and new offices occurred between February 1 and March 16. The YoY decrease in operating expenses is attributed to decreased R&D expenses and advertising expenses. The decrease in R&D expenses were converted into intangible assets (capitalized R&D cost) after open beta testing and into cost of revenues after commercialization.
Income before income tax expenses and others was KRW 220 million (US$184 thousand) for the second quarter of 2008. The Company recorded losses before income tax expenses and others in the first quarter of 2008 and the second quarter of 2007, which were KRW 278 million and KRW 2,566 million, respectively.
As a result of the foregoing factors, GRAVITY recorded a net loss of KRW 665 million (US$557 thousand) for the second quarter of 2008 compared with a net loss of KRW 1,370 million for the first quarter of 2008 and a net loss of KRW 3,415 million for the second quarter of 2007.
The balance of cash and cash equivalents and short-term financial instruments was KRW 54,429 million (US$45,553 thousand) as of June 30, 2008.
Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the rate of KRW 1,194.85 to US$1.00, the noon buying rate in effect on October 1, 2008 as quoted by the Federal Reserve Bank of New York.
About GRAVITY Co., Ltd.
Based in Korea, GRAVITY is a developer and publisher of online games. GRAVITY's principal product, Ragnarok Online(tm), is a popular online game in many markets, including Japan, Taiwan and Thailand, and is currently commercially offered in 23 markets. For more information about GRAVITY, please visit http://www.gravity.co.kr.
Forward-Looking Statements:
Certain statements in this press release may include, in addition to historical information, "forward-looking statements" within the meaning of the "safe-harbor" provisions of the U.S. Private Securities Litigation Reform Act 1995. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" "project," or "continue" or the negative thereof or other similar words, although not all forward-looking statements contain these words. Investors should consider the information contained in our submissions and filings with the United States Securities and Exchange Commission (the "SEC"), including our registration statement on Form F-1, as amended, and our annual reports on Form 20-F, together with such other documents and we may submit to or file with the SEC from time to time, on Form 6-K. The forward-looking statements speak only as of this press release and we assume no duty to update them to reflect new, changing or unanticipated events or circumstances.
GRAVITY Co., Ltd.
Consolidated Balance Sheet
(In millions of KRW and in thousands of US$)
As of
-----------------------------------------
31-Dec-07 30-Jun-08
------------------- --------------------
KRW US$ KRW US$
Assets (Audited) (unaudited)(unaudited)(unaudited)
Current assets
Cash and cash
equivalents 53,588 44,849 51,750 43,311
Short-term financial
instruments 8,715 7,294 2,679 2,242
Accounts receivable, net 4,820 4,034 7,479 6,259
Other current assets 5,544 4,640 5,107 4,275
------- ------- ------- -------
Total current assets 72,667 60,817 67,015 56,087
------- ------- ------- -------
Property and equipment, net 7,195 6,022 7,127 5,965
Leasehold and other deposits 2,412 2,019 2,174 1,819
Intangible assets 2,012 1,684 1,077 901
Development cost 9,674 8,096 10,545 8,825
Goodwill 1,451 1,214 1,451 1,214
Investment 20 17 3,810 3,189
Other non-current assets 1,496 1,252 1,502 1,257
------- ------- ------- -------
Total assets 96,927 81,121 94,701 79,257
======= ======= ======= =======
Liabilities and
shareholders' equity
Current liabilities
Accounts payable 4,573 3,827 3,713 3,108
Deferred income 3,639 3,046 3,473 2,907
Current portion of
deferred tax liabilities 583 488 285 239
Other current liabilities 1,317 1,102 1,359 1,136
------- ------- ------- -------
Total current
liabilities 10,112 8,463 8,830 7,390
------- ------- ------- -------
Long-term deferred income 10,245 8,574 10,212 8,547
Accrued severance benefits 715 598 584 489
Deferred income tax
liabilities 49 41 54 45
Other non-current
liabilities 262 220 149 125
------- ------- ------- -------
Total liabilities 21,383 17,896 19,829 16,596
------- ------- ------- -------
Minority interest 68 57 108 90
Common stock 3,474 2,907 3,474 2,907
Additional paid-in capital 75,126 62,875 75,235 62,966
Retained earnings (2,879) (2,410) (4,914) (4,113)
Accumulated other
comprehensive income
(loss) (245) (204) 969 811
------- ------- ------- -------
Total shareholders'
equity 75,476 63,168 74,764 62,571
------- ------- ------- -------
Total liabilities and
shareholders' equity 96,927 81,121 94,701 79,257
======= ======= ======= =======
* For convenience, the KRW amounts are expressed in U.S. dollars at
the rate of KRW1,194.85 to US$1.00, the noon buying rate in effect
on October 1, 2008 as quoted by the Federal Reserve Bank of New
York.
GRAVITY Co., Ltd.
Consolidated Statements of Operations
(In millions of KRW and in thousands of US$)
Three months ended
---------------------------------------------
31-Mar-08 30-Jun-07 30-Jun-08
(KRW) (KRW) (KRW) (US$)
(unaudited)(unaudited) (unaudited)(unaudited)
Revenues
Online games-
subscription revenue 2,860 1,846 3,082 2,579
Online games-royalties
and license fees 6,897 5,627 6,742 5,643
Mobile games 1,421 1,396 2,076 1,737
Character merchandising,
animation and other
revenue 1,351 539 762 638
------- ------- ------- -------
Total net revenues 12,529 9,408 12,662 10,597
Cost of revenues 7,504 4,283 7,505 6,281
------- ------- ------- -------
Gross profit 5,025 5,125 5,157 4,316
Operating expenses
Selling, general and
administrative 5,928 5,745 5,272 4,412
Research and development 783 2,232 609 510
------- ------- ------- -------
Operating income (loss) (1,686) (2,852) (724) (606)
Other income (expenses)
Interest income 702 790 702 588
Interest expense (4) (6) (6) (5)
Foreign currency gains
(losses), net 713 (694) 248 207
Others, net (3) 196 -- --
------- ------- ------- -------
Income (loss) before
income tax expense,
minority interest and
equity in loss of
related joint venture (278) (2,566) 220 184
Income tax expenses
(benefit) 849 674 808 676
------- ------- ------- -------
Income (loss) before
minority interest and
equity in loss of
related joint venture (1,127) (3,240) (588) (492)
------- ------- ------- -------
Minority interest 22 12 18 15
Equity in loss of related
joint venture 221 163 59 50
------- ------- ------- -------
Net loss (1,370) (3,415) (665) (557)
======= ======= ======= =======
Six months ended
----------------------------------
30-Jun-07 30-Jun-08
(KRW) (KRW) (US$)
(unaudited) (unaudited) (unaudited)
Revenues
Online games-subscription revenue 3,908 5,942 4,973
Online games-royalties and license
fees 12,912 13,639 11,415
Mobile games 2,183 3,497 2,927
Character merchandising, animation
and other revenue 918 2,113 1,768
------- ------- -------
Total net revenues 19,921 25,191 21,083
Cost of revenues 8,247 15,009 12,561
------- ------- -------
Gross profit 11,674 10,182 8,522
Operating expenses
Selling, general and administrative 10,777 11,200 9,374
Research and development 4,812 1,392 1,165
------- ------- -------
Operating income (loss) (3,915) (2,410) (2,017)
Other income (expenses)
Interest income 1,544 1,403 1,174
Interest expense (15) (10) (8)
Foreign currency gains (losses),
net (406) 961 804
Others, net 196 (3) (3)
------- ------- -------
Income (loss) before income tax
expense, minority interest and
equity in loss of related joint
venture (2,596) (59) (50)
Income tax expenses (benefit) 1,440 1,657 1,386
------- ------- -------
Income (loss) before minority
interest and equity in loss of
related joint venture (4,036) (1,716) (1,436)
------- ------- -------
Minority interest 18 39 33
Equity in loss of related joint
venture 334 280 234
------- ------- -------
Net loss (4,388) (2,035) (1,703)
======= ======= =======
* For convenience, the KRW amounts are expressed in U.S. dollars at
the rate of KRW1,194.85 to US$1.00, the noon buying rate in effect
on October 1, 2008 as quoted by the Federal Reserve Bank of New
York.