Gravity Reports Third Quarter of 2021 Results and Business Update

Seoul, KOREA, REPUBLIC OF


Seoul, South Korea, Nov. 12, 2021 (GLOBE NEWSWIRE) --

GRAVITY Co., Ltd. (Nasdaq GM: 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, 2021, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

THIRD QUARTER 2021 HIGHLIGHTS

  • Total revenues were KRW 128,670 million (US$ 108,702 thousand), representing a 53.9% increase from the second quarter ended June 30, 2021 (“QoQ”) and a 2.4% decrease from the third quarter ended September 30, 2020 (“YoY”).
  • Operating profit was KRW 40,242 million (US$ 33,997 thousand), representing a 110.1% increase QoQ and a 17.1% increase YoY.
  • Profit before income tax expenses was KRW 41,435 million (US$ 35,005 thousand), representing a 113.7% increase QoQ and a 23.0% increase YoY.
  • Net profit attributable to parent company was KRW 26,351 million (US$ 22,262 thousand), representing a 78.5% increase QoQ and a 4.2% increase YoY.

REVIEW OF THIRD QUARTER 2021 FINANCIAL RESULTS

Revenues

Online game revenues for the third quarter of 2021 were KRW 18,295 million (US$ 15,456 thousand), representing a 18.3% decrease QoQ from KRW 22,380 million and a 42.5% decrease YoY from KRW 31,833 million. The decrease QoQ was mainly attributable to decreased revenues from Ragnarok Online in Thailand and Japan. Such decrease was partially offset by increased revenues from Ragnarok Online in Taiwan. The decrease YoY was largely due to decreased revenues from Ragnarok Online in Thailand.

Mobile game revenues were KRW 106,218 million (US$ 89,734 thousand) for the third quarter of 2021, representing a 92.6% increase QoQ from KRW 55,140 million and a 11.2% increase YoY from KRW 95,531 million. The increase QoQ resulted primarily from increased revenues from Ragnarok X: Next Generation in Southeast Asia that was launched on June 18, 2021 and Ragnarok Origin in Japan that was launched on June 28, 2021. Such increase was partially offset by decreased revenues from Ragnarok Origin in Korea, Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok M: Eternal Love in Southeast Asia. The increase YoY was primarily due to revenues from Ragnarok X: Next Generation in Southeast Asia, Taiwan, Hong Kong and Macau, and Ragnarok Origin in Japan. This increase was partially offset by decreased revenues from Ragnarok Origin in Korea and Ragnarok M: Eternal Love.

Other revenues were KRW 4,157 million (US$ 3,512 thousand) for the third quarter of 2021, representing a 31.8% decrease QoQ from KRW 6,091 million and a 6.2% decrease YoY from KRW 4,431 million.

Cost of Revenues

Cost of revenue was KRW 66,146 million (US$ 55,881 thousand) for the third quarter of 2021, representing a 44.3% increase QoQ from KRW 45,842 million and a 10.7% decrease YoY from KRW 74,107 million. The increase QoQ was mainly due to increased commission paid for mobile game services related to Ragnarok X: Next Generation in Southeast Asia and Ragnarok Origin in Japan. The decrease YoY was mostly from decreased commission paid for mobile game services related to Ragnarok M: Eternal Love and Ragnarok Origin in Korea.

Operating Expenses

Operating expenses were KRW 22,282 million (US$ 18,824 thousand) for the third quarter of 2021, representing a 19.7% increase QoQ from KRW 18,612 million and a 4.5% decrease YoY from KRW 23,332 million. The increase QoQ was mainly attributable to increased advertising expenses for Ragnarok: The Lost Memories in Thailand and Ragnarok Origin in Korea, United States and Canada, and salaries. The decrease YoY was mostly resulted from decreased advertising expenses for Ragnarok Origin in Korea, commission paid for payment gate way fees related to Ragnarok Online in Thailand, and research and development expenses.

Profit before income tax expenses

Profit before income tax expenses was KRW 41,435 million (US$ 35,005 thousand) for the third quarter of 2021 compared with profit before income tax expense of KRW 19,387 million for the second quarter of 2021 and profit before income tax expenses of KRW 33,675 million for the third quarter of 2020.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 26,351 million (US$ 22,262 thousand) for the third quarter of 2021 compared with net profit attributable to parent company of KRW 14,766 million for the second quarter of 2021 and a net profit attributable to parent company of KRW 25,281 million for the third quarter of 2020.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 226,173 million (US$ 191,073 thousand) as of September 30, 2021.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,183.70 to US$ 1.00, the noon buying rate in effect on September 30, 2021 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online

Gravity Game Tech, a subsidiary in Thailand, opened Ragnarok Classic, the new server of Ragnarok Online, in Thailand on October 28, 2021 and Gravity Game Link, a subsidiary in Indonesia, is also preparing to launch the new server, Ragnarok Retro, in Indonesia on December 15, 2021. Ragnarok Online is expected to be relaunched in the Philippines, Singapore and Malaysia in the first half of 2022, and Gravity Game Hub, a subsidiary in Singapore, will publish this game.

Ragnarok Online IP-based Games

  • Ragnarok X: Next Generation, a MMORPG mobile game

Ragnarok X: Next Generation was launched in Vietnam on September 1, 2021.

  • Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin was launched in the United States and Canada on November 10, 2021 and ranked as the second in free download of Google Play in the United States on the launching day. The game is scheduled to be launched in Taiwan, Hong Kong and Macau in the first half of 2022, and in Southeast Asia in the second half of 2022.

  • Other Ragnarok Online IP-based games

Ragnarok: The Lost Memories, a Cinematic Newtro Story RPG mobile game, was launched in Thailand in August 26, 2021. The game is scheduled to be launched in the Philippines, Singapore and Malaysia on December, 2021 and in North America in the first half of 2022. Gravity NeoCyon, Inc., our subsidiary in Korea, has developed the game.

Ragnarok V: Returns, a MMORPG mobile game, is expected to hold the closed beta test (“CBT”) in Oceania in December 2021 and is scheduled to be launched in the first quarter of 2022. The game has been developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Ragnarok Begins, a MMORPG PC game, has completed the CBT on September 7, 2021 with users’ positive feedbacks. The company is preparing to design the game as a cross-platform game across PC and mobile, and the game has been developed by Gravity.

Project T (Tentative title), a Card SRPG mobile game, is expected to be launched in Taiwan, Hong Kong and Macau in the first quarter of 2022.

Other IP games

NBA RISE TO STARDOM, a Sports mobile game, has started the open beta test (“OBT”) and pre-registration on September 28, 2021. The game is expected to be launched in Japan in November, 2021 and in Korea in the first half of 2022.

SADAKO M, a Mystery Solving Horror Escape Adventure mobile game, was launched in Japan on October 26, 2021.

Grandia HD Collection, a RPG console game, was released in Korea, Taiwan and Hong Kong on October 1, 2021. The game consists of a bundle of RPG classics Grandia and Grandia II and supports Korean and Chinese languages. Nintendo Switch is available for the game.

Investor Presentation

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

Based in Korea, 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-Sep-21 
  KRW  US$  KRW  US$ 
  (audited)  (unaudited)  (unaudited)  (unaudited) 
Assets                
Current assets:                
Cash and cash equivalents  110,632    93,463    118,173   99,834 
Short-term financial instruments  71,000    59,981    108,000   91,239 
Accounts receivable, net  59,761    50,487    82,071   69,334 
Other receivables, net  8    7    11   9 
Prepaid expenses  2,238    1,891    2,061   1,741 
Other current assets  2,946    2,489    3,958   3,344 
Total current assets  246,585    208,318    314,274   265,501 
Property and equipment, net  7,695    6,501    10,307   8,707 
Intangible assets  3,363    2,841    3,400   2,872 
Deferred tax assets  3,590    3,033    787   665 
Other non-current financial assets  1,324    1,119    2,388   2,017 
Other non-current assets  2,815    2,377    1,578   1,335 
Total assets  265,372    224,189    332,734   281,097 
Liabilities and Equity                
Current liabilities:                
Accounts payable  52,688    44,511    56,702   47,902 
Deferred revenue  13,692    11,567    11,076   9,357 
Withholdings  2,851    2,409    5,162   4,361 
Accrued expense  1,365    1,153    1,354   1,144 
Income tax payable  9,470    8,000    3,684   3,112 
Other current liabilities  2,654    2,242    2,945   2,488 
Total current liabilities  82,720    69,882    80,923   68,364 
Long-term deferred revenue  101    85    98   83 
Other non-current liabilities  5,203    4,397    6,279   5,305 
Total liabilities  88,024    74,364    87,300   73,752 
Share capital  3,474    2,935    3,474   2,935 
Capital surplus  27,110    22,903    27,099   22,894 
Other components of equity  (1,045)   (883)   2,037   1,721 
Retained earnings  147,371    124,500    212,053   179,144 
Equity attributable to owners of the Parent Company  

176,910
    

149,455
    244,663   

206,694
 
Non-controlling interest  438    370    771   651 
Total equity  177,348    149,825    245,434   207,345 
Total liabilities and equity  265,372    224,189    332,734   281,097 

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,183.70 to US$ 1.00, the noon buying rate in effect on September 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  Nine months ended 
  30-Jun-21  30-Sep-20  30-Sep-21  30-Sep-20
 30-Sep-21 
  (KRW)  (KRW)  (KRW)  (US$)  (KRW)  (KRW)  (US$) 
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Revenues:                            
Online games  22,380    31,833    18,295    15,456    74,176    60,133    50,801  
Mobile games  55,140    95,531    106,218    89,734    205,762    243,796    205,961  
Other revenue  6,091    4,431    4,157    3,512    13,575    13,411    11,330  
Total net revenue  83,611    131,795    128,670    108,702    293,513    317,340    268,092  
Cost of revenue  45,842    74,107    66,146    55,881    174,079    169,541    143,230  
Gross profit  37,769    57,688    62,524    52,821    119,434    147,799    124,862  
Operating expenses:                            
Selling, general and administrative expenses  14,014    18,042    18,091    15,283    46,692    47,613    40,223  
Research and development  4,147    4,550    4,143    3,500    10,676    12,299    10,390  
Others, net  451    740    48    41    1,041    535    454  
Total operating expenses  18,612    23,332    22,282    18,824    58,409    60,447    51,067  
Operating profit  19,157    34,356    40,242    33,997    61,025    87,352    73,795  
Finance income(costs):                            
Finance income  597    822    2,128    1,798    3,000    4,325    3,654  
Finance costs  (367)   (1,503)   (935)   (790)   (2,765)   (2,235)   (1,888) 
Profit before income tax  19,387    33,675    41,435    35,005    61,260    89,442    75,561  
Income tax expenses  4,569    8,390    15,151    12,800    13,687    24,779    20,933  
Profit for the year  14,818    25,285    26,284    22,205    47,573    64,663    54,628  
Profit attributable to:                            
Non-controlling interest  52    4    (67)   (57)   (66)   (19)   (16) 
Owners of Parent company  14,766    25,281    26,351    22,262    47,639    64,682    54,644  
Earnings per share                            
- Basic and diluted  2,125    3,638    3,792    3.20    6,856    9,308    7.86  
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  
Earnings per ADS(1)                            
- Basic and diluted  2,125    3,638    3,792    3.20    6,856    9,308    7.86  

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,183.70 to US$1.00, the noon buying rate in effect on September 30, 2021 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.