GRAVITY REPORTS FIRST QUARTER OF 2018
RESULTS AND BUSINESS UPDATES
Seoul, South Korea – April 27, 2018 – 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, 2018, prepared in accordance with
international Financial Reporting Standards as issued by the
International Accounting Standards Board.
FIRST QUARTER 2018 HIGHLIGHTS
- Total revenues were KRW 66,311 million (US$ 62,499 thousand),
representing a 1.8% decrease from the fourth quarter ended December
31, 2017 (“QoQ”) and a 184.0% increase from the first quarter ended
March 31, 2017 (“YoY”).
- Operating profit was KRW 4,820 million (US$ 4,543 thousand),
representing a 63.9% increase QoQ and a 46.1% increase YoY.
- Profit before income tax expenses was KRW 5,117 million (US$
4,823 thousand), representing a 76.8% increase QoQ and a 51.3%
increase YoY.
- Net profit attributable to parent company was KRW 3,549 million
(US$ 3,345 thousand), representing a 27.5% decrease QoQ and a 63.5%
increase YoY.
REVIEW OF FIRST QUARTER 2018 FINANCIAL
RESULTS
Revenues
Subscription revenues for the first quarter of
2018 were KRW 8,896 million (US$ 8,385 thousand), representing a
16.1% increase QoQ from KRW 7,661 million and a 9.7% decrease YoY
from KRW 9,855 million. The increase QoQ was mainly attributable to
increased revenues from Ragnarok Online in Korea and Ragnarok
Prequel in the Philippines. Ragnarok Prequel was launched in the
Philippines on December 12, 2017. The decrease YoY was largely due
to decreased revenues from Ragnarok Prequel and Ragnarok Online in
Taiwan, which was partially offset by increased revenues from
Ragnarok Online in Korea..
Royalty and license fee revenues for the first
quarter of 2018 were KRW 4,619 million (US$ 4,353 thousand),
representing a 2.4% decrease QoQ from KRW 4,731 million and a 3.2%
increase YoY from KRW 4,475 million. The decrease QoQ was primarily
due to a revenue recognition related to Ragnarok Online II in china
based on a game development and publishing agreement in the fourth
quarter 2017, which did not incur in the first quarter of 2018.
This decrease was partially offset by increased revenue from
Ragnarok Online in Japan. The increase YoY resulted mainly from
increased revenues from Ragnarok Online in Japan, Philippines,
Singapore, Malaysia.
Mobile game and application revenues were KRW
51,396 million (US$ 48,441 thousand) for the first quarter of 2018,
representing a 2.3% decrease QoQ from KRW 52,592 million and a
537.4% increase YoY from KRW 8,063 million. The decrease QoQ
resulted primarily from decreased revenues from global service of
RO: Idle Poring, except for Japan and China; and Ragnarok M in
Taiwan. Such decrease was partially offset by increased revenues
from Ragnarok M, which was officially launched in Korea on March
14, 2018. The increase YoY was primarily due to revenues from
Ragnarok M in Taiwan and Korea, which was launched on October 12,
2017 and on March 14, 2018, respectively.
Character merchandising and other revenues were
KRW 1,400 million (US$ 1,320 thousand) for the first quarter of
2018, representing 44.8% decrease from KRW 2,537 million and a 46%
increase YoY from KRW 959 million
Cost of Revenue
Cost of revenue was KRW 45,784 million (US$
43,152 thousand) for the first quarter of 2018, representing a
11.1% decrease QoQ from KRW 51,521 million and a 234.8% increase
YoY from KRW 13,675 million. The decrease QoQ was mainly due to
decreased commission paid for mobile game services and outsourcing
fees. The increase YoY was mostly from increased commission paid
for game services related to Ragnarok M in Taiwan and Korea; and
RO: Idle Poring in global markets except for China and Japan.
Operating Expenses
Operating expenses were KRW 15,707 million (US$
14,804 thousand) for the first quarter of 2018, representing a
20.3% increase QoQ from KRW 13,059 million and a 146.3% increase
YoY from KRW 6,378 million. The increase QoQ was mainly
attributable to increased advertising expenses related to
pre-launch marketing for Ragnarok M and RO: Idle Poring in Korea.
The increase YoY was mostly resulted from increased advertising
expenses for Ragnarok M and RO: Idle Poring in Korea; and research
and development expenses.
Profit before income tax expenses
Profit before income tax expenses was KRW 5,117
million (US$ 4,823 thousand) for the first quarter of 2018 compared
with profit before income tax expense of KRW 2,895 million for the
fourth quarter of 2017 and profit before income tax expenses of KRW
3,382 million for the first quarter of 2017.
Net Profit
As a result of the foregoing factors, Gravity
recorded a net profit attributable to parent company of KRW 3,549
million (US$ 3,345 thousand) for the first quarter of 2018 compared
with net profit attributable to parent company of KRW 4,898 million
for the fourth quarter of 2017 and a net profit attributable to
parent company of KRW 2,170 million for the first quarter of
2017.
Liquidity
The balance of cash and cash equivalents and
short-term financial instruments was KRW 57,397 million (US$ 54,097
thousand) as of March 31, 2018.
Note: For convenience purposes only, the KRW
amounts have been expressed in U.S. dollars at the exchange rate of
KRW 1,060.99 to US$ 1.00, the noon buying rate in effect on March
30, 2018 as quoted by the Federal Reserve Bank of New York.
GRAVITY BUSINESS UPDATE
Ragnarok Online
IP-based Games
- Ragnarok M, an MMORPG mobile game
Gravity launched Ragnarok M in Korea on March
14, 2018. Based on revenues, Ragnarok M ranked first in Apple’s App
Store and third in Google Play Store in Korea, at its peak. Gravity
plans to launch Ragnarok M in more markets during 2018.
- RO: Idle Poring, a text RPG mobile game
The Company launched RO: Idle Poring in Korea on
January 30, 2018.
- Ragnarok R, a card RPG mobile game
The Company launched Ragnarok R in the United
States and Canada on January 23, 2018.
- Other Ragnarok Online IP-based games
A 3D MO Action RPG mobile game, Spear of Odin,
is expected to be launched in South East Asia in 2018.
Ragnarok Online
The Company plans to launch new versions of
Ragnarok Online in various markets during 2018. Ragnarok Online
RE:START was launched in the United States and Canada on June 27,
2017; and in Taiwan on January 31, 2018. Ragnarok Zero was launched
in Korea on December 29, 2017.
Investor Presentation
Gravity issued an investor presentation. The
presentation contains the Company’s recent business updates,
results of first quarter in 2018 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 81 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, 2017 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: 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$)
|
|
|
As of |
|
|
|
31-Dec-17 |
|
31-Mar-18 |
|
|
|
KRW |
|
US$ |
|
KRW |
|
US$ |
Assets |
(audited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
39,095 |
|
|
36,848 |
|
|
29,571 |
|
|
27,871 |
|
|
Short-term financial instruments |
22,500 |
|
|
21,207 |
|
|
27,826 |
|
|
26,226 |
|
|
Accounts receivable, net |
42,168 |
|
|
39,744 |
|
|
41,811 |
|
|
39,408 |
|
|
Other receivables, net |
698 |
|
|
658 |
|
|
431 |
|
|
406 |
|
|
Prepaid expenses |
3,027 |
|
|
2,853 |
|
|
2,532 |
|
|
2,386 |
|
|
Other current assets |
1,383 |
|
|
1,303 |
|
|
2,577 |
|
|
2,430 |
|
|
|
Total
current assets |
108,871 |
|
|
102,613 |
|
|
104,748 |
|
|
98,727 |
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
946 |
|
|
892 |
|
|
972 |
|
|
916 |
|
Intangible assets |
1,036 |
|
|
976 |
|
|
947 |
|
|
893 |
|
Deferred tax assets |
3,036 |
|
|
2,861 |
|
|
3,037 |
|
|
2,862 |
|
Other non-current financial assets |
1,394 |
|
|
1,314 |
|
|
1,384 |
|
|
1,304 |
|
Other non-current assets |
600 |
|
|
566 |
|
|
704 |
|
|
664 |
|
|
|
Total
assets |
115,883 |
|
|
109,222 |
|
|
111,792 |
|
|
105,366 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
44,410 |
|
|
41,857 |
|
|
38,248 |
|
|
36,049 |
|
|
Deferred revenue |
16,100 |
|
|
15,175 |
|
|
14,639 |
|
|
13,797 |
|
|
Withholdings |
1,439 |
|
|
1,356 |
|
|
1,667 |
|
|
1,571 |
|
|
Accrued expense |
1,037 |
|
|
977 |
|
|
970 |
|
|
914 |
|
|
Income tax payable |
1,628 |
|
|
1,534 |
|
|
1,828 |
|
|
1,723 |
|
|
Other current liabilities |
130 |
|
|
123 |
|
|
112 |
|
|
107 |
|
|
|
Total
current liabilities |
64,744 |
|
|
61,022 |
|
|
57,464 |
|
|
54,161 |
|
Long-term deferred revenue |
6,581 |
|
|
6,203 |
|
|
5,997 |
|
|
5,652 |
|
Other non-current liabilities |
560 |
|
|
528 |
|
|
549 |
|
|
517 |
|
|
|
Total
liabilities |
71,885 |
|
|
67,753 |
|
|
64,010 |
|
|
60,330 |
|
Share capital |
3,474 |
|
|
3,274 |
|
|
3,474 |
|
|
3,274 |
|
Capital surplus |
27,164 |
|
|
25,603 |
|
|
27,164 |
|
|
25,603 |
|
Other components of equity |
(40 |
) |
|
(37 |
) |
|
220 |
|
|
208 |
|
Retained earnings (Accumulated deficit) |
13,962 |
|
|
13,159 |
|
|
17,511 |
|
|
16,504 |
|
|
|
Equity attributable to owners of the Parent Company |
44,560 |
|
|
41,999 |
|
|
48,369 |
|
|
45,589 |
|
|
|
Non-controlling interest |
(562 |
) |
|
(530 |
) |
|
(587 |
) |
|
(553 |
) |
|
|
Total
equity |
43,998 |
|
|
41,469 |
|
|
47,782 |
|
|
45,036 |
|
|
|
Total
liabilities and equity |
115,883 |
|
|
109,222 |
|
|
111,792 |
|
|
105,366 |
|
* For convenience purposes only, the KRW amounts
are expressed in U.S. dollars at the rate of KRW 1,060.99 to US$
1.00, the noon buying rate in effect on March 30, 2018 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 |
|
|
|
31-Dec-17 |
|
31-Mar-17 |
|
31-Mar-18 |
|
|
|
(KRW) |
|
(US$) |
|
(KRW) |
|
(US$) |
|
(KRW) |
|
(US$) |
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Online games-subscription revenue |
7,661 |
|
|
7,221 |
|
|
9,855 |
|
|
9,288 |
|
|
8,896 |
|
|
8,385 |
|
|
Online games-royalties and license fees |
4,731 |
|
|
4,459 |
|
|
4,475 |
|
|
4,218 |
|
|
4,619 |
|
|
4,353 |
|
|
Mobile games and applications |
52,592 |
|
|
49,569 |
|
|
8,063 |
|
|
7,600 |
|
|
51,396 |
|
|
48,441 |
|
|
Character merchandising and other revenue |
2,537 |
|
|
2,391 |
|
|
959 |
|
|
904 |
|
|
1,400 |
|
|
1,320 |
|
|
|
Total
net revenue |
67,521 |
|
|
63,640 |
|
|
23,352 |
|
|
22,010 |
|
|
66,311 |
|
|
62,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
51,521 |
|
|
48,558 |
|
|
13,675 |
|
|
12,889 |
|
|
45,784 |
|
|
43,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
16,000 |
|
|
15,082 |
|
|
9,677 |
|
|
9,121 |
|
|
20,527 |
|
|
19,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
10,964 |
|
|
10,334 |
|
|
5,528 |
|
|
5,210 |
|
|
13,827 |
|
|
13,032 |
|
|
Research and development |
1,899 |
|
|
1,790 |
|
|
863 |
|
|
813 |
|
|
1,874 |
|
|
1,766 |
|
|
Others, net |
196 |
|
|
185 |
|
|
(13 |
) |
|
(12 |
) |
|
6 |
|
|
6 |
|
|
|
Total
operating expenses |
13,059 |
|
|
12,309 |
|
|
6,378 |
|
|
6,011 |
|
|
15,707 |
|
|
14,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
2,941 |
|
|
2,773 |
|
|
3,299 |
|
|
3,110 |
|
|
4,820 |
|
|
4,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income(costs): |
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
758 |
|
|
714 |
|
|
535 |
|
|
504 |
|
|
590 |
|
|
556 |
|
|
Finance costs |
(804 |
) |
|
(758 |
) |
|
(452 |
) |
|
(426 |
) |
|
(293 |
) |
|
(276 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax |
2,895 |
|
|
2,729 |
|
|
3,382 |
|
|
3,188 |
|
|
5,117 |
|
|
4,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses(profits) |
(2,015 |
) |
|
(1,899 |
) |
|
1,228 |
|
|
1,158 |
|
|
1,593 |
|
|
1,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
4,910 |
|
|
4,628 |
|
|
2,154 |
|
|
2,030 |
|
|
3,524 |
|
|
3,322 |
|
Profit (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest |
12 |
|
|
11 |
|
|
(16 |
) |
|
(15 |
) |
|
(25 |
) |
|
(23 |
) |
|
Owners of the parent company |
4,898 |
|
|
4,617 |
|
|
2,170 |
|
|
2,045 |
|
|
3,549 |
|
|
3,345 |
|
Earnings per share - Basic and diluted |
705 |
|
|
0.66 |
|
|
312 |
|
|
0.29 |
|
|
511 |
|
|
0.48 |
|
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 |
|
Earnings per ADS(1)- Basic and diluted |
1,410 |
|
|
1.32 |
|
|
624 |
|
|
0.58 |
|
|
1,022 |
|
|
0.96 |
|
* For convenience, the KRW amounts are expressed
in U.S. dollars at the rate of KRW 1,060.99 to US$1.00, the noon
buying rate in effect on March 30, 2018 as quoted by the Federal
Reserve Bank of New York.
(1) Each ADS represents two common
shares.
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