Seoul, Korea, Aug. 09, 2017 (GLOBE NEWSWIRE) -- 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
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 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.
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.
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.
- Ragnarok Online
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.
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.
Mr. Heung Gon Kim
Chief Financial Officer
Gravity Co., Ltd.
Ms. Ji Hee Kim
Gravity Co., Ltd.
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GRAVITY Co., Ltd.
Consolidated Balance Sheet
(In millions of KRW and thousands of US$)
|Cash and cash equivalents||16,720||14,619||17,070||14,925|
|Short-term financial instruments||22,000||19,235||28,502||24,920|
|Accounts receivable, net||11,819||10,334||22,689||19,837|
|Other current assets||2,852||2,493||3,111||2,720|
|Total current assets||53,391||46,681||71,372||62,402|
|Property and equipment, net||593||518||870||760|
|Leasehold and other deposits||962||841||972||850|
|Other non-current assets||153||134||98||85|
|Liabilities and Equity|
|Other current liabilities||964||843||2,161||1,889|
|Total current liabilities||20,686||18,086||29,741||26,003|
|Long-term deferred revenue||4,096||3,581||7,083||6,193|
|Accrued severance benefits||104||91||148||130|
|Other non-current liabilities||210||184||339||296|
|Additional paid-in capital||75,076||65,640||75,076||65,640|
|Accumulated other comprehensive income||617||540||912||798|
|Total parent company shareholders' equity||30,656||26,803||36,676||32,066|
|Total liabilities and equity||55,190||48,254||73,397||64,172|
* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,143.75 to US$ 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|
|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|
|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|
|Other income (expenses):|
|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) attributable to:|
|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.
Source:GRAVITY Co., Ltd.