Gravity Reports First Quarter of 2021 Results and Business Update

Seoul, KOREA, REPUBLIC OF


Seoul, Korea, May 14, 2021 (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 first quarter ended March 31, 2021, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

FIRST QUARTER 2021 HIGHLIGHTS

  • Total revenues were KRW 105,059 million (US$ 93,243 thousand), representing a 6.6% decrease from the fourth quarter ended December 31, 2020 (“QoQ”) and a 43.4% increase from the first quarter ended March 31, 2020 (“YoY”).
  • Operating profit was KRW 27,953 million (US$ 24,809 thousand), representing a 2.2% increase QoQ and a 169.9% increase YoY.
  • Profit before income tax expenses was KRW 28,620 million (US$ 25,401 thousand), representing a 7.0% increase QoQ and a 154.4% increase YoY.
  • Net profit attributable to parent company was KRW 23,565 million (US$ 20,915 thousand), representing a 56.4% increase QoQ and a 154.4% increase YoY.

REVIEW OF FIRST QUARTER 2021 FINANCIAL RESULTS

Revenues

Online game revenues for the first quarter of 2021 were KRW 19,458 million (US$ 17,270 thousand), representing a 26.6 % increase QoQ from KRW 15,370 million and a 44.8% increase YoY from KRW 13,436 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Taiwan and Japan. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and Japan.

Mobile game revenues were KRW 82,438 million (US$ 73,166 thousand) for the first quarter of 2021, representing a 10.9% decrease QoQ from KRW 92,562 million and a 47.3% increase YoY from KRW 55,982 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok Origin in Korea. Such decrease was partially offset by increased revenues from Tera Classic in Japan that was launched on January 29, 2021 and Ragnarok M: Eternal Love in Southeast Asia. The increase YoY was primarily due to revenues from Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok Origin in Korea. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love in Taiwan, Southeast Asia, North America, Japan, Korea and Europe and Ragnarok Tactics.

Other revenues were KRW 3,163 million (US$ 2,807 thousand) for the first quarter of 2021, representing 29.8% decrease QoQ from KRW 4,508 million and an 17.7% decrease YoY from KRW 3,842 million.

Cost of Revenue

Cost of revenue was KRW 57,553 million (US$ 51,080 thousand) for the first quarter of 2021, representing a 11.4% decrease QoQ from KRW 64,966 million and a 17.8% increase YoY from KRW 48,874 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok Origin in Korea. The increase YoY was mostly from increased commission paid for mobile game services related to Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok Origin in Korea.

Operating Expenses

Operating expenses were KRW 19,553 million (US$ 17,354 thousand) for the first quarter of 2021, representing a 2.9% decrease QoQ from KRW 20,131 million and a 39.4% increase YoY from KRW 14,030 million. The decrease QoQ was mainly attributable to decreased advertising expenses for Ragnarok Origin in Korea and The Labyrinth of Ragnarok in Southeast Asia, and research and development expenses. The increase YoY was mostly resulted from increased advertising expenses for Tera Classic in Japan, The Labyrinth of Ragnarok in global and The Lord in Thailand, research and development expenses and commission paid.

Profit Before Income Tax Expenses

Profit before income tax expenses was KRW 28,620 million (US$ 25,401 thousand) for the first quarter of 2021 compared with profit before income tax expense of KRW 26,751 million for the fourth quarter of 2020 and profit before income tax expenses of KRW 11,250 million for the first quarter of 2020.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 23,565 million (US$ 20,915 thousand) for the first quarter of 2021 compared with net profit attributable to parent company of KRW 15,064 million for the fourth quarter of 2020 and a net profit attributable to parent company of KRW 9,263 million for the first quarter of 2020.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 194,754 million (US$ 172,850 thousand) as of March 31, 2021.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,126.72 to US$ 1.00, the noon buying rate in effect on March 31, 2021 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 being prepared for launch in Japan in the second quarter of 2021. The closed beta test (“CBT”) has completed on April 22 with users’ positive feedbacks.

  • Ragnarok X: Next Generation, a MMORPG mobile game

Ragnarok X: Next Generation has started the CBT and pre-registration on April 23, 2021. The game is being prepared for launch in Southeast Asia in June 2021.

  • The Labyrinth of Ragnarok, a Time Effective MMORPG mobile game

The Labyrinth of Ragnarok was launched in global including Korea (except Taiwan, Hong Kong, Macau, China and Japan) on March 23, 2021.

  • Ragnarok: Poring Merge, a Time Effective RPG

Ragnarok: Poring Merge was launched in global on April 12, 2021.

  • Other Ragnarok Online IP-based games

The Lost Memories: a Song of Valkyrie, a Story RPG mobile game, is expected to be launched in Thailand, North America and global in the second half of 2021. The game was developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Project S (Tentative title), a MMORPG mobile game, is scheduled to start the CBT in the second half of 2021.


Other IP games

The Lord, a SRPG mobile game, is expected to be launched in Indonesia, Vietnam, Taiwan, Hong Kong and Macau in the second half of 2021.

CPBL Pro-baseball 2021, a Sports mobile game, will be launched in Taiwan, Hong Kong and Macau on June 17, 2021.


Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the first quarter in 2021 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 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, 2020 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. Hye Ji An
IR Unit
Gravity Co., Ltd.
Email: ir@gravity.co.kr
Telephone: +82-2-2132-7800

# # #

GRAVITY Co., Ltd.
Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

  As of 
  31-Dec-20  31-Mar-21 
  KRW  US$  KRW  US$ 
  (audited)  (unaudited)  (unaudited)  (unaudited) 
Assets                
Current assets:                
Cash and cash equivalents  110,632    98,189    116,754   103,623 
Short-term financial instruments  71,000    63,015    78,000   69,227 
Accounts receivable, net  59,761    53,040    62,994   55,909 
Other receivables, net  8    7    183   162 
Prepaid expenses  2,238    1,986    1,989   1,765 
Other current assets  2,946    2,615    3,220   2,859 
Total current assets  246,585    218,852    263,140   233,545 
Property and equipment, net  7,695    6,830    8,286   7,354 
Intangible assets, net  3,363    2,985    3,746   3,325 
Deferred tax assets  3,590    3,186    2,810   2,494 
Other non-current financial assets  1,324    1,175    2,070   1,837 
Other non-current assets  2,815    2,498    1,916   1,701 
Total assets  265,372    235,526    281,968   250,256 
Liabilities and Equity                
Current liabilities:                
Accounts payable  52,688    46,762    47,651   42,292 
Deferred revenue  13,692    12,152    11,902   10,563 
Withholdings  2,851    2,530    2,991   2,655 
Accrued expense  1,365    1,211    1,261   1,119 
Income tax payable  9,470    8,405    8,575   7,611 
Other current liabilities  2,654    2,356    2,745   2,436 
Total current liabilities  82,720    73,416    75,125   66,676 
Long-term deferred revenue  101    90    185   164 
Other non-current liabilities  5,203    4,618    4,593   4,077 
Total liabilities  88,024    78,124    79,903   70,917 
Share capital  3,474    3,083    3,474   3,083 
Capital surplus  27,110    24,061    27,110   24,061 
Other components of equity  (1,045)   (927)   112   99 
Retained earnings  147,371    130,796    170,936   151,711 
Equity attributable to owners of the Parent Company  

176,910
    

157,013
    

201,632
   

178,954
 
Non-controlling interest  438    389    433   385 
Total equity  177,348    157,402    202,065   179,339 
Total liabilities and equity  265,372    235,526    281,968   250,256 

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,126.72 to US$ 1.00, the noon buying rate in effect on March 31, 2021 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 
  31-Dec-20  31-Mar-20  31-Mar-21 
  (KRW)  (US$)  (KRW)  (US$)  (KRW)  (US$) 
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Revenues:                        
Online games  15,370    13,641    13,436    11,925    19,458    17,270  
Mobile games  92,562    82,152    55,982    49,686    82,438    73,166  
Other revenue  4,508    4,001    3,842    3,410    3,163    2,807  
Total net revenue  112,440    99,794    73,260    65,021    105,059    93,243  
Cost of revenue  64,966    57,659    48,874    43,377    57,553    51,080  
Gross profit  47,474    42,135    24,386    21,644    47,506    42,163  
Operating expenses:                        
Selling, general and administrative expenses  15,708    13,941    11,007    9,769    15,508    13,764  
Research and development  4,358    3,868    2,872    2,549    4,009    3,558  
Others, net  65    58    151    134    36    32  
Total operating expenses  20,131    17,867    14,030    12,452    19,553    17,354  
Operating profit  27,343    24,268    10,356    9,192    27,953    24,809  
Finance income(costs):                        
Finance income  476    422    1,551    1,377    1,600    1,420  
Finance costs  (1,068)   (947)   (657)   (583)   (933)   (828) 
Profit before income tax  26,751    23,743    11,250    9,986    28,620    25,401  
Income tax expense  11,768    10,444    2,004    1,779    5,059    4,490  
Profit for the year  14,983    13,299    9,246    8,207    23,561    20,911  
Profit attributable to:                        
Non-controlling interest  (81)   (71)   (17)   (15)   (4)   (4) 
Owners of Parent company  15,064    13,370    9,263    8,222    23,565    20,915  
Earning per share                        
- Basic and diluted  2,168    1.92    1,333    1.18    3,391    3.01  
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  
Earning per ADS(1)                        
- Basic and diluted  2,168    1.92    1,333    1.18    3,391    3.01  

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,126.72 to US$1.00, the noon buying rate in effect on March 31, 2021 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.