Seoul, May 29, 2020 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (NasdaqGM: 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, 2020, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

FIRST QUARTER 2020 HIGHLIGHTS

• Total revenues were KRW 73,260 million (US$ 60,102 thousand), representing a 2.2% increase from the fourth quarter ended December 31, 2019 (“QoQ”) and a 45.2% decrease from the first quarter ended March 31, 2019 (“YoY”).
• Operating profit was KRW 10,356 million (US$ 8,496 thousand), representing a 475.7% increase QoQ and a 56.2% decrease YoY.
• Profit before income tax expenses was KRW 11,250 million (US$ 9,229 thousand), representing a 595.7% increase QoQ and a 53.9 decrease YoY.
• Net profit attributable to parent company was KRW 9,263 million (US$ 7,599 thousand), representing a 2,957.1% increase QoQ and a 53.1% decrease YoY.

REVIEW OF FIRST QUARTER 2020 FINANCIAL RESULTS

Revenues

Subscription revenues for the first quarter of 2020 were KRW 9,893 million (US$ 8,116 thousand), representing a 37.7 % increase QoQ from KRW 7,185 million and a 58.1% increase YoY from KRW 6,256 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online and Ragnarok Prequel in Taiwan. The increase YoY was largely due to increased revenues from Ragnarok Online and Ragnarok Prequel II in Taiwan.

Royalty and license fee revenues for the first quarter of 2020 were KRW 3,543 million (US$ 2,907 thousand), representing a 45.4% increase QoQ from KRW 2,436 million and a 4.8% decrease YoY from KRW 3,720 million. The increase QoQ was primarily due to increased revenue from Ragnarok Online in Japan. The decrease YoY resulted mainly from decreased revenue from Ragnarok Online in Japan.

Mobile game revenues were KRW 55,982 million (US$ 45,928 thousand) for the first quarter of 2020, representing a 1.3% decrease QoQ from KRW 56,714 million and a 53.4% decrease YoY from KRW 120,090 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok M: Eternal Love in Southeast Asia and Europe, and Ragnarok H5 in Korea. Such decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Taiwan and Ragnarok Tactics in Taiwan and Southeast Asia that was launched on February 25, 2020 and January 2, 2020, respectively. The decrease YoY was primarily due to revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America and Oceania and Korea. This decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Japan, Taiwan and Europe, Ragnarok Tactics in Taiwan, Southeast Asia and Thailand.

Other revenues were KRW 3,842 million (US$ 3,151 thousand) for the first quarter of 2020, representing 27.7% decrease QoQ from KRW 5,316 million and an 8.0% increase YoY from KRW 3,557 million

Cost of Revenue

Cost of revenue was KRW 48,874 million (US$ 40,096 thousand) for the first quarter of 2020, representing a 5.3% decrease QoQ from KRW 51,635 million and a 51.7% decrease YoY from KRW 101,237 million. The decrease QoQ was mainly due to decreased outsourcing fee, commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia and salaries. The decrease YoY was mostly from decreased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania.

Operating Expenses

Operating expenses were KRW 14,030 million (US$ 11,510 thousand) for the first quarter of 2020, representing a 23.0% decrease QoQ from KRW 18,217 million and a 60.4% increase YoY from KRW 8,746 million. The decrease QoQ was mainly attributable to decreased advertising expenses related to G-star 2019, The Color of Dream Fantasy Latale, Ragnarok M: Eternal Love, Ragnarok H5 and Ragnarok Click H5. The increase YoY was mostly resulted from increased advertising expenses for Ragnarok Tactics in Taiwan, Southeast Asia and Korea, commission paid, and research and development expenses.

Profit before income tax expenses

Profit before income tax expenses was KRW 11,250 million (US$ 9,229 thousand) for the first quarter of 2020 compared with profit before income tax expense of KRW 1,617 million for the fourth quarter of 2019 and profit before income tax expenses of KRW 24,389 million for the first quarter of 2019.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 9,263 million (US$ 7,599 thousand) for the first quarter of 2020 compared with net profit attributable to parent company of KRW 303 million for the fourth quarter of 2019 and a net profit attributable to parent company of KRW 19,760 million for the first quarter of 2019.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 123,002 million (US$ 100,911 thousand) as of March 31, 2020.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,218.92 to US$ 1.00, the noon buying rate in effect on March 31, 2020 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online

Gravity Game Tech, a subsidiary in Thailand, opened Ragnarok online in Thailand on May 28, 2020 and the company announced 4^th job change for Ragnarok online in Korea on May 27, 2020.

Ragnarok Online IP-based Games

• Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin is scheduled to be launched in Korea in July 2020. The first closed beta test (CBT) has completed on May 13 with users’ positive feedbacks. The company is preparing its second CBT before the official launch.

• Ragnarok X: Next Generation, a MMORPG mobile game

Ragnarok X: Next Generation is being prepared for the service in Taiwan, Hong Kong, and Macau in the second half of 2020.

• Ragnarok Tactics, a SRPG mobile game

Ragnarok Tactics was launched in Korea on March 31, 2020. The game is scheduled to be launched in global market for June 2020 target.

• Other Ragnarok Online IP-based games

Ragnarok H5 (locally named Ragnarok Frontier), an idle RPG game, was launched in Indonesia on March 31, 2020.

Other IP games

A First-Person Shooter (FPS) game, Tactical Warfare, has started pre-registration and will be launched in North, Central and South America in June 2020. The game is published by Gravity Interactive, a subsidiary in the United States.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of first quarter in 2020 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 93 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, 2020 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. Jin Lee
Ms. Minji Oh
IR Unit
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-19								31-Mar-20
		KRW				US$				KRW				US$
		(audited)				(unaudited)				(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			79,428				65,163				82,502				67,685
Short-term financial instruments			39,500				32,406				40,500				33,226
Accounts receivable, net			32,253				26,460				40,748				33,430
Other receivables, net			56				46				413				339
Prepaid expenses			1,962				1,610				2,150				1,764
Other current assets			2,664				2,186				3,869				3,173
Total current assets			155,863				127,871				170,182				139,617
Property and equipment, net			6,663				5,466				8,576				7,036
Intangible assets			1,717				1,409				1,571				1,289
Deferred tax assets			7,667				6,290				9,042				7,418
Other non-current financial assets			1,770				1,452				1,771				1,453
Other non-current assets			1,745				1,430				1,788				1,466
Total assets			175,425				143,918				192,930				158,279
Liabilities and Equity
Current liabilities:
Accounts payable			37,496				30,762				42,029				34,481
Deferred revenue			10,748				8,818				10,389				8,523
Withholdings			1,764				1,447				2,315				1,899
Accrued expense			1,175				964				1,186				973
Income tax payable			2,618				2,148				3,100				2,543
Other current liabilities			1,986				1,629				2,781				2,282
Total current liabilities			55,787				45,768				61,800				50,701
Long-term deferred revenue			98				80				98				80
Other non-current liabilities			3,774				3,096				4,430				3,634
Total liabilities			59,659				48,944				66,328				54,415
Share capital			3,474				2,850				3,474				2,850
Capital surplus			27,128				22,256				27,128				22,256
Other components of equity			274				225				1,577				1,294
Retained earnings			84,668				69,461				93,931				77,060
Equity attributable to owners of the Parent Company			115,544				94,792				126,110				103,460
Non-controlling interest			222				182				492				404
Total equity			115,766				94,974				126,602				103,864
Total liabilities and equity			175,425				143,918				192,930				158,279

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,218.92 to US$ 1.00, the noon buying rate in effect on March 31, 2020 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-19								31-Mar-19								31-Mar-20
		(KRW)				(US$)				(KRW)				(US$)				(KRW)				(US$)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenues:
Online games-subscription revenue			7,185				5,895				6,256				5,132				9,893				8,116
Online games-royalties and license fees			2,436				1,998				3,720				3,052				3,543				2,907
Mobile games			56,714				46,528				120,090				98,522				55,982				45,928
Other revenue			5,316				4,361				3,557				2,918				3,842				3,151
Total net revenue			71,651				58,782				133,623				109,624				73,260				60,102
Cost of revenue			51,635				42,361				101,237				83,055				48,874				40,096
Gross profit			20,016				16,421				32,386				26,569				24,386				20,006
Operating expenses:
Selling, general and administrative			15,491				12,709				6,665				5,468				11,007				9,030
Research and development			2,845				2,334				1,877				1,540				2,872				2,356
Others, net			(119	)			(98	)			204				167				151				124
Total operating expenses			18,217				14,945				8,746				7,175				14,030				11,510
Operating profit			1,799				1,476				23,640				19,394				10,356				8,496
Finance income(costs):
Finance income			631				518				1,062				871				1,551				1,272
Finance costs			(813	)			(667	)			(313	)			(256	)			(657	)			(539	)
Profit before income tax			1,617				1,327				24,389				20,009				11,250				9,229
Income tax expenses			1,334				1,095				4,627				3,796				2,004				1,644
Profit for the period			283				232				19,762				16,213				9,246				7,585
Profit attributable to:
Non-controlling interest			(20	)			(17	)			2				2				(17	)			(14	)
Owners of Parent company			303				249				19,760				16,211				9,263				7,599
Earning per share
- Basic and diluted			44				0.04				2,844				2.33				1,333				1.09
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
Earning per ADS(1)
- Basic and diluted			44				0.04				2,844				2.33				1,333				1.09

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,218.92 to US$1.00, the noon buying rate in effect on March 31, 2020 as quoted by the Federal Reserve Bank of New York.

(1) Each ADS represents one common share.