Gravity Reports Second Quarter of 2021 Results and Business Update

Seoul, KOREA, REPUBLIC OF


Seoul, South Korea, Aug. 13, 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 second quarter ended June 30, 2021, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

SECOND QUARTER 2021 HIGHLIGHTS

  • Total revenues were KRW 83,611 million (US$ 73,965 thousand), representing a 20.4% decrease from the first quarter ended March 31, 2021 (“QoQ”) and a 5.5% decrease from the second quarter ended June 30, 2020 (“YoY”).
  • Operating profit was KRW 19,157 million (US$ 16,947 thousand), representing a 31.5% decrease QoQ and a 17.4% increase YoY.
  • Profit before income tax expenses was KRW 19,387 million (US$ 17,150 thousand), representing a 32.3% decrease QoQ and a 18.7% increase YoY.
  • Net profit attributable to parent company was KRW 14,766 million (US$ 13,062 thousand), representing a 37.3% decrease QoQ and a 12.8% increase YoY.

REVIEW OF SECOND QUARTER 2021 FINANCIAL RESULTS

Revenues

Online game revenues for the second quarter of 2021 were KRW 22,380 million (US$ 19,798 thousand), representing a 15.0% increase QoQ from KRW 19,458 million and a 22.6% decrease YoY from KRW 28,907 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Thailand. The decrease YoY was largely due to decreased revenues from Ragnarok Online in Thailand and revenues from collaboration event with Garena’s Free Fire items based on Ragnarok Online IP.

Mobile game revenues were KRW 55,140 million (US$ 48,778 thousand) for the second quarter of 2021, representing a 33.1% decrease QoQ from KRW 82,438 million and a 1.6% increase YoY from KRW 54,249 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau, Ragnarok Origin in Korea and Ragnarok M: Eternal Love in Southeast Asia. Such decrease was partially offset by increased revenues from Ragnarok X: Next Generation in Southeast Asia that was launched on June 18, 2021. The increase YoY was primarily due to revenues from Ragnarok X: Next Generation in Taiwan, Hong Kong, Macau and Southeast Asia and Ragnarok Origin in Korea. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love and Ragnarok Tactics.

Other revenues were KRW 6,091 million (US$ 5,389 thousand) for the second quarter of 2021, representing 92.6% increase QoQ from KRW 3,163 million and a 14.9% increase YoY from KRW 5,302 million.

Cost of Revenue

Cost of revenue was KRW 45,842 million (US$ 40,554 thousand) for the second quarter of 2021, representing a 20.3% decrease QoQ from KRW 57,553 million and a 10.3% decrease YoY from KRW 51,098 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok M: Eternal Love, Ragnarok Origin in Korea and Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau. The decrease YoY was mostly from decreased commission paid for mobile game services related to Ragnarok M: Eternal Love and Ragnarok Tactics.

Operating Expenses

Operating expenses were KRW 18,612 million (US$ 16,464 thousand) for the second quarter of 2021, representing a 4.8% decrease QoQ from KRW 19,553 million and a 11.6% decrease YoY from KRW 21,047 million. The decrease QoQ was mainly attributable to decreased advertising expenses for Tera Classic in Japan, The Lord in Thailand and The Labyrinth of Ragnarok in global. The decrease YoY was mostly resulted from decreased advertising expenses for Ragnarok Origin and Ragnarok Tactics in Korea, Sacred Blade in Japan, Ragnarok Online in Thailand and Ragnarok H5 in Indonesia.

Profit before income tax expenses

Profit before income tax expenses was KRW 19,387 million (US$ 17,150 thousand) for the second quarter of 2021 compared with profit before income tax expense of KRW 28,620 million for the first quarter of 2021 and profit before income tax expenses of KRW 16,335 million for the second quarter of 2020.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 14,766 million (US$ 13,062 thousand) for the second quarter of 2021 compared with net profit attributable to parent company of KRW 23,565 million for the first quarter of 2021 and a net profit attributable to parent company of KRW 13,095 million for the second quarter of 2020.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 202,631 million (US$ 179,253 thousand) as of June 30, 2021.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,130.42 to US$ 1.00, the noon buying rate in effect on June 30, 2021 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online

Gravity opened Ragnarok Online in Vietnam on July 8, 2021 with VTC Technology and Digital Content Company as a joint publisher.

Ragnarok Online IP-based Games

  • Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin was launched in Japan on June 28, 2021 and ranked as the first in free download of Google Play games and Apple’s App Store games after its launching. The game is scheduled to be launched in the United States and Canada in October 2021 and in Taiwan, Hong Kong and Macau in the first half of 2022.

  • Ragnarok X: Next Generation, a MMORPG mobile game

Ragnarok X: Next Generation was launched in Southeast Asia on June 18, 2021 and ranked as the first in top grossing of Apple App Store in Thailand, Indonesia and the Philippines. The game is being prepared for launch in Vietnam in September 2021 and in Korea in the first half of 2022.

  • Other Ragnarok Online IP-based games

Ragnarok Project S (Tentative title), a MMORPG mobile game, is scheduled to be launched in Oceania in the fourth quarter of 2021 and has been developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Ragnarok The Lost Memories, a Cinematic Newtro Story RPG mobile game, is expected to be launched in Thailand in the third quarter of 2021 and in North America in the fourth quarter of 2021. Gravity NeoCyon, Inc., our subsidiary in Korea, has developed the game.

Ragnarok Begins, a MMORPG PC game, is expected to start the first closed beta test(“CBT”) in September 2021 and the launching schedule will be disclosed in G-STAR 2021. The game has been developed by Gravity.

Other IP games

NBA RISE TO STARDOM, a Sports mobile game, is scheduled to run the CBT in September 2021 and is expected to be launched in Japan in the fourth quarter of 2021. Both mobile platforms, iOS and Android, will be available for the game.

Sadako M, an Adventure mobile game, is expected to be launched in Japan in September 2021.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the second 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 91 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  30-June-21 
  KRW  US$  KRW  US$ 
  (audited)  (unaudited)  (unaudited)  (unaudited) 
Assets                
Current assets:                
Cash and cash equivalents  110,632    97,868    101,631   89,906 
Short-term financial instruments  71,000    62,809    101,000   89,347 
Accounts receivable, net  59,761    52,866    58,874   52,082 
Other receivables, net  8    7    60   53 
Prepaid expenses  2,238    1,980    1,946   1,721 
Other current assets  2,946    2,606    2,301   2,035 
Total current assets  246,585    218,136    265,812   235,144 
Property and equipment, net  7,695    6,807    9,459   8,368 
Intangible assets, net  3,363    2,975    3,788   3,351 
Deferred tax assets  3,590    3,176    3,072   2,718 
Other non-current financial assets  1,324    1,171    2,071   1,832 
Other non-current assets  2,815    2,490    1,844   1,631 
Total assets  265,372    234,755    286,046   253,044 
Liabilities and Equity                
Current liabilities:                
Accounts payable  52,688    46,609    40,271   35,625 
Deferred revenue  13,692    12,112    12,030   10,642 
Withholdings  2,851    2,522    2,680   2,371 
Accrued expense  1,365    1,208    1,219   1,078 
Income tax payable  9,470    8,377    4,273   3,780 
Other current liabilities  2,654    2,348    2,567   2,271 
Total current liabilities  82,720    73,176    63,040   55,767 
Long-term deferred revenue  101    89    98   87 
Other non-current liabilities  5,203    4,604    5,782   5,114 
Total liabilities  88,024    77,869    68,920   60,968 
Share capital  3,474    3,073    3,474   3,073 
Capital surplus  27,110    23,982    27,110   23,982 
Other components of equity  (1,045)   (924)   11   10 
Retained earnings  147,371    130,368    185,702   164,277 
Equity attributable to owners of the Parent Company  

176,910
    

156,499
    

216,297
   

191,342
 
Non-controlling interest  438    387    829   734 
Total equity  177,348    156,886    217,126   192,076 
Total liabilities and equity  265,372    234,755    286,046   253,044 

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,130.42 to US$ 1.00, the noon buying rate in effect on June 30, 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 Six months ended
  31-Mar-21  30-Jun-20  30-Jun-21 30-Jun-20 30-Jun-21
  (KRW)  (KRW)  (KRW)  (US$)  (KRW)  (KRW)  (US$) 
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Revenues:                            
    Online games  19,458    28,907    22,380    19,798    42,343    41,838    37,011  
    Mobile games  82,438    54,249    55,140    48,778    110,231    137,578    121,705  
    Other revenue  3,163    5,302    6,091    5,389    9,144    9,254    8,187  
       Total net revenue  105,059    88,458    83,611    73,965    161,718    188,670    166,903  
Cost of revenue  57,553    51,098    45,842    40,554    99,972    103,395    91,467  
Gross profit  47,506    37,360    37,769    33,411    61,746    85,275    75,436  
Operating expenses:                            
    Selling, general and administrative expenses      15,508    17,643    14,014    12,397    28,650    29,522    26,116  
    Research and development  4,009    3,254    4,147    3,669    6,126    8,156    7,215  
    Others, net  36    150    451    398    301    487    430  
       Total operating expenses  19,553    21,047    18,612    16,464    35,077    38,165    33,761  
Operating profit  27,953    16,313    19,157    16,947    26,669    47,110    41,675  
Finance income(costs):                            
    Finance income  1,600    627    597    528    2,178    2,197    1,943  
    Finance costs  (933)   (605)   (367)   (325)   (1,262)   (1,300)   (1,150) 
Profit before income tax  28,620    16,335    19,387    17,150    27,585    48,007    42,468  
Income tax expense  5,059    3,293    4,569    4,042    5,297    9,628    8,517  
    Profit for the year  23,561    13,042    14,818    13,108    22,288    38,379    33,951  
Profit attributable to:                            
    Non-controlling interest  (4)   (53)   52    46    (70)   48    42  
    Owners of Parent company  23,565    13,095    14,766    13,062    22,358    38,331    33,909  
Earning per share                            
       - Basic and diluted  3,391    1,884    2,125    1.88    3,217    5,516    4.88  
Weighted average number of shares outstanding                            
       - Basic and diluted  6,498,000    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  3,391    1,884    2,125    1.88    3,217    5,516    4.88  

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,130.42 to US$1.00, the noon buying rate in effect on June 30, 2021 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.