Seoul, Nov. 14, 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 third quarter ended September 30, 2019, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

THIRD QUARTER 2019 HIGHLIGHTS

  • Total revenues were KRW 77,566 million (US$ 64,863 thousand), representing a 0.7% decrease from the second quarter ended June 30, 2019 (“QoQ”) and a 75.5% increase from the third quarter ended September 30, 2018 (“YoY”).
  • Operating profit was KRW 10,226 million (US$ 8,551 thousand), representing a 21.3% decrease QoQ and a 44.4% increase YoY.
  • Profit before income tax expenses was KRW 11,213 million (US$ 9,376 thousand), representing a 20.1% decrease QoQ and a 53.0% increase YoY.
  • Net profit attributable to parent company was KRW 8,952 million (US$ 7,485 thousand), representing a 17.6% decrease QoQ and a 41.8% increase YoY.

REVIEW OF THIRD QUARTER 2019 FINANCIAL RESULTS

Revenues

Subscription revenues for the third quarter of 2019 were KRW 10,564 million (US$ 8,834 thousand), representing a 56.6 % increase QoQ from KRW 6,746 million and a 75.9% increase YoY from KRW 6,005 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Taiwan, Brazil, and Ragnarok Prequel 2 in Taiwan. The increase YoY was largely due to increased revenues from Ragnarok Online in Taiwan, Brazil and Ragnarok Prequel 2 in Taiwan. Such increase was partially offset by decreased revenue from Ragnarok Prequel in Taiwan.

Royalty and license fee revenues for the third quarter of 2019 were KRW 2,583 million (US$ 2,160 thousand), representing an 8.8% decrease QoQ from KRW 2,832 million and a 12.8% decrease YoY from KRW 2,961 million. The decrease QoQ was primarily due to decreased revenue from Ragnarok Online in Japan. The decrease YoY resulted mainly from decreased revenues from Ragnarok Online in Brazil and Thailand.

Mobile game and application revenues were KRW 61,238 million (US$ 51,209 thousand) for the third quarter of 2019, representing a 7.9% decrease QoQ from KRW 66,463 million and a 83.4% increase YoY from KRW 33,387 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America, Oceania, and Taiwan. Such decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Japan, Korea and Ragnarok H5 that has launched on September 19, 2019 in Korea. The increase YoY was primarily due to revenues from Ragnarok M: Eternal Love in Southeast Asia, Japan, North America, South America, Oceania, and Ragnarok H5 launched in September in Korea. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love in Taiwan and Korea.

Character merchandising and other revenues were KRW 3,181 million (US$ 2,660 thousand) for the third quarter of 2019, representing 52.5% increase QoQ from KRW 2,086 million and a 72.1% increase YoY from KRW 1,848 million

Cost of Revenue

Cost of revenue was KRW 56,058 million (US$ 46,877 thousand) for the third quarter of 2019, representing a 1.4% decrease QoQ from KRW 56,858 million and a 88.1% increase YoY from KRW 29,806 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, 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 America, South America, Oceania, and Japan.

Operating Expenses

Operating expenses were KRW 11,282 million (US$ 9,435 thousand) for the third quarter of 2019, representing a 36.4% increase QoQ from KRW 8,271 million and a 54.3% increase YoY from KRW 7,311 million. The increase QoQ was mainly attributable to increased advertising expenses for Ragnarok M: Eternal Love in Korea, Ragnarok H5 launched in September in Korea, and re-launched Ragnarok Online in Indonesia. The increase YoY was mostly resulted from increased advertising expenses for Ragnarok M: Eternal Love in Korea, Ragnarok H5 launched in September in Korea, re-launched Ragnarok Online in Indonesia, research and development expenses and salaries. 

Profit before income tax expenses

Profit before income tax expenses was KRW 11,213 million (US$ 9,376 thousand) for the third quarter of 2019 compared with profit before income tax expense of KRW 14,037 million for the second quarter of 2019 and profit before income tax expenses of KRW 7,329 million for the third quarter of 2018.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 8,952 million (US$ 7,485 thousand) for the third quarter of 2019 compared with net profit attributable to parent company of KRW 10,861 million for the second quarter of 2019 and a net profit attributable to parent company of KRW 6,312 million for the third quarter of 2018.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 120,259 million (US$ 100,564 thousand) as of September 30, 2019.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,195.85 to US$ 1.00, the noon buying rate in effect on September 30, 2019 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 is scheduled to be launched in Korea in 2020. The game embodies Ragnarok’s game elements to the highest level of graphics on the mobile device.

  • Ragnarok M: Eternal Love, a MMORPG mobile game

Ragnarok M: Eternal Love has launched in Europe (except for some regions) and Russia on October 16, 2019.

  • Ragnarok Tactics, a SRPG mobile game

Ragnarok Tactics has launched in Thailand on November 8, 2019. On the launching day, the game ranked as the first in free download rankings and the second in gross rankings of Apple App Store. The game is scheduled to be launched in Korea in the first half of 2020.

  • Other Ragnarok Online IP-based games

Gravity has launched Ragnarok Click H5, a Click Action RPG game, globally on November 13, 2019.

The company has been preparing to launch Ragnarok H5, an idle RPG game, in Indonesia in the first quarter of 2020.

Other IP games

  •  The Color of Dream Fantasy Latele, a MMORPG mobile game, has launched in Japan on October 16, 2019.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the third 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. ---------------------------------------------------

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, 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 Lee
Ms. Minji Oh
IR Unit
Gravity Co., Ltd.
Email: ir@gravity.co.kr
Telephone: +82-2-2132-7800~1

#     #     #

GRAVITY Co., Ltd.
Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

  As of 
  31-Dec-18  30-Sep-19 
  KRW  US$  KRW  US$ 
  (audited)  (unaudited)  (unaudited)  (unaudited) 
Assets                
Current assets:                
Cash and cash equivalents  86,051   71,958   88,759   74,223 
Short-term financial instruments  9,500   7,944   31,500   26,341 
Accounts receivable, net  60,664   50,729   39,409   32,955 
Other receivables, net  255   213   199   166 
Prepaid expenses  2,516   2,104   1,929   1,613 
Other current assets  1,182   988   3,749   3,135 
Total current assets  160,168   133,936   165,545   138,433 
Property and equipment, net  1,498   1,253   6,833   5,714 
Intangible assets  1,163   973   1,568   1,311 
Deferred tax assets  7,413   6,199   8,866   7,414 
Other non-current financial assets  1,494   1,249   1,662   1,390 
Other non-current assets  1,438   1,202   1,727   1,444 
Total assets  173,174   144,812   186,201   155,706 
Liabilities and Equity                
Current liabilities:                
Accounts payable  71,928   60,148   44,258   37,010 
Deferred revenue  16,476   13,778   12,795   10,700 
Withholdings  2,019   1,688   2,119   1,772 
Accrued expense  1,031   862   1,049   878 
Income tax payable  1,944   1,626   3,204   2,679 
Other current liabilities  123   102   1,889   1,580 
Total current liabilities  93,521   78,204   65,314   54,619 
Long-term deferred revenue  3,598   3,009   1,294   1,082 
Other non-current liabilities  503   421   3,564   2,980 
Total liabilities  97,622   81,634   70,172   58,681 
Share capital  3,474   2,905   3,474   2,905 
Capital surplus  27,141   22,695   27,128   22,685 
Other components of equity  138   115   814   680 
Retained earnings (Accumulated deficit)  45,405   37,970   84,978   71,061 
Equity attributable to owners of the Parent Company  76,158   63,685   116,394   97,331 
Non-controlling interest  (606)  (507)  (365)  (306)
Total equity  75,552   63,178   116,029   97,025 
Total liabilities and equity  173,174   144,812   186,201   155,706 

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,195.85 to US$ 1.00, the noon buying rate in effect on September 30, 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  Nine months ended
  30-Jun-19  30-Sep-18  30-Sep-19  30-Sep-18  30-Sep-19
  (KRW)  (KRW)  (KRW)  (US$)  (KRW)  (KRW)  (US$)
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)
Revenues:                           
Online games-subscription revenue  6,746   6,005   10,564   8,834   21,017   23,566   19,706
Online games-royalties and license fees  2,832   2,961   2,583   2,160   10,788   9,135   7,639
Mobile games and applications  66,463   33,387   61,238   51,209   136,573   248,848   208,093
Character merchandising and other revenue  2,086   1,848   3,181   2,660   5,160   7,767   6,495
Total net revenue  78,127   44,201   77,566   64,863   173,538   289,316   241,933
Cost of revenue  56,858   29,806   56,058   46,877   118,740   214,153   179,080
Gross profit  21,269   14,395   21,508   17,986   54,798   75,163   62,853
Operating expenses:                           
Selling, general and administrative  5,733   5,602   8,984   7,513   28,899   21,382   17,880
Research and development  2,432   1,760   2,349   1,965   5,376   6,658   5,568
Others, net  106   (51)  (51)  (43)  296   259   217
Total operating expenses  8,271   7,311   11,282   9,435   34,571   28,299   23,665
Operating profit  12,998   7,084   10,226   8,551   20,227   46,864   39,188
Finance income(costs):                           
Finance income  1,141   58   1,353   1,131   1,540   3,556   2,974
Finance costs  (102)  187   (366)   (306)   (679)  (781)  (653)
Profit before income tax  14,037   7,329   11,213   9,376   21,088   49,639   41,509
Income tax expenses(profits)  3,208   1,024   2,357   1,971   4,659   10,192   8,523
Profit for the period  10,829   6,305   8,856   7,405   16,429   39,447   32,986
Profit attributable to:                           
Non-controlling interest  (32)  (7)   (96)  (80)  (47)  (126)  (105)
Owners of Parent company  10,861   6,312   8,952   7,485   16,476   39,573   33,091
Earning per share                           
- Basic and diluted  1,563   908   1,288   1.08   2,371   5,695   4.76
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  1,563   908   1,288   1.08   2,371   5,695   4.76

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,195.85 to US$1.00, the noon buying rate in effect on September 30, 2019 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.