×

GRAVITY Reports Second Quarter of 2013 Results and Business Updates

SEOUL, South Korea, Aug. 29, 2013 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (Nasdaq:GRVY) ("Gravity" or "Company"), an online game developer and publisher based in South Korea, today announced its unaudited financial results for the second quarter ended June 30, 2013, prepared in accordance with generally accepted accounting principles in the United States, and business updates.

FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2013

Revenues for the second quarter ended June 30, 2013 was KRW 12,788 million (US$ 11,379 thousand), representing a 8.4% increase from KRW 11,796 million for the first quarter ended March 31, 2013 ("QoQ") and a 9.2% decrease from KRW 14,084 million for the second quarter ended June 30, 2012 ("YoY").

Review of Financial Results

Revenues

Royalty and licensing fee revenues for the second quarter of 2013 were KRW 5,543 million (US$ 4,932 thousand), representing a 16.7% decrease QoQ from KRW 6,654 million and a 31.6% decrease YoY from KRW 8,109 million. The decreases in royalty and licensing fee revenues QoQ and YoY were primarily due to decreased revenues from Ragnarok Online in Japan and strengthening of the Korean Won against the Japanese Yen. The decreases in royalty and licensing fee revenues QoQ and YoY were partially offset by revenues from Ragnarok Online in China where the game was relaunched in February 2013.

Subscription revenues for the second quarter of 2013 were KRW 2,836 million (US$ 2,523 thousand), representing a 45.6% increase QoQ from KRW 1,948 million and a 31.8% increase YoY from KRW 2,151 million. The increases QoQ and YoY were mainly driven by revenues from Ragnarok Online II in the United States, Canada and 28 European countries and markets where the game was launched in May 2013.

Mobile game revenues were KRW 3,996 million (US$ 3,556 thousand) for the second quarter of 2013, representing a 45.2% increase QoQ from KRW 2,753 million and a 77.9% increase YoY from KRW 2,246 million. The increases QoQ and YoY were mostly attributable to revenues from NeoCyon's mobile game operation service for a third party and revenues from Ragnarok Online – Uprising: Valkyrie.

Character merchandising and other revenues were KRW 413 million (US$ 368 thousand) for the second quarter of 2013, representing a 6.3% decrease QoQ from KRW 441 million and a 73.8% decrease YoY from KRW 1,578 million. The decrease QoQ was mostly due to decreased revenues from Ragnarok Odyssey, a PS Vita game. The decrease YoY resulted mainly from sales of goods related to mobile phones in the second quarter of 2012, which did not occur in the second quarter of 2013.

Cost of Revenue and Operating Expenses

Cost of revenue was KRW 8,439 million (US$ 7,509 thousand) for the second quarter of 2013, representing a 14.1% increase QoQ from KRW 7,397 million but a 12.9% decrease YoY from KRW 9,691 million. The increase QoQ was mostly from increased commission paid related to our service for third parties. The decrease YoY resulted mainly from cost of goods sold by NeoCyon associated with its sales of goods related to mobile phones in the second quarter of 2012, which did not occur in the second quarter of 2013.

Operating expenses were KRW 5,930 million (US$ 5,277 thousand) for the second quarter of 2013, representing a 0.4% decrease QoQ from KRW 5,951 million and a 3.1% decrease YoY from KRW 6,121 million. The decreases QoQ and YoY were mainly attributable to gain on disposal of investments related to liquidation of Online Game Revolution Fund No. 1, which is largely due to realization of related accumulated other comprehensive income balance. The decreases in operating expenses QoQ and YoY were partly offset by increased research and development expenses mostly related to Ragnarok Odyssey Ace, an expansion pack of Ragnarok Odyssey.

Loss before income tax expenses and others was KRW 1,020 million (US$ 908 thousand) for the second quarter of 2013 compared with loss before income tax expenses and others of KRW 1,133 million for the first quarter of 2013 and loss before income tax expenses and others of KRW 1,048 million for the second quarter of 2012.

As a result of the foregoing factors, Gravity recorded a net loss attributable to parent company of KRW 1,617 million (US$ 1,439 thousand) for the second quarter of 2013 compared with a net loss attributable to parent company of KRW 1,629 million for the first quarter of 2013 and a net loss attributable to parent company of KRW 1,126 million for the second quarter of 2012.

The balance of cash and cash equivalents and short-term financial instruments was KRW 50,813 million (US$ 45,213 thousand) as of June 30, 2013.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,123.85 to US$ 1.00, the noon buying rate in effect on August 2, 2013 as quoted by the Federal Reserve Bank of New York.

BUSINESS UPDATES

  • Ragnarok Online II was launched in Indonesia on August 28, 2013 and will be released in Thailand in the fourth quarter of 2013.
  • Tower of Ascension, a mobile multiplayer online role playing game, was released in Korea on August 23, 2013. The Company developed Tower of Ascension using the Unreal Engine 3, one of the most advanced and robust game engines, and the game boasts high-quality graphics similar to those of PC-based games and an intuitive tap-based control system. The game was rolled out on iOS first and will be followed by Android. Gravity will enter overseas markets right after launching the game in the Korean market.
  • Ragnarok Odyssey Ace, a PS Vita game based on the universe of Ragnarok Online and expansion pack of Ragnarok Odyssey, is slated to be launched in Korea, Japan, Taiwan, Hong Kong, Singapore, Malaysia, Thailand and Indonesia on August 29, 2013. The game will be rolled out in North America and Europe in the first quarter of 2014.

About GRAVITY Co., Ltd.

Based in Korea, Gravity is a developer and publisher of online games. Gravity's principal product, Ragnarok Online™, is a popular online game in many markets, including Japan, Taiwan and Thailand, and is currently commercially offered in 60 markets. 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 registration statement on Form F-1, as amended, and our annual reports on Form 20-F, together with such other documents and 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.

GRAVITY CO., LTD.
Consolidated Balance Sheet
(In millions of KRW and in thousands of US$)
As of
31-Dec-12 30-Jun-13
KRW US$ KRW US$
Assets (audited) (unaudited) (unaudited) (unaudited)
Current assets:
Cash and cash equivalents 36,455 32,438 23,813 21,189
Short-term financial instruments 17,500 15,571 27,000 24,024
Accounts receivable, net 7,116 6,332 6,002 5,341
Other current assets 6,858 6,102 6,769 6,023
Total current assets 67,929 60,443 63,584 56,577
Property and equipment, net 3,524 3,136 3,257 2,898
Leasehold and other deposits 5,767 5,131 5,577 4,962
Intangible assets 24,270 21,595 21,480 19,113
Equity method investments 647 576
Other non-current assets 8,418 7,491 8,499 7,563
Total assets 110,555 98,372 102,397 91,113
Liabilities and Equity
Current liabilities:
Accounts payable 5,115 4,551 3,593 3,197
Deferred revenue 3,006 2,675 3,539 3,149
Other current liabilities 2,254 2,006 1,655 1,473
Total current liabilities 10,375 9,232 8,787 7,819
Long-term deferred revenue 9,172 8,161 8,084 7,193
Accrued severance benefits 683 608 321 285
Other non-current liabilities 247 220 318 283
Total liabilities 20,477 18,221 17,510 15,580
Common shares 3,474 3,091 3,474 3,091
Additional paid-in capital 75,395 67,086 75,395 67,086
Retained earnings 7,699 6,851 4,453 3,963
Accumulated other comprehensive income 3,001 2,670 1,582 1,407
Total parent company shareholders' equity 89,569 79,698 84,904 75,547
Non-controlling interest 509 453 (17) (14)
Total equity 90,078 80,151 84,887 75,533
Total liabilities and equity 110,555 98,372 102,397 91,113
* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,123.85 to US$1.00, the noon buying rate in effect on August 2, 2013 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$, except for share and ADS data)
Three months ended Six months ended
31-Mar-13 30-Jun-12 30-Jun-13 30-Jun-12 30-Jun-13
(KRW) (KRW) (KRW) (US$) (KRW) (KRW) (US$)
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Online games-subscription revenue 1,948 2,151 2,836 2,523 6,392 4,784 4,257
Online games-royalties and license fees 6,654 8,109 5,543 4,932 16,819 12,197 10,853
Mobile games 2,753 2,246 3,996 3,556 4,283 6,749 6,005
Character merchandising and other revenue 441 1,578 413 368 2,947 854 760
Total net revenue 11,796 14,084 12,788 11,379 30,441 24,584 21,875
Cost of revenue 7,397 9,691 8,439 7,509 16,518 15,836 14,091
Gross profit 4,399 4,393 4,349 3,870 13,923 8,748 7,784
Operating expenses:
Selling, general and administrative 4,407 5,258 4,512 4,015 12,050 8,919 7,936
Research and development 1,392 1,400 2,061 1,834 2,787 3,453 3,072
Impairment losses on intangible assets 152 582 518 734 653
Gain on disposal of investments (537) (1,225) (1,090) (537) (1,225) (1,089)
Total operating expenses 5,951 6,121 5,930 5,277 14,300 11,881 10,572
Operating loss (1,552) (1,728) (1,581) (1,407) (377) (3,133) (2,788)
Other income (expenses):
Interest income 370 458 345 307 934 715 636
Interest expense (11) (14) (14) (12) (25) (25) (22)
Foreign currency gain, net 60 170 230 204 10 290 258
Others, net 66 66
Income (loss) before income tax expenses and equity income (loss) on investments (1,133) (1,048) (1,020) (908) 608 (2,153) (1,916)
Income tax expenses 875 531 720 640 1,349 1,595 1,419
Loss before equity income (loss) on investments (2,008) (1,579) (1,740) (1,548) (741) (3,748) (3,335)
Equity income (loss) on investments (23) 43 (39) (23) (20)
Net loss (2,031) (1,536) (1,740) (1,548) (780) (3,771) (3,355)
Net income (loss) attributable to:
Non-controlling interest (402) (410) (123) (109) (782) (525) (467)
Parent company (1,629) (1,126) (1,617) (1,439) 2 (3,246) (2,888)
Earnings (loss) per share
- Basic and diluted (234) (162) (233) (0.21) 0 (467) (0.42)
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
Earnings (loss) per ADS(1)
- Basic and diluted (59) (41) (58) (0.05) 0 (117) (0.10)
* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,123.85 to US$1.00, the noon buying rate in effect on August 2, 2013 as quoted by the Federal Reserve Bank of New York.

(1) Each ADS represents one-fourth of a common share.

CONTACT: Mr. Heung Gon Kim Chief Financial Officer Gravity Co., Ltd. Email: kheung@gravity.co.kr Ms. Yoon Joo Lee IR Manager Gravity Co., Ltd. Email: yoonjoo.lee@gravity.co.kr Telephone: +82-2-2132-7800Source:GRAVITY Co., Ltd.