SEOUL, South Korea, Aug. 27, 2014 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (Nasdaq:GRVY) ("Gravity" or "Company"), an online game developer and publisher based in South Korea, today announced its unaudited financial results for the second quarter ended June 30, 2014, prepared in accordance with generally accepted accounting principles in the United States.
Revenues for the second quarter ended June 30, 2014 was KRW 10,248 million (US$ 10,130 thousand), representing a 4.8% decrease from KRW 10,767 million for the first quarter ended March 31, 2014 ("QoQ") and a 19.9% decrease from KRW 12,788 million for the second quarter ended June 30, 2013 ("YoY").
Revenues
Royalty and license fee revenues for the second quarter of 2014 were KRW 3,402 million (US$ 3,363 thousand), representing a 4.8% decrease QoQ from KRW 3,575 million and a 38.6% decrease YoY from KRW 5,543 million. The decrease QoQ was primarily due to decreased revenues from Ragnarok Online in Taiwan, Hong Kong and Macau. The decrease YoY resulted mostly from decreased revenues from Ragnarok Online in Japan and China.
Subscription revenues for the second quarter of 2014 were KRW 1,589 million (US$ 1,571 thousand), representing a 15.9% decrease QoQ from KRW 1,890 million and a 44.0% decrease YoY from KRW 2,836 million. The decrease QoQ was mainly attributable to a decrease in revenues from Ragnarok Online in Korea. The decrease YoY was largely due to decreased revenues from Ragnarok Online II in the United States and Canada.
Mobile game revenues were KRW 4,120 million (US$ 4,073 thousand) for the second quarter of 2014, representing a 4.6% decrease QoQ from KRW 4,317 million but a 15.7% increase YoY from KRW 3,560 million. The decrease QoQ resulted primarily from decreased revenues from NeoCyon's mobile game operation service for a third party and from Road to Dragons. The increase YoY was mostly driven by Ragnarok: Path of Heroes, an updated version of Ragnarok Online – Uprising: Valkyrie, which was launched in March 2014.
Character merchandising and other revenues were KRW 1,137 million (US$ 1,123 thousand) for the second quarter of 2014, representing a 15.4% increase QoQ from KRW 985 million and a 33.9% increase YoY from KRW 849 million.
Cost of Revenue and Operating Expenses
Cost of revenue was KRW 8,882 million (US$ 8,780 thousand) for the second quarter of 2014, representing a 6.2% decrease QoQ from KRW 9,467 million but a 5.2% increase YoY from KRW 8,439 million. The decrease QoQ was mostly from decreased salaries primarily resulting from a decrease in salaries for the headquarters mostly due to a decrease in the number of employees. The increase YoY was mainly attributable to increased outsourcing fee and commission paid mostly related to our services provided to third parties.
Operating expenses were KRW 4,069 million (US$ 4,022 thousand) for the second quarter of 2014, representing a 2.6% decrease QoQ from KRW 4,178 million and a 43.1% decrease YoY from KRW 7,155 million. The decrease QoQ was mainly due to decreased salaries. The decrease YoY mostly resulted from i) a decrease in research and development expenses primarily due to the expenses to develop Ragnarok Odyssey Ace for the PlayStation Vita platform in the second quarter of 2013, which did not occur in the second quarter of 2014; ii) decreased advertising expenses; iii) impairment loss on intangible assets in the second quarter of 2013, which did not occur in the second quarter of 2014; and iv) decreased salaries.
Loss before income tax expenses and others was KRW 2,665 million (US$ 2,634 thousand) for the second quarter of 2014 compared with loss before income tax expenses and others of KRW 2,503 million for the first quarter of 2014 and loss before income tax expenses and others of KRW 1,020 million for the second quarter of 2013.
As a result of the foregoing factors, Gravity recorded a net loss attributable to parent company of KRW 3,031 million (US$ 2,996 thousand) for the second quarter of 2014 compared with a net loss attributable to parent company of KRW 2,969 million for the first quarter of 2014 and a net loss attributable to parent company of KRW 1,617 million for the second quarter of 2013.
The balance of cash and cash equivalents and short-term financial instruments was KRW 43,915 million (US$ 43,411 thousand) as of June 30, 2014.
Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,011.6 to US$ 1.00, the noon buying rate in effect on June 30, 2014 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, is a popular online game in many markets, including Japan, Taiwan and Thailand, and is currently commercially offered in 60 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 annual report for the fiscal year ended December 31, 2013 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.
| GRAVITY CO., LTD. | ||||||||||||||||||||||||||
| Consolidated Balance Sheet | ||||||||||||||||||||||||||
| (In millions of KRW and in thousands of US$) | ||||||||||||||||||||||||||
| As of | ||||||||||||||||||||||||||
| 31-Dec-13 | 30-Jun-14 | |||||||||||||||||||||||||
| KRW | US$ | KRW | US$ | |||||||||||||||||||||||
| Assets | (audited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
| Current assets: | ||||||||||||||||||||||||||
| Cash and cash equivalents | 31,222 | 30,864 | 24,415 | 24,135 | ||||||||||||||||||||||
| Short-term financial instruments | 18,000 | 17,794 | 19,500 | 19,276 | ||||||||||||||||||||||
| Accounts receivable, net | 5,333 | 5,272 | 4,775 | 4,720 | ||||||||||||||||||||||
| Other current assets | 4,096 | 4,049 | 3,949 | 3,904 | ||||||||||||||||||||||
| Total current assets | 58,651 | 57,979 | 52,639 | 52,035 | ||||||||||||||||||||||
| Property and equipment, net | 2,315 | 2,289 | 1,697 | 1,678 | ||||||||||||||||||||||
| Leasehold and other deposits | 5,569 | 5,505 | 5,558 | 5,494 | ||||||||||||||||||||||
| Intangible assets | 13,919 | 13,759 | 11,965 | 11,828 | ||||||||||||||||||||||
| Other non-current assets | 7,311 | 7,227 | 7,284 | 7,200 | ||||||||||||||||||||||
| Total assets | 87,765 | 86,759 | 79,143 | 78,235 | ||||||||||||||||||||||
| Liabilities and Equity | ||||||||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||||||||
| Accounts payable | 4,374 | 4,324 | 2,762 | 2,730 | ||||||||||||||||||||||
| Deferred revenue | 5,782 | 5,716 | 5,607 | 5,543 | ||||||||||||||||||||||
| Other current liabilities | 1,244 | 1,229 | 1,496 | 1,479 | ||||||||||||||||||||||
| Total current liabilities | 11,400 | 11,269 | 9,865 | 9,752 | ||||||||||||||||||||||
| Long-term deferred revenue | 6,875 | 6,796 | 5,828 | 5,761 | ||||||||||||||||||||||
| Accrued severance benefits | 263 | 260 | 175 | 173 | ||||||||||||||||||||||
| Other non-current liabilities | 227 | 225 | 160 | 158 | ||||||||||||||||||||||
| Total liabilities | 18,765 | 18,550 | 16,028 | 15,844 | ||||||||||||||||||||||
| Common shares | 3,474 | 3,434 | 3,474 | 3,434 | ||||||||||||||||||||||
| Additional paid-in capital | 75,076 | 74,215 | 63,656 | 62,926 | ||||||||||||||||||||||
| Accumulated deficit(1) | (10,889) | (10,764) | (5,469) | (5,406) | ||||||||||||||||||||||
| Accumulated other comprehensive income | 1,674 | 1,655 | 1,727 | 1,707 | ||||||||||||||||||||||
| Total parent company shareholders' equity | 69,335 | 68,540 | 63,388 | 62,661 | ||||||||||||||||||||||
| Non-controlling interest | (335) | (331) | (273) | (270) | ||||||||||||||||||||||
| Total equity | 69,000 | 68,209 | 63,115 | 62,391 | ||||||||||||||||||||||
| Total liabilities and equity | 87,765 | 86,759 | 79,143 | 78,235 | ||||||||||||||||||||||
| * For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,011.6 to US$1.00, the noon buying rate in effect on June 30, 2014 as quoted by the Federal Reserve Bank of New York. | ||||||||||||||||||||||||||
| (1) The Company disposed the accumulated deficit by transferring KRW 11,420 million out of KRW 75,076 million of its additional paid-in capital in the fiscal year 2013. | ||||||||||||||||||||||||||
| GRAVITY CO., LTD. | |||||||||||||
| Consolidated Statements of Operations | |||||||||||||
| (In millions of KRW and in thousands of US$, except for share and ADS data) | |||||||||||||
| Three months ended | Six months ended | ||||||||||||
| 31-Mar-14 | 30-Jun-13 | 30-Jun-14 | 30-Jun-13 | 30-Jun-14 | |||||||||
| (KRW) | (KRW) | (KRW) | (US$) | (KRW) | (KRW) | (US$) | |||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||
| Revenues: | |||||||||||||
| Online games-subscription revenue | 1,890 | 2,836 | 1,589 | 1,571 | 4,784 | 3,479 | 3,439 | ||||||
| Online games-royalties and license fees | 3,575 | 5,543 | 3,402 | 3,363 | 12,197 | 6,977 | 6,897 | ||||||
| Mobile games and applications(1) | 4,317 | 3,560 | 4,120 | 4,073 | 5,883 | 8,437 | 8,340 | ||||||
| Character merchandising and other revenue(1) | 985 | 849 | 1,137 | 1,123 | 1,720 | 2,122 | 2,098 | ||||||
| Total net revenue | 10,767 | 12,788 | 10,248 | 10,130 | 24,584 | 21,015 | 20,774 | ||||||
| Cost of revenue | 9,467 | 8,439 | 8,882 | 8,780 | 15,836 | 18,349 | 18,139 | ||||||
| Gross profit | 1,300 | 4,349 | 1,366 | 1,350 | 8,748 | 2,666 | 2,635 | ||||||
| Operating expenses: | |||||||||||||
| Selling, general and administrative | 3,366 | 4,512 | 3,091 | 3,055 | 8,919 | 6,457 | 6,383 | ||||||
| Research and development | 812 | 2,061 | 978 | 967 | 3,453 | 1,790 | 1,769 | ||||||
| Impairment losses on intangible assets | ㅡ | 582 | ㅡ | ㅡ | 734 | ㅡ | ㅡ | ||||||
| Total operating expenses | 4,178 | 7,155 | 4,069 | 4,022 | 13,106 | 8,247 | 8,152 | ||||||
| Operating loss | (2,878) | (2,806) | (2,703) | (2,672) | (4,358) | (5,581) | (5,517) | ||||||
| Other income (expenses): | |||||||||||||
| Interest income | 282 | 345 | 276 | 273 | 715 | 558 | 552 | ||||||
| Interest expense | (3) | (14) | (4) | (4) | (25) | (7) | (7) | ||||||
| Foreign currency income (loss), net | 96 | 230 | (234) | (231) | 290 | (138) | (137) | ||||||
| Others, net | ㅡ | 1,225 | ㅡ | ㅡ | 1,225 | ㅡ | ㅡ | ||||||
| Loss before income tax expenses and equity loss on investments | (2,503) | (1,020) | (2,665) | (2,634) | (2,153) | (5,168) | (5,109) | ||||||
| Income tax expenses | 410 | 720 | 359 | 355 | 1,595 | 769 | 760 | ||||||
| Loss before equity loss on investments | (2,913) | (1,740) | (3,024) | (2,989) | (3,748) | (5,937) | (5,869) | ||||||
| Equity loss on investments | ㅡ | ㅡ | ㅡ | ㅡ | (23) | ㅡ | ㅡ | ||||||
| Net loss | (2,913) | (1,740) | (3,024) | (2,989) | (3,771) | (5,937) | (5,869) | ||||||
| Net income (loss) attributable to: | |||||||||||||
| Non-controlling interest | 56 | (123) | 7 | 7 | (525) | 63 | 62 | ||||||
| Parent company | (2,969) | (1,617) | (3,031) | (2,996) | (3,246) | (6,000) | (5,931) | ||||||
| Loss per share | |||||||||||||
| - Basic and diluted | (427) | (233) | (436) | (0.43) | (467) | (863) | (0.85) | ||||||
| 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 | ||||||
| Loss per ADS(2) | |||||||||||||
| - Basic and diluted | (107) | (58) | (109) | (0.11) | (117) | (216) | (0.21) | ||||||
| * For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,011.6 to US$1.00, the noon buying rate in effect on June 30, 2014 as quoted by the Federal Reserve Bank of New York. | |||||||||||||
| (1) The Company reclassified certain revenue within Mobile games and applications revenue as Character merchandising and other revenue in 2013 as this better represents the nature of the revenue, and the effect of such reclassification was reflected in each quarter of 2013. The reclassification has no effect on the Company's previously reported total net revenue and other line items on the consolidated financial statements. | |||||||||||||
| (2) Each ADS represents one-fourth of a common share. | |||||||||||||