Seoul, Aug. 07, 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 second quarter ended June 30, 2020, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

SECOND QUARTER 2020 HIGHLIGHTS

• Total revenues were KRW 88,458 million (US$ 73,684 thousand), representing a 20.7% increase from the first quarter ended March 31, 2020 (“QoQ”) and a 13.2% increase from the second quarter ended June 30, 2019 (“YoY”).
• Operating profit was KRW 16,313 million (US$ 13,588 thousand), representing a 57.5% increase QoQ and a 25.5% increase YoY.
• Profit before income tax expenses was KRW 16,335million (US$ 13,606 thousand), representing a 45.2% increase QoQ and a 16.4% increase YoY.
• Net profit attributable to parent company was KRW 13,095 million (US$ 10,907 thousand), representing a 41.4% increase QoQ and a 20.6% increase YoY.

REVIEW OF SECOND QUARTER 2020 FINANCIAL RESULTS

Revenues

Subscription revenues for the second quarter of 2020 were KRW 24,448 million (US$ 20,365 thousand), representing a 147.1% increase QoQ from KRW 9,893 million and a 262.4% increase YoY from KRW 6,746 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Thailand that was re-launched on May 28, 2020 and Ragnarok H5 in Indonesia that was launched on March 31, 2020. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and Taiwan and Ragnarok H5 in Indonesia.

Royalty and license fee revenues for the second quarter of 2020 were KRW 4,459 million (US$ 3,714 thousand), representing 25.9% increase QoQ from KRW 3,543 million and a 57.5% increase YoY from KRW 2,832 million. The increase QoQ was primarily due to increased revenue from collaboration event with Garena’s Free Fire items based on Ragnarok Online IP. Such increase was partially offset by decreased revenue from Ragnarok Online in Japan. The increase YoY resulted mainly from increased revenue from collaboration event with Garena’s Free Fire items based on Ragnarok Online IP.

Mobile game revenues were KRW 54,249 million (US$ 45,189 thousand) for the second quarter of 2020, representing a 3.1% decrease QoQ from KRW 55,982 million and a 16.6% decrease YoY from KRW 65,013 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok M: Eternal Love in Taiwan and Japan, and Ragnarok Tactics in Taiwan. Such decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Southeast Asia, Ragnarok H5 in Indonesia, and Ragnarok Tactics in Korea. The decrease YoY was primarily due to revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America and Oceania. This decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Taiwan and Europe, Ragnarok Tactics in Korea and Taiwan, and Ragnarok H5 in Indonesia.

Other revenues were KRW 5,302 million (US$ 4,416 thousand) for the second quarter of 2020, representing 38.0% increase QoQ from KRW 3,842 million and a 49.9% increase YoY from KRW 3,536 million

Cost of Revenues

Cost of revenue was KRW 51,098 million (US$ 42,564 thousand) for the second quarter of 2020, representing a 4.6% increase QoQ from KRW 48,874 million and a 10.1% decrease YoY from KRW 56,858 million. The increase QoQ was mainly due to increased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania, Ragnarok H5 in Indonesia, and Ragnarok Tactics in Korea. 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 21,047 million (US$ 17,532 thousand) for the second quarter of 2020, representing a 50.0% increase QoQ from KRW 14,030 million and a 154.5% increase YoY from KRW 8,271 million. The increase QoQ was mainly attributable to increased advertising expenses for Ragnarok Origin in Korea, Ragnarok Online in Thailand, Sacred Blade in Japan, Ragnarok H5 in Indonesia, and commission paid for payment gate way fees related to Ragnarok Online in Thailand. The increase YoY was mostly resulted from increased advertising expenses for Ragnarok Origin and Ragnarok Tactics in Korea, Ragnarok Online in Thailand, Sacred Blade in Japan, Ragnarok H5 in Indonesia, commission paid for payment gate way fees related to Ragnarok Online in Thailand, salaries and research and development expenses.

Profit before income tax expenses

Profit before income tax expenses was KRW 16,335 million (US$ 13,606 thousand) for the second quarter of 2020 compared with profit before income tax expense of KRW 11,250 million for the first quarter of 2020 and profit before income tax expenses of KRW 14,037 million for the second quarter of 2019.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 13,095 million (US$ 10,907 thousand) for the second quarter of 2020 compared with net profit attributable to parent company of KRW 9,263 million for the first quarter of 2020 and a net profit attributable to parent company of KRW 10,861 million for the second quarter of 2019.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 131,566 million (US$ 109,593 thousand) as of June 30, 2020.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,200.50 to US$ 1.00, the noon buying rate in effect on June 30, 2020 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online IP-based Games

• Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin was launched in Korea on July 7, 2020 and ranked as the fourth in top grossing of Google Play games and the fourth in top grossing of Apple’s App Store games after its launching. Gravity signed a publishing contract with GungHo Online Entertainment, Inc. for Japan service. The game is being prepared to launch in Japan.

• Ragnarok X: Next Generation, a MMORPG mobile game

Gravity signed a joint publishing contract with ByteDance Ltd., a multinational content platform company, for Ragnarok X: Next Generation in Taiwan, Hong Kong, Macau, and Southeast Asia. The game is expected to be launched in Taiwan, Hong Kong and Macau in the second half of 2020.

• Ragnarok Tactics, a SRPG mobile game

Ragnarok Tactics was launched in global market on June 18, 2020.

• Other Ragnarok Online IP-based games

Action RO2: Spear of Odin, a 3D Action MORPG mobile game, is expected to be launched in Indonesia, Malaysia, Philippines, Singapore and Oceania in 2020. The game was developed by NeoCyon, Inc., our subsidiary in Korea.

Other IP games

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

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of second 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, 2019 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

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GRAVITY Co., Ltd.
Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

		As of
		31-Dec-19								30-Jun-20
		KRW				US$				KRW				US$
		(audited)				(unaudited)				(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			79,428				66,162				94,066				78,356
Short-term financial instruments			39,500				32,903				37,500				31,237
Accounts receivable, net			32,253				26,866				48,910				40,741
Other receivables, net			56				47				265				221
Prepaid expenses			1,962				1,634				2,892				2,409
Other current assets			2,664				2,219				2,558				2,131
Total current assets			155,863				129,831				186,191				155,095
Property and equipment, net			6,663				5,550				7,893				6,575
Intangible assets			1,717				1,430				1,899				1,582
Deferred tax assets			7,667				6,387				10,246				8,535
Other non-current financial assets			1,770				1,474				1,785				1,487
Other non-current assets			1,745				1,454				2,050				1,707
Total assets			175,425				146,126				210,064				174,981
Liabilities and Equity
Current liabilities:
Accounts payable			37,496				31,234				43,914				36,580
Deferred revenue			10,748				8,953				12,834				10,691
Withholdings			1,764				1,469				2,366				1,971
Accrued expense			1,175				979				1,185				987
Income tax payable			2,618				2,181				2,577				2,147
Other current liabilities			1,986				1,654				2,788				2,322
Total current liabilities			55,787				46,470				65,664				54,698
Long-term deferred revenue			98				82				343				286
Other non-current liabilities			3,774				3,143				4,058				3,380
Total liabilities			59,659				49,695				70,065				58,364
Share capital			3,474				2,894				3,474				2,894
Capital surplus			27,128				22,597				27,110				22,582
Other components of equity			274				228				1,875				1,562
Retained earnings			84,668				70,527				107,026				89,151
Equity attributable to owners of the Parent Company			115,544				96,246				139,485				116,189
Non-controlling interest			222				185				514				428
Total equity			115,766				96,431				139,999				116,617
Total liabilities and equity			175,425				146,126				210,064				174,981

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,200.50 to US$ 1.00, the noon buying rate in effect on June 30, 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																	Six months ended
		31-Mar-20				30-Jun-19				30-Jun-20									30-Jun-19							30-Jun-20
		(KRW)				(KRW)				(KRW)				(US$)							(KRW)							(KRW)				(US$)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)							(unaudited)							(unaudited)				(unaudited)
Revenues:
Online games-subscription revenue			9,893				6,746				24,448				20,365							13,002							34,341				28,606
Online games-royalties and license fees			3,543				2,832				4,459				3,714							6,552							8,002				6,666
Mobile games			55,982				65,013				54,249				45,189							185,103							110,231				91,821
Other revenue			3,842				3,536				5,302				4,416							7,093							9,144				7,616
Total net revenue			73,260				78,127				88,458				73,684							211,750							161,718				134,709
Cost of revenues			48,874				56,858				51,098				42,564							158,095							99,972				83,275
Gross profit			24,386				21,269				37,360				31,120							53,655							61,746				51,434
Operating expenses:
Selling, general and administrative expenses			11,007				5,733				17,643				14,696							12,398							28,650				23,865
Research and development			2,872				2,432				3,254				2,711							4,309							6,126				5,103
Others, net			151				106				150				125							310							301				251
Total operating expenses			14,030				8,271				21,047				17,532							17,017							35,077				29,219
Operating profit			10,356				12,998				16,313				13,588							36,638							26,669				22,215
Finance income(costs):
Finance income			1,551				1,141				627				522							2,203							2,178				1,814
Finance costs			(657	)			(102	)			(605	)			(504		)					(415		)					(1,262	)			(1,051		)
Profit before income tax			11,250				14,037				16,335				13,606							38,426							27,585				22,978
Income tax expenses			2,004				3,208				3,293				2,743							7,835							5,297				4,412
Profit for the year			9,246				10,829				13,042				10,863							30,591							22,288				18,566
Profit attributable to:
Non-controlling interest			(17	)			(32	)			(53	)			(44		)					(30		)					(70	)			(58		)
Owners of Parent company			9,263				10,861				13,095				10,907							30,621							22,358				18,624
Earning per share
- Basic and diluted			1,333				1,563				1,884				1.6							4,407							3,217				2.7
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 per ADS(1)
- Basic and diluted			1,333				1,563				1,884				1.6							4,407							3,217				2.7

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,200.50 to US$1.00, the noon buying rate in effect on June 30, 2020 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.