GRAVITY REPORTS THIRD QUARTER OF 2020 RESULTS AND BUSINESS UPDATES
Seoul, South Korea, Nov. 13, 2020 (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, 2020, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.
*THIRD QUARTER 2020 HIGHLIGHTS*
· Total revenues were KRW 131,795 million (US$ 113,034 thousand), representing a 49.0% increase from the second quarter ended June 30, 2020 (“QoQ”) and a 69.9% increase from the third quarter ended September 30, 2019 (“YoY”).
· Operating profit was KRW 34,356 million (US$ 29,465 thousand), representing a 110.6% increase QoQ and a 236.0% increase YoY.
· Profit before income tax expenses was KRW 33,675 million (US$ 28,881 thousand), representing a 106.2% increase QoQ and a 200.3% increase YoY.
· Net profit attributable to parent company was KRW 25,281 million (US$ 21,682 thousand), representing a 93.1% increase QoQ and a 182.4% increase YoY.
*REVIEW OF THIRD QUARTER 2020 FINANCIAL RESULTS*
Revenues
Subscription revenues for the third quarter of 2020 were KRW 29,159 million (US$ 25,008 thousand), representing a 19.3% increase QoQ from KRW 24,448 million and a 176.0% increase YoY from KRW 10,564 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Thailand that was re-launched on May 28, 2020 and Brazil. Such increase was partially offset by decreased revenues from Ragnarok H5 in Indonesia and Ragnarok Online in Taiwan. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and United States.
Royalty and license fee revenues for the third quarter of 2020 were KRW 2,674 million (US$ 2,293 thousand), representing a 40.0% decrease QoQ from KRW 4,459 million and a 3.5% increase YoY from KRW 2,583 million. The decrease QoQ was primarily due to temporarily generated revenue from collaboration event with Garena’s Free Fire items based on Ragnarok Online IP in previous quarter. The increase YoY resulted mainly from increased revenue from Ragnarok Online in Japan. Such increase was partially offset by decreased revenue from Ragnarok Online in Thailand.
Mobile game revenues were KRW 95,531 million (US$ 81,933 thousand) for the third quarter of 2020, representing a 76.1% increase QoQ from KRW 54,249 million and a 59.0% increase YoY from KRW 60,086 million. The increase QoQ resulted primarily from increased revenues from Ragnarok Origin in Korea that was launched on July 7, 2020 and Ragnarok M: Eternal Love in Southeast Asia. Such increase was partially offset by decreased revenues from Ragnarok Tactics in Korea and Taiwan, Ragnarok H5 in Indonesia, and Ragnarok M: Eternal Love in Korea and Taiwan. The increase YoY was primarily due to revenues from Ragnarok Origin in Korea that was launched on July 7, 2020, Ragnarok M: Eternal Love in Taiwan. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love in Japan, Southeast Asia, North America, South America and Oceania, and Korea.
Other revenues were KRW 4,431 million (US$ 3,800 thousand) for the third quarter of 2020, representing a 16.4% decrease QoQ from KRW 5,302 million and a 2.3% increase YoY from KRW 4,333 million
Cost of Revenues
Cost of revenue was KRW 74,107 million (US$ 63,558 thousand) for the third quarter of 2020, representing a 45.0% increase QoQ from KRW 51,098 million and a 32.2% increase YoY from KRW 56,058 million. The increase QoQ was mainly due to increased commission paid for mobile game services related to Ragnarok Origin in Korea that was launched on July 7, 2020. The increase YoY was mostly from increased commission paid for mobile game services related to Ragnarok Origin in Korea that was launched on July 7, 2020.
Operating Expenses
Operating expenses were KRW 23,332 million (US$ 20,011 thousand) for the third quarter of 2020, representing a 10.9% increase QoQ from KRW 21,047 million and a 106.8% increase YoY from KRW 11,282 million. The increase QoQ was mainly attributable to increased research and development expenses and commission paid for payment gate way fees related to Ragnarok Online in Thailand. The increase YoY was mostly resulted from increased advertising expenses for Ragnarok Origin in Korea, commission paid for payment gate way fees related to Ragnarok Online in Thailand, research and development expenses, and salaries.
Profit before income tax expenses
Profit before income tax expenses was KRW 33,675 million (US$ 28,881 thousand) for the third quarter of 2020 compared with profit before income tax expense of KRW 16,335 million for the second quarter of 2020 and profit before income tax expenses of KRW 11,213 million for the third quarter of 2019.
Net Profit
As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 25,281 million (US$ 21,682 thousand) for the third quarter of 2020 compared with net profit attributable to parent company of KRW 13,095 million for the second quarter of 2020 and a net profit attributable to parent company of KRW 8,952 million for the third quarter of 2019.
Liquidity
The balance of cash and cash equivalents and short-term financial instruments was KRW 171,800 million (US$ 147,345 thousand) as of September 30, 2020.
Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,165.97 to US$ 1.00, the noon buying rate in effect on September 30, 2020 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 was launched in Korea on July 7, 2020 and is being prepared for launch in Japan in 1^st half of 2021.
· Ragnarok X: Next Generation, a MMORPG mobile game
Ragnarok X: Next Generation was launched in Taiwan, Hong Kong and Macau on October 15, 2020 and is being prepared for launch in Southeast Asia in 1^st half of 2021.
· The Labyrinth of Ragnarok, an Idle MMORPG mobile game
The Labyrinth of Ragnarok was launched in Philippines, Singapore and Malaysia on October 14, 2020. This game is being prepared for launch in Thailand and Indonesia in December 2020.
· 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 in 1^st half of 2021. The game was developed by NeoCyon, Inc., our subsidiary in Korea.
Action RO2: Spear of Odin, a 3D Action MORPG mobile game, is expected to be launched in Indonesia, Malaysia, Philippines, Singapore and Australia in 1^st half of 2021. The game was developed by NeoCyon, Inc., our subsidiary in Korea.
*Other IP games*
Tactical Warfare, a First-Person Shooter (FPS) game, has started pre-registration and will be launched in North, Central and South America in the fourth quarter of 2020. The game is published by Gravity Interactive, Inc., a subsidiary in the United States.
Tera Classic, a MMORPG mobile game, has started pre-registration and will be launched in Japan in January 2021. The game is published by Gravity Game Arise, Inc., a subsidiary in Japan.
*Investor Presentation*
Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of third quarter in 2020 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 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, 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. 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$)
* * * * *As of* * *
* * * * *31-Dec-19* * * * * *30-Sep-20* * *
* * * * KRW * * US$ * * KRW * * US$ (audited) (unaudited) (unaudited) (unaudited)
*Assets*
Current assets:
Cash and cash equivalents 79,428 68,122 116,800 100,174
Short-term financial instruments 39,500 33,877 55,000 47,171
Accounts receivable, net 32,253 27,662 55,570 47,660
Other receivables, net 56 48
Prepaid expenses 1,962 1,683 2,782 2,386
Other current assets 2,664 2,285 1,137 975
Total current assets 155,863 133,677 231,289 198,366
Property and equipment, net 6,663 5,715 7,201 6,176
Intangible assets 1,717 1,473 1,733 1,486
Deferred tax assets 7,667 6,576 7,885 6,763
Other non-current financial assets 1,770 1,518 1,777 1,524
Other non-current assets 1,745 1,494 5,255 4,508
Total assets 175,425 150,453 255,140 218,823
*Liabilities and Equity*
Current liabilities:
Accounts payable 37,496 32,159 56,668 48,602
Deferred revenue 10,748 9,218 15,194 13,031
Withholdings 1,764 1,513 3,463 2,970
Accrued expense 1,175 1,008 1,182 1,014
Income tax payable 2,618 2,245 3,325 2,852
Other current liabilities 1,986 1,703 2,629 2,255
Total current liabilities 55,787 47,846 82,461 70,724
Long-term deferred revenue 98 84 5,037 4,320
Other non-current liabilities 3,774 3,237 3,368 2,889
Total liabilities 59,659 51,167 90,866 77,933
Share capital 3,474 2,979 3,474 2,979
Capital surplus 27,128 23,266 27,110 23,251
Other components of equity 274 235 896 768
Retained earnings 84,668 72,616 132,307 113,474
Equity attributable to owners of the Parent Company 115,544 99,096 163,787 140,472
Non-controlling interest 222 190 487 418
Total equity 115,766 99,286 164,274 140,890
Total liabilities and equity 175,425 150,453 255,140 218,823
* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,165.97 to US$ 1.00, the noon buying rate in effect on September 30, 2020 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-20* * * * * *30-Sep-19* * * * * *30-Sep-20* * * * * *30-Sep-19* * * * * *30-Sep-20* * *
* * * * (KRW) (KRW) (KRW) (US$) (KRW) (KRW) (US$)
* * * * (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Online games-subscription revenue 24,448 10,564 29,159 25,008 23,566 63,500 54,461
Online games-royalties and license fees 4,459 2,583 2,674 2,293 9,135 10,676 9,156
Mobile games 54,249 60,086 95,531 81,933 245,189 205,762 176,473
Other revenue 5,302 4,333 4,431 3,800 11,426 13,575 11,643
Total net revenue 88,458 77,566 131,795 113,034 289,316 293,513 251,733
Cost of revenues 51,098 56,058 74,107 63,558 214,153 174,079 149,300
Gross profit 37,360 21,508 57,688 49,476 75,163 119,434 102,433
Operating expenses:
Selling, general and administrative expenses 17,643 8,984 18,042 15,474 21,382 46,692 40,046
Research and development 3,254 2,349 4,550 3,902 6,658 10,676 9,156
Others, net 150 (51 ) 740 635 259 1,041 893
Total operating expenses 21,047 11,282 23,332 20,011 28,299 58,409 50,095
Operating profit 16,313 10,226 34,356 29,465 46,864 61,025 52,338
Finance income(costs):
Finance income 627 1,353 822 705 3,556 3,000 2,573
Finance costs (605 ) (366 ) (1,503 ) (1,289 ) (781 ) (2,765 ) (2,371 )
Profit before income tax 16,335 11,213 33,675 28,881 49,639 61,260 52,540
Income tax expenses 3,293 2,357 8,390 7,196 10,192 13,687 11,739
Profit for the year 13,042 8,856 25,285 21,685 39,447 47,573 40,801
Profit attributable to:
Non-controlling interest (53 ) (96 ) 4 3 (126 ) (66 ) (57 )
Owners of Parent company 13,095 8,952 25,281 21,682 39,573 47,639 40,858
Earning per share
- Basic and diluted 1,884 1,288 3,638 3.10 5,695 6,856 5.9
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 1,884 1,288 3,638 3.10 5,695 6,856 5.9
* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,165.97 to US$1.00, the noon buying rate in effect on September 30, 2020 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.