GRAVITY REPORTS SECOND QUARTER OF 2017 RESULTS AND BUSINESS
UPDATES
Seoul, South Korea – August 9, 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 second
quarter ended June 30, 2017, prepared in accordance with generally
accepted accounting principles in the United States.
SECOND QUARTER 2017 HIGHLIGHTS
- Total revenues were KRW 27,028 million (US$ 23,631 thousand),
representing a 15.7% increase from the first quarter ended March
31, 2017 (“QoQ”) and a 198.4% increase from the second quarter
ended June 30, 2016 (“YoY”).
- Operating income was KRW 4,373 million (US$ 3,823 thousand),
representing a 32.6% increase QoQ and an increase of KRW 5,879
million (US$ 5,140 thousand) from KRW 1,506 million of operating
loss in the same period last year.
- Income before income tax expenses was KRW 4,560 million (US$
3,987 thousand), representing a 34.8% increase QoQ and an increase
of KRW 5,772 million (US$ 5,047 thousand) from KRW 1,212 million of
loss before income tax expenses in the same period last year.
- Net Income attributable to parent company was KRW 3,555 million
(US$ 3,108 thousand), representing a 63.8% increase QoQ and an
increase of KRW 5,160 million (US$ 4,511 thousand) from KRW 1,605
million of net loss attributable to parent company in the same
period last year.
Mr. Hyun Chul Park, CEO of Gravity said, “We
delivered a stronger set of financial results for the second
quarter of 2017, compared to the first quarter of 2017 and the
second quarter of 2016. Gravity is dedicated to continuously
provide better game experiences and innovative content to our
global game users.”
REVIEW OF SECOND QUARTER 2017 FINANCIAL
RESULTS
Revenues
Subscription revenues were KRW 9,786 million
(US$ 8,556 thousand), representing a 0.7% decrease QoQ from KRW
9,855 million and a 321.3% increase YoY from KRW 2,323million.
The decrease QoQ was mainly attributable to
lower revenue from Ragnarok Online in Taiwan, which was partially
offset by higher revenues derived from Ragnarok Online in United
States and Canada and Dragonica Online in Taiwan. The Company
launched Dragonica Online in Taiwan in May 2017. The increase YoY
was largely due to strong revenue growth from Ragnarok Online and
Ragnarok Prequel in Taiwan. The Company began to directly offer
Ragnarok Online in Taiwan since June 2016 and Ragnarok Prequel was
launched in Taiwan in July 2016.
Royalty and license fee revenues were KRW 3,546
million (US$ 3,100 thousand), representing a 20.8% decrease QoQ
from KRW 4,475 million and a 28.3% increase YoY from KRW 2,763
million.
The decrease QoQ was primarily due to lower
revenues from Ragnarok Online in Japan and Thailand. The increase
YoY resulted mainly from revenue growth from Ragnarok Online in
Thailand and Indonesia. Our local licensee, Electronic Extreme
Ltd.(“Extreme”), successfully re-launched Ragnarok Online in
Thailand and Indonesia in July 2016 and February 2017,
respectively.
Mobile game and application revenues were KRW
12,239 million (US$ 10,701 thousand), representing a 51.8% increase
QoQ from KRW 8,063 million and a 290.0% increase YoY from KRW 3,138
million.
The increase QoQ mainly reflected growth in
revenue from launchings of Ragnarok R in Thailand and Korea in
February 2017 and April 2017, respectively. The increase YoY
resulted primarily from increased revenues from Ragnarok R in
Taiwan, Thailand and Korea, which was launched in December 2016,
February 2017 and April 2017, respectively.
Character merchandising and other revenues were
KRW 1,457 million (US$ 1,274 thousand), representing 51.9% increase
QoQ from KRW 959 million and a 74.9 % increase YoY from KRW 833
million.
Cost of Revenue
Cost of revenue was KRW 15,463 million (US$
13,520 thousand), representing a 10.7% increase QoQ from KRW 13,969
million and a 125.9% increase YoY from KRW 6,846 million.
The increase QoQ was mainly due to: i) higher
commission paid to mobile platforms including App Store and Google
Play Store for mobile game distribution service for Ragnarok R in
Korea; and ii) royalty payments related to Ragnarok R in Korea,
which was launched in April 2017. The increase YoY was mostly from
increased royalty payments, game channeling service fees and
outsourcing fees related to Ragnarok R and Ragnarok Prequel. Also,
such increase was also driven by higher commission paid to mobile
platforms for service of Ragnarok R in Korea, Taiwan and
Thailand.
Operating Expenses
Operating expenses were KRW 7,192 million (US$
6,288 thousand), representing a 18.2% increase QoQ from KRW 6,085
million and a 93.5% increase YoY from KRW 3,717 million.
The increase QoQ was mainly attributable to
higher advertising expenses related to marketing for Ragnarok R,
which was officially launched in Korea in April, 2017. The increase
YoY was mostly resulted from increased advertising expenses related
to Ragnarok R and higher commission paid for payment gateway
fees.
Income before income tax expenses
Income before income tax expenses was KRW 4,560
million (US$ 3,987 thousand) compared with income before income tax
expense of KRW 3,382 million for the first quarter of 2017 and loss
before income tax expenses of KRW 1,212 million for the second
quarter of 2016.
Net Income
As a result of the foregoing factors, Gravity
recorded a net income attributable to parent company of KRW 3,555
million (US$ 3,108 thousand) compared with net income attributable
to parent company of KRW 2,170 million for the first quarter of
2017 and a net loss attributable to parent company of KRW 1,605
million for the second quarter of 2016.
Liquidity
The balance of cash and cash equivalents and
short-term financial instruments was KRW 45,572 million (US$ 39,845
thousand) as of June 30, 2017.
Note: For convenience purposes only, the KRW
amounts have been expressed in U.S. dollars at the exchange rate of
KRW 1,143.75 to US$ 1.00, the noon buying rate in effect on June
30, 2017 as quoted by the Federal Reserve Bank of New York.
GRAVITY BUSINESS UPDATES
- Ragnarok M, an MMORPG mobile game
On August 8, 2017, Gravity, Shanghai the Dream
Network Technology Co., Ltd. and X.D. Network Inc.(“the Partners”)
announced that the Partners entered into an agreement to launch
Ragnarok M in Taiwan, Korea and Thailand. Ragnarok M is scheduled
to be launched in Taiwan during the fourth quarter of 2017 and the
launching schedules for Korea and Thailand are to be announced in
the future.
The Partners co-developed Ragnarok M based on
the content of Ragnarok Online and Ragnarok M has drawn a large
attention among Ragnarok Online users for its recreation of
Ragnarok Online.
- Ragnarok R, a card RPG mobile game
The Company plans to launch Ragnarok R in United
States and Canada during the fourth quarter of 2017. Also,
such game is expected to be launched in more Asian markets in
2018.
Our local licensee, Extreme, re-launched
Ragnarok Online in Philippines on June 20, 2017. Such game was
successfully re-launched in Taiwan, Thailand and Indonesia. Gravity
and Extreme plan to re-launch Ragnarok Online in more Asian
markets.
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 79 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$)
|
|
|
|
As of |
|
|
|
|
31-Dec-16 |
|
30-June-17 |
|
|
|
|
KRW |
|
US$ |
|
KRW |
|
US$ |
| Assets |
(audited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
| Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
16,720 |
|
|
14,619 |
|
|
17,070 |
|
|
14,925 |
|
|
|
Short-term financial instruments |
22,000 |
|
|
19,235 |
|
|
28,502 |
|
|
24,920 |
|
|
|
Accounts receivable, net |
11,819 |
|
|
10,334 |
|
|
22,689 |
|
|
19,837 |
|
|
|
Other current assets |
2,852 |
|
|
2,493 |
|
|
3,111 |
|
|
2,720 |
|
|
|
|
Total
current assets |
53,391 |
|
|
46,681 |
|
|
71,372 |
|
|
62,402 |
|
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
593 |
|
|
518 |
|
|
870 |
|
|
760 |
|
| Leasehold and other deposits |
962 |
|
|
841 |
|
|
972 |
|
|
850 |
|
| Intangible assets |
91 |
|
|
80 |
|
|
85 |
|
|
75 |
|
| Other non-current assets |
153 |
|
|
134 |
|
|
98 |
|
|
85 |
|
|
|
|
Total
assets |
55,190 |
|
|
48,254 |
|
|
73,397 |
|
|
64,172 |
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and Equity |
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
10,033 |
|
|
8,772 |
|
|
15,709 |
|
|
13,735 |
|
|
|
Deferred revenue |
9,689 |
|
|
8,471 |
|
|
11,871 |
|
|
10,379 |
|
|
|
Other current liabilities |
964 |
|
|
843 |
|
|
2,161 |
|
|
1,889 |
|
|
|
|
Total
current liabilities |
20,686 |
|
|
18,086 |
|
|
29,741 |
|
|
26,003 |
|
| Long-term deferred revenue |
4,096 |
|
|
3,581 |
|
|
7,083 |
|
|
6,193 |
|
| Accrued severance benefits |
104 |
|
|
91 |
|
|
148 |
|
|
130 |
|
| Other non-current liabilities |
210 |
|
|
184 |
|
|
339 |
|
|
296 |
|
|
|
|
Total
liabilities |
25,096 |
|
|
21,942 |
|
|
37,311 |
|
|
32,622 |
|
| Common shares |
3,474 |
|
|
3,037 |
|
|
3,474 |
|
|
3,037 |
|
| Additional paid-in capital |
75,076 |
|
|
65,640 |
|
|
75,076 |
|
|
65,640 |
|
| Accumulated deficit |
(48,511 |
) |
|
(42,414 |
) |
|
(42,786 |
) |
|
(37,409 |
) |
| Accumulated other comprehensive income |
617 |
|
|
540 |
|
|
912 |
|
|
798 |
|
|
|
|
Total
parent company shareholders' equity |
30,656 |
|
|
26,803 |
|
|
36,676 |
|
|
32,066 |
|
| Non-controlling interest |
(562 |
) |
|
(491 |
) |
|
(590 |
) |
|
(516 |
) |
|
|
|
Total
equity |
30,094 |
|
|
26,312 |
|
|
36,086 |
|
|
31,550 |
|
|
|
|
Total
liabilities and equity |
55,190 |
|
|
48,254 |
|
|
73,397 |
|
|
64,172 |
|
* For convenience purposes only, the KRW amounts
are expressed in U.S. dollars at the rate of KRW 1,143.75 to US$
1.00, the noon buying rate in effect on June 30, 2017 as quoted by
the Federal Reserve Bank of New York.
GRAVITY CO.,
LTD.Consolidated Statements of
Operations
(In millions of KRW and in thousands of US$,
except for shares and ADS data)
|
|
|
|
Three months ended |
|
Six months ended |
|
|
|
|
31-Mar-17 |
|
30-Jun-16 |
|
30-Jun-17 |
|
30-Jun-16 |
|
30-Jun-17 |
|
|
|
|
(KRW) |
|
(KRW) |
|
(KRW) |
|
(US$) |
|
(KRW) |
|
(KRW) |
|
(US$) |
|
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
| Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online games-subscription revenue |
9,855 |
|
|
2,323 |
|
|
9,786 |
|
|
8,556 |
|
|
4,460 |
|
|
19,641 |
|
|
17,172 |
|
|
|
Online games-royalties and license fees |
4,475 |
|
|
2,763 |
|
|
3,546 |
|
|
3,100 |
|
|
6,131 |
|
|
8,021 |
|
|
7,013 |
|
|
|
Mobile games and applications |
8,063 |
|
|
3,138 |
|
|
12,239 |
|
|
10,701 |
|
|
5,968 |
|
|
20,302 |
|
|
17,750 |
|
|
|
Character merchandising and other revenue |
959 |
|
|
833 |
|
|
1,457 |
|
|
1,274 |
|
|
1,592 |
|
|
2,416 |
|
|
2,112 |
|
|
|
|
Total
net revenue |
23,352 |
|
|
9,057 |
|
|
27,028 |
|
|
23,631 |
|
|
18,151 |
|
|
50,380 |
|
|
44,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue |
13,969 |
|
|
6,846 |
|
|
15,463 |
|
|
13,520 |
|
|
13,465 |
|
|
29,432 |
|
|
25,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
9,383 |
|
|
2,211 |
|
|
11,565 |
|
|
10,111 |
|
|
4,686 |
|
|
20,948 |
|
|
18,314 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
5,516 |
|
|
3,205 |
|
|
6,498 |
|
|
5,681 |
|
|
5,893 |
|
|
12,014 |
|
|
10,504 |
|
|
|
Research and development |
569 |
|
|
512 |
|
|
694 |
|
|
607 |
|
|
855 |
|
|
1,263 |
|
|
1,104 |
|
|
|
Impairment losses on intangible assets |
ㅡ |
|
ㅡ |
|
ㅡ |
|
ㅡ |
|
5 |
|
|
ㅡ |
|
ㅡ |
|
|
|
Total
operating expenses |
6,085 |
|
|
3,717 |
|
|
7,192 |
|
|
6,288 |
|
|
6,753 |
|
|
13,277 |
|
|
11,608 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating Income(loss) |
3,298 |
|
|
(1,506 |
) |
|
4,373 |
|
|
3,823 |
|
|
(2,067 |
) |
|
7,671 |
|
|
6,706 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
133 |
|
|
131 |
|
|
139 |
|
|
122 |
|
|
263 |
|
|
272 |
|
|
238 |
|
|
|
Interest expense |
(3 |
) |
|
ㅡ |
|
(3 |
) |
|
(3 |
) |
|
ㅡ |
|
(6 |
) |
|
(5 |
) |
|
|
Foreign currency income (loss), net |
(46 |
) |
|
163 |
|
|
51 |
|
|
45 |
|
|
(695 |
) |
|
5 |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income(loss) before income tax expenses |
3,382 |
|
|
(1,212 |
) |
|
4,560 |
|
|
3,987 |
|
|
(2,499 |
) |
|
7,942 |
|
|
6,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income tax expenses |
1,228 |
|
|
410 |
|
|
1,017 |
|
|
889 |
|
|
843 |
|
|
2,245 |
|
|
1,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income(loss) |
2,154 |
|
|
(1,622 |
) |
|
3,543 |
|
|
3,098 |
|
|
(3,342 |
) |
|
5,697 |
|
|
4,980 |
|
| Net income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest |
(16 |
) |
|
(17 |
) |
|
(12 |
) |
|
(10 |
) |
|
(36 |
) |
|
(28 |
) |
|
(25 |
) |
|
|
Parent company |
2,170 |
|
|
(1,605 |
) |
|
3,555 |
|
|
3,108 |
|
|
(3,306 |
) |
|
5,725 |
|
|
5,005 |
|
| Earning(loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic and diluted |
312 |
|
|
(231 |
) |
|
512 |
|
|
0.45 |
|
|
(476 |
) |
|
824 |
|
|
0.72 |
|
| 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(loss) per ADS(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic and diluted |
624 |
|
|
(462 |
) |
|
1,024 |
|
|
0.90 |
|
(952 |
) |
|
1,648 |
|
|
1.44 |
|
* For convenience, the KRW amounts are expressed
in U.S. dollars at the rate of KRW 1,143.75 to US$1.00, the noon
buying rate in effect on June 30, 2017 as quoted by the Federal
Reserve Bank of New York.
(1) Each ADS represents two common shares.
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