GRAVITY REPORTS FIRST QUARTER OF 2017
RESULTS AND BUSINESS UPDATES
Seoul, South Korea – April 28, 2017 – GRAVITY
Co., Ltd. (NasdaqCM: 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, 2017, prepared in accordance with
generally accepted accounting principles in the United States.
FINAICIAL RESULTS FOR THE FIRST QUARTER OF
2017
Revenues for the first quarter ended March 31,
2017 was KRW 23,352 million (US$ 20,897 thousand), representing a
33.4% increase from KRW 17,500 million for the fourth quarter ended
December 31, 2016 (“QoQ”) and a 156.8% increase from KRW 9,094
million for the first quarter ended March 31, 2016 (“YoY”).
Review of Financial Results
Revenues
Subscription revenues for the first quarter of
2017 were KRW 9,855 million (US$ 8,819 thousand), representing a
2.5% decrease QoQ from KRW 10,107 million and a 361.2% increase YoY
from KRW 2,137 million. The decrease QoQ was mainly attributable to
decreased revenues from Ragnarok Online in Taiwan and Korea, which
was partially offset by increased revenue from Ragnarok Prequel in
Taiwan. The increase YoY was largely due to increased revenues from
Ragnarok Online and Ragnarok Prequel in Taiwan. We began to
directly offer Ragnarok Online and Ragnarok Prequel in Taiwan since
June 2016 and July 2016, respectively.
Royalty and license fee revenues for the first
quarter of 2017 were KRW 4,475 million (US$ 4,005 thousand),
representing a 49.9% increase QoQ from KRW 2,985 million and a
32.9% increase YoY from KRW 3,368 million. The increase QoQ was
primarily due to increased revenues from Ragnarok Online in Japan
and Indonesia. The increase YoY resulted mainly from increased
revenues from Ragnarok Online in Japan, Thailand and Indonesia,
which was partially offset by decreased revenue from Ragnarok
Online in Taiwan
Mobile game and application revenues were KRW
8,063 million (US$ 7,215 thousand) for the first quarter of 2017,
representing a 148.6% increase QoQ from KRW 3,243 million and a
184.9% increase YoY from KRW 2,830 million. The increase QoQ and
YoY resulted primarily from increased royalty revenues from
Ragnarok Online IP-based mobile games in China and increased
revenues from Ragnarok R (locally titled as RO Xianjing Chuanshuo:
Fuxinging) in Taiwan. Ragnarok R was launched in Taiwan on December
1, 2016.
Character merchandising and other revenues were
KRW 959 million (US$ 858 thousand) for the first quarter of 2017,
representing 17.7% decrease from KRW 1,165 million and a 26.5 %
increase YoY from KRW 759 million.
Cost of Revenue
Cost of revenue was KRW 13,969 million (US$
12,500 thousand) for the first quarter of 2017, representing a
42.6% increase QoQ from KRW 9,797 million and a 111.0% increase YoY
from KRW 6,619 million. The increase QoQ was mainly due to
increased commission paid for mobile game service in Taiwan and
Thailand, which was partially offset by decreased outsourcing fees.
The increase YoY was mostly from increased commission paid related
to mobile game and web game service in Taiwan and Thailand, which
was partially offset by decreased salaries.
Operating Expenses
Operating expenses were KRW 6,085 million (US$
5,445 thousand) for the first quarter of 2017, representing a 5.7%
increase QoQ from KRW 5,759 million and a 100.4% increase YoY from
KRW 3,036 million. The increase QoQ was mainly attributable to
increased advertising expenses related to pre-launch marketing for
Ragnarok R, which was officially launched in Korea on April 13,
2017. Such increase was partially offset by decreased commission
paid. The increase YoY was mostly resulted from increased
advertising expenses for Ragnarok R and Ragnarok Online and
commission paid for payment gateway fees.
Income before income tax expenses
Income before income tax expenses was KRW 3,382
million (US$ 3,027 thousand) for the first quarter of 2017 compared
with income before income tax expense of KRW 2,394 million for the
fourth quarter of 2016 and loss before income tax expenses of KRW
1,287 million for the first quarter of 2016.
Net Income
As a result of the foregoing factors, Gravity
recorded a net income attributable to parent company of KRW 2,170
million (US$ 1,942 thousand) for the first quarter of 2017 compared
with net income attributable to parent company of KRW 470 million
for the fourth quarter of 2016 and a net loss attributable to
parent company of KRW 1,701 million for the first quarter of
2016.
Liquidity
The balance of cash and cash equivalents and
short-term financial instruments was KRW 42,196 million (US$ 37,760
thousand) as of March 31, 2017.
Note: For convenience purposes only, the KRW
amounts have been expressed in U.S. dollars at the exchange rate of
KRW 1,117.48 to US$ 1.00, the noon buying rate in effect on March
31, 2017 as quoted by the Federal Reserve Bank of New York.
GRAVITY BUSINESS UPDATE
- Ragnarok R, a card RPG mobile game*1
On April 13, 2017, Ragnarok R was commercially
launched in Korea. Based on mobile game sales ranking in Korea,
such game was ranked fourth in both Apple’s App Store and Google
Play Store, at its peak.
Ragnarok R was developed by Shanghai The Dream
Network Technology Co., Ltd.(“Dream Square”) based on contents
Ragnarok Online and Gravity is a publisher of such game in Taiwan,
Thailand and Korea. Gravity and Dream Square plan to launch
Ragnarok R in more markets.
- Other Ragnarok Online IP-based games
On March 27, 2017, Ragnarok Prequel, a web
browser-based MMORPG, was launched in United States and Canada.
Such game is locally named as Ragnarok Journey and currently being
offered through WarpPortal, Gravity’s online game service platform.
Gravity and Dream Square plan to launch Ragnarok Prequel in more
markets.
Gravity is currently developing two more mobile
games in-house. One of such mobile games is planned to be launched
during 2017 and the other is planned to be launched during
2018.
Our local licensee, Electronics Extreme Ltd.,
plans to re-launch Ragnarok Online in Philippine during third
quarter of 2017. Electronics Extreme Ltd. successfully re-launched
Ragnarok Online in Thailand on July 13, 2016 and Ragnarok Online
won best MMORPG award in 2016 Thailand Games Show Big Festival.
*1 Descriptions about rankings of the games are
based on various statistical data available from public sources and
such rankings do not necessarily reflect actual profits from such
games.
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 78 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, 2016 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. Ji Hee Kim IR Manager Gravity Co., Ltd.
Email: ircommunication@gravity.co.kr Telephone: +82-2-2132-7800
#
# #
GRAVITY Co.,
Ltd.Consolidated Balance Sheet
(In millions of KRW and thousands of US$)
|
|
|
|
As of |
|
|
|
|
31-Dec-16 |
|
31-Mar-17 |
|
|
|
|
KRW |
|
US$ |
|
KRW |
|
US$ |
| Assets |
(audited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
| Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
16,720 |
|
|
14,962 |
|
|
19,696 |
|
|
17,625 |
|
|
|
Short-term financial instruments |
22,000 |
|
|
19,687 |
|
|
22,500 |
|
|
20,135 |
|
|
|
Accounts receivable, net |
11,819 |
|
|
10,576 |
|
|
15,180 |
|
|
13,584 |
|
|
|
Other current assets |
2,852 |
|
|
2,552 |
|
|
3,139 |
|
|
2,809 |
|
|
|
|
Total
current assets |
53,391 |
|
|
47,777 |
|
|
60,515 |
|
|
54,153 |
|
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
593 |
|
|
531 |
|
|
753 |
|
|
674 |
|
| Leasehold and other deposits |
962 |
|
|
861 |
|
|
947 |
|
|
847 |
|
| Intangible assets |
91 |
|
|
81 |
|
|
89 |
|
|
80 |
|
| Other non-current assets |
153 |
|
|
137 |
|
|
105 |
|
|
94 |
|
|
|
|
Total
assets |
55,190 |
|
|
49,387 |
|
|
62,409 |
|
|
55,848 |
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and Equity |
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
10,033 |
|
|
8,978 |
|
|
13,056 |
|
|
11,683 |
|
|
|
Deferred revenue |
9,689 |
|
|
8,670 |
|
|
10,930 |
|
|
9,781 |
|
|
|
Other current liabilities |
964 |
|
|
863 |
|
|
1,660 |
|
|
1,485 |
|
|
|
|
Total
current liabilities |
20,686 |
|
|
18,511 |
|
|
25,646 |
|
|
22,949 |
|
| Long-term deferred revenue |
4,096 |
|
|
3,665 |
|
|
3,818 |
|
|
3,417 |
|
| Accrued severance benefits |
104 |
|
|
93 |
|
|
135 |
|
|
121 |
|
| Other non-current liabilities |
210 |
|
|
188 |
|
|
312 |
|
|
280 |
|
|
|
|
Total
liabilities |
25,096 |
|
|
22,457 |
|
|
29,911 |
|
|
26,767 |
|
| Common shares |
3,474 |
|
|
3,109 |
|
|
3,474 |
|
|
3,109 |
|
| Additional paid-in capital |
75,076 |
|
|
67,183 |
|
|
75,076 |
|
|
67,183 |
|
| Accumulated deficit |
(48,511 |
) |
|
(43,411 |
) |
|
(46,341 |
) |
|
(41,469 |
) |
| Accumulated other comprehensive income |
617 |
|
|
552 |
|
|
867 |
|
|
776 |
|
|
|
|
Total
parent company shareholders' equity |
30,656 |
|
|
27,433 |
|
|
33,076 |
|
|
29,599 |
|
| Non-controlling interest |
(562 |
) |
|
(503 |
) |
|
(578 |
) |
|
(518 |
) |
|
|
|
Total
equity |
30,094 |
|
|
26,930 |
|
|
32,498 |
|
|
29,081 |
|
|
|
|
Total
liabilities and equity |
55,190 |
|
|
49,387 |
|
|
62,409 |
|
|
55,848 |
|
* For convenience purposes only, the KRW amounts
are expressed in U.S. dollars at the rate of KRW 1,117.48 to US$
1.00, the noon buying rate in effect on March 31, 2017 as quoted by
the Federal Reserve Bank of New York.
GRAVITY Co.,
Ltd.Consolidated Statements of
Operations
(In millions of KRW and thousands of US$ except
for share and ADS data)
|
|
|
|
Three months ended |
|
|
|
|
31-Dec-16 |
|
31-Mar-16 |
|
31-Mar-17 |
|
|
|
|
(KRW) |
|
(US$) |
|
(KRW) |
|
(US$) |
|
(KRW) |
|
(US$) |
|
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
| Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Online games-subscription revenue |
10,107 |
|
|
9,044 |
|
|
2,137 |
|
|
1,912 |
|
|
9,855 |
|
|
8,819 |
|
|
|
Online games-royalties and license fees |
2,985 |
|
|
2,671 |
|
|
3,368 |
|
|
3,014 |
|
|
4,475 |
|
|
4,005 |
|
|
|
Mobile games and applications |
3,243 |
|
|
2,902 |
|
|
2,830 |
|
|
2,533 |
|
|
8,063 |
|
|
7,215 |
|
|
|
Character merchandising and other revenue(1) |
1,165 |
|
|
1,043 |
|
|
759 |
|
|
679 |
|
|
959 |
|
|
858 |
|
|
|
|
Total
net revenue |
17,500 |
|
|
15,660 |
|
|
9,094 |
|
|
8,138 |
|
|
23,352 |
|
|
20,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue |
9,797 |
|
|
8,767 |
|
|
6,619 |
|
|
5,923 |
|
|
13,969 |
|
|
12,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
7,703 |
|
|
6,893 |
|
|
2,475 |
|
|
2,215 |
|
|
9,383 |
|
|
8,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
5,125 |
|
|
4,586 |
|
|
2,688 |
|
|
2,405 |
|
|
5,516 |
|
|
4,936 |
|
|
|
Research and development |
634 |
|
|
567 |
|
|
343 |
|
|
307 |
|
|
569 |
|
|
509 |
|
|
|
Impairment losses on intangible assets |
─ |
|
─ |
|
5 |
|
|
4 |
|
|
─ |
|
─ |
|
|
|
Total
operating expenses |
5,759 |
|
|
5,153 |
|
|
3,036 |
|
|
2,716 |
|
|
6,085 |
|
|
5,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
1,944 |
|
|
1,740 |
|
|
(561 |
) |
|
(501 |
) |
|
3,298 |
|
|
2,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
130 |
|
|
116 |
|
|
132 |
|
|
118 |
|
|
133 |
|
|
119 |
|
|
|
Interest expense |
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
(3 |
) |
|
(3 |
) |
|
|
Foreign currency income (loss), net |
320 |
|
|
286 |
|
|
(858 |
) |
|
(768 |
) |
|
(46 |
) |
|
(41 |
) |
|
|
Others, net |
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income(loss) before income tax expenses |
2,394 |
|
|
2,142 |
|
|
(1,287 |
) |
|
(1,151 |
) |
|
3,382 |
|
|
3,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax expenses |
1,932 |
|
|
1,729 |
|
|
433 |
|
|
387 |
|
|
1,228 |
|
|
1,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(loss) |
462 |
|
|
413 |
|
|
(1,720 |
) |
|
(1,538 |
) |
|
2,154 |
|
|
1,928 |
|
| Net income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest |
(8 |
) |
|
(7 |
) |
|
(19 |
) |
|
(17 |
) |
|
(16 |
) |
|
(14 |
) |
|
|
Parent company |
470 |
|
|
420 |
|
|
(1,701 |
) |
|
(1,521 |
) |
|
2,170 |
|
|
1,942 |
|
| Income(loss) per share - Basic and diluted |
67 |
|
|
0.06 |
|
|
(245 |
) |
|
(0.22 |
) |
|
312 |
|
|
0.28 |
|
| 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 |
|
| Income(loss) per ADS(2)- Basic and diluted |
134 |
|
|
0.12 |
|
|
(490 |
) |
|
(0.44 |
) |
|
624 |
|
|
0.56 |
|
* For convenience, the KRW amounts are expressed
in U.S. dollars at the rate of KRW 1,117.48 to US$1.00, the noon
buying rate in effect on March 31, 2017 as quoted by the Federal
Reserve Bank of New York.
(1) The Company reclassified certain revenue
within Character merchandising and other revenue as Mobile games
and applications revenue in 2016 as this better represents the
nature of the revenue, and the effect of such reclassification was
reflected in each quarter of 2016. The reclassification has no
effect on the Company’s previously reported total net revenue and
other line items on the consolidated financial statements.
(2) Each ADS represents two common shares.
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