SEOUL, South Korea, Nov. 17, 2008 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (Nasdaq:GRVY) ("Gravity" or the "Company"), an online game developer and publisher based in South Korea, today announced its unaudited financial results for the third quarter ended September 30, 2008, prepared in accordance with generally accepted accounting principles in the United States.
Revenues for the third quarter ended September 30, 2008 was KRW 12,782 million (US$10,128 thousand), representing a similar amount of revenue of KRW 12,662 million for the second quarter ended June 30, 2008 ("QoQ") and a 36.8% increase from KRW 9,341 million for the third quarter ended September 30, 2007 ("YoY"). The Company turned profitable with its net income of KRW 932 million (US$737 thousand) for the third quarter ended September 30, 2008, which was a result of the Company's broad range of restructuring efforts led by the new management team appointed in June, 2008.
REVIEW OF FINANCIAL RESULTS
Revenues
Royalty and licensing fee revenues for the third quarter ended September 30, 2008 were KRW 7,226 million (US$5,726 thousand), representing a 7.2% increase QoQ from KRW 6,742 million and a 28.9% increase YoY from KRW 5,607 million. The increase YoY was mainly resulted from the increase in Japan revenues. The weakening of the Korean Won by approximately 28.7% against the Japanese Yen from 2007 to 2008 also contributed to the increase YoY royalty revenues from Japan.
Subscription revenue for the third quarter of 2008 was KRW 3,539 million (US$2,804 thousand), representing a 14.8% increase QoQ and a 35.6% increase YoY compared to KRW 3,082 million and KRW 2,610 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 increase QoQ and YoY are also partly due to the commercialization of Requiem in the United States, Canada and Russia in June 2008.
Mobile game revenues were KRW 1,614 million (US$1,279 thousand) for the third quarter of 2008, representing a 22.3% decrease QoQ from KRW 2,076 million and a 100.5% increase YoY from KRW 805 million. The increase YoY is principally due to the revenues from the newly released mobile games of NEOCYON, a subsidiary of the Company, in 2008.
Character merchandising, animation and other revenue was KRW 403 million (US$319 thousand) for the third quarter of 2008, representing a 47.1% decrease QoQ from KRW 762 million and a 26.3% increase YoY from KRW 319 million. The decrease QoQ is due to decrease in the animation related revenue. The increase YoY is mainly due to the increase of product sales of NEOCYON.
Cost of Revenues and Operating Expenses
Cost of revenues was KRW 6,726 million (US$5,329 thousand) for the third quarter of 2008, representing a 10.4% decrease QoQ from KRW 7,505 million and a 48.4% increase YoY from KRW 4,533 million. The increase YoY is primarily attributed to higher salaries of head quarters from the commercialization of new games and of L5 games Inc., which was established in October 2007. The increase YoY is also due to the increased amortization on development cost for Emil Chronicle Online, Pucca Racing and Requiem, which were commercialized in August, September and October of 2007, respectively.
Operating expenses were KRW 5,815 million (US$4,609 thousand) for the third quarter of 2008, representing a 1.1% decrease QoQ from KRW 5,881 million and a 67.9% decrease YoY from KRW 18,135 million. The decrease YoY is primarily attributed to the recognition of KRW 8,619 million impairment loss of Perpetual Entertainment, Inc. in the third quarter of 2007, which went into liquidation in October 2007. The decrease YoY is also attributed to the overall decrease of marketing and advertising expense as a part of restructuring efforts, amounted to KRW 3,556 million (US$2,818 thousand), compared to the third quarter of 2007.
Income before income tax expenses and others was KRW 1,879 million (US$1,487 thousand) for the third quarter of 2008, which represents a 754.1% increase QoQ compared with KRW 220 million, and a turnaround from the loss before income tax expenses and others of KRW 11,995 million for the third quarter of 2007.
As a result of the foregoing factors, Gravity recorded a net income of KRW 932 million (US$737 thousand) for the third quarter of 2008 compared with a net loss of KRW 665 million for the second quarter of 2008 and a net loss of KRW 12,576 million for the third quarter of 2007.
The balance of cash and cash equivalents and short-term financial instruments was KRW 55,688 million (US$44,126 thousand) as of September 30, 2008.
Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the rate of KRW 1,262.00 to US$1.00, the noon buying rate in effect on November 3, 2008, as quoted by the Federal Reserve Bank of New York.
About GRAVITY Co., Ltd.
Based in Korea, Gravity is a developer and publisher of online games. Gravity's principal product, Ragnarok Online(tm), is a popular online game in many markets, including Japan, Taiwan and Thailand, and is currently commercially offered in 22 markets. For more information about Gravity, please visit http://www.gravity.co.kr.
Forward-Looking Statements:
Certain statements in this press release may include, in addition to historical information, "forward-looking statements" within the meaning of the "safe-harbor" provisions of the U.S. Private Securities Litigation Reform Act 1995. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" "project," or "continue" or the negative thereof or other similar words, although not all forward-looking statements contain these words. Investors should consider the information contained in our submissions and filings with the United States Securities and Exchange Commission (the "SEC"), including our registration statement on Form F-1, as amended, and our annual reports on Form 20-F, together with such other documents and we may submit to or file with the SEC from time to time, on Form 6-K. The forward-looking statements speak only as of this press release and we assume no duty to update them to reflect new, changing or unanticipated events or circumstances.
GRAVITY Co., Ltd.
Consolidated Balance Sheet
(In millions of KRW and in thousands of US$)
As of
-----------------------------------------
31-Dec-07 30-Sep-08
------------------ -------------------
KRW US$ KRW US$
Assets (audited) (unaudited)(unaudited) (unaudited)
Current assets
Cash and cash
equivalents 53,588 42,463 52,583 41,666
Short-term financial
instruments 8,715 6,906 3,105 2,460
Accounts receivable, net 4,820 3,819 5,579 4,421
Other current assets 5,544 4,393 5,359 4,247
------- ------- ------- -------
Total current assets 72,667 57,581 66,626 52,794
------- ------- ------- -------
Property and equipment, net 7,195 5,701 6,139 4,865
Leasehold and other
deposits 2,412 1,911 2,206 1,748
Intangible assets 11,686 9,260 11,207 8,881
Goodwill 1,451 1,150 1,451 1,150
Investments 20 16 6,910 5,475
Other non-current assets 1,496 1,185 1,512 1,197
------- ------- ------- -------
Total assets 96,927 76,804 96,051 76,110
======= ======= ======= =======
Liabilities and
shareholders' equity
Current liabilities
Accounts payable 4,573 3,624 2,799 2,218
Deferred income 3,639 2,884 3,445 2,730
Current portion of
deferred tax liabilities 583 462 134 106
Other current liabilities 1,317 1,043 1,539 1,219
------- ------- ------- -------
Total current
liabilities 10,112 8,013 7,917 6,273
------- ------- ------- -------
Long-term deferred income 10,245 8,118 10,012 7,933
Accrued severance benefits 715 567 570 452
Deferred income tax
liabilities 49 39 61 48
Other non-current
liabilities 262 207 258 205
------- ------- ------- -------
Total liabilities 21,383 16,944 18,818 14,911
------- ------- ------- -------
Minority interest 68 54 130 103
Common stock 3,474 2,753 3,474 2,753
Additional paid-in capital 75,126 59,529 75,185 59,576
Retained earnings (2,879) (2,281) (3,982) (3,155)
Accumulated other
comprehensive income
(loss) (245) (195) 2,426 1,922
------- ------- ------- -------
Total shareholders'
equity 75,476 59,806 77,103 61,096
------- ------- ------- -------
Total liabilities
and shareholders'
equity 96,927 76,804 96,051 76,110
======= ======= ======= =======
* For convenience purposes only, the KRW amounts are expressed in
U.S. dollars at the rate of KRW1,262.00 to US$1.00, the noon
buying rate in effect on November 3, 2008 as quoted by the Federal
Reserve Bank of New York.
GRAVITY Co., Ltd.
Consolidated Statements of Operations
(In millions of KRW and in thousands of US$)
Three months ended
--------------------------------------------
30-Jun-08 30-Sep-07 30-Sep-08
(KRW) (KRW) (KRW) (US$)
(unaudited)(unaudited)(unaudited)(unaudited)
Revenues
Online games-
subscription revenue 3,082 2,610 3,539 2,804
Online games-royalties
and license fees 6,742 5,607 7,226 5,726
Mobile games 2,076 805 1,614 1,279
Character merchandising,
animation and other
revenue 762 319 403 319
------- ------- ------- -------
Total net revenues 12,662 9,341 12,782 10,128
Cost of revenues 7,505 4,533 6,726 5,329
------- ------- ------- -------
Gross profit 5,157 4,808 6,056 4,799
Operating expenses
Selling, general and
administrative 5,272 17,402 5,401 4,280
Research and development 609 733 414 329
------- ------- ------- -------
Operating income (loss) (724) (13,327) 241 190
Other income (expenses)
Interest income 702 764 661 524
Interest expense (6) (1) (7) (6)
Foreign currency gains
(losses), net 248 568 1,000 792
Others, net -- 1 (16) (13)
------- ------- ------- -------
Income (loss) before
income tax expense,
minority interest and
equity in loss of
related joint venture 220 (11,995) 1,879 1,487
Income tax expenses
(benefit) 808 554 865 686
------- ------- ------- -------
Income (loss) before
minority interest and
equity in loss of
related joint venture (588) (12,549) 1,014 801
------- ------- ------- -------
Minority interest 18 14 22 17
Equity in loss of related
joint venture 59 13 60 47
Net income (loss) (665) (12,576) 932 737
======= ======= ======= =======
Nine months ended
---------------------------------
30-Sep-07 30-Sep-08
(KRW) (KRW) (US$)
(unaudited)(unaudited)(unaudited)
Revenues
Online games-subscription revenue 6,518 9,481 7,513
Online games-royalties and license
fees 18,519 20,865 16,533
Mobile games 2,988 5,111 4,050
Character merchandising, animation
and other revenue 1,238 2,515 1,993
------- ------- -------
Total net revenues 29,263 37,972 30,089
Cost of revenues 12,780 21,735 17,223
------- ------- -------
Gross profit 16,483 16,237 12,866
Operating expenses
Selling, general and administrative 28,179 16,601 13,155
Research and development 5,545 1,806 1,430
------- ------- -------
Operating income (loss) (17,241) (2,170) (1,719)
Other income (expenses)
Interest income 2,308 2,065 1,636
Interest expense (17) (18) (14)
Foreign currency gains (losses), net 162 1,962 1,555
Others, net 198 (19) (16)
------- ------- -------
Income (loss) before income tax
expense, minority interest and
equity in loss of related joint
venture (14,590) 1,820 1,442
Income tax expenses (benefit) 1,995 2,521 1,997
------- ------- -------
Income (loss) before minority
interest and equity in loss of
related joint venture (16,585) (701) (555)
------- ------- -------
Minority interest 31 61 48
Equity in loss of related joint
venture 347 341 271
Net income (loss) (16,963) (1,103) (874)
======= ======= =======
* For convenience purposes only, the KRW amounts are expressed in
U.S. dollars at the rate of KRW1,262.00 to US$1.00, the noon
buying rate in effect on November 3, 2008 as quoted by the Federal
Reserve Bank of New York.