Gravity Reports Third Quarter of 2022 Results and Business Update

Seoul, Korea, Nov. 14, 2022 (GLOBE NEWSWIRE) -- Seoul, South Korea – November 14, 2022 – 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 third quarter ended September 30, 2022, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

THIRD QUARTER 2022 HIGHLIGHTS

  • Total revenues were KRW 102,377 million (US$ 71,509 thousand), representing an 6.1% increase from the second quarter ended June 30, 2022 (“QoQ”) and a 20.4% decrease from the third quarter ended September 30, 2021 (“YoY”).
  • Operating profit was KRW 21,271 million (US$ 14,857 thousand), representing a 3.8% decrease QoQ and a 47.1% decrease YoY.
  • Profit before income tax expenses was KRW 24,410 million (US$ 17,050 thousand), representing a 2.2% increase QoQ and a 41.1% decrease YoY.
  • Net profit attributable to parent company was KRW 16,076 million (US$ 11,229 thousand), representing a 8.0% decrease QoQ and a 39.0% decrease YoY.

REVIEW OF THIRD QUARTER 2022 FINANCIAL RESULTS

Revenues

Online game revenues for the third quarter of 2022 were KRW 19,271 million (US$ 13,460 thousand), representing a 22.4% decrease QoQ from KRW 24,827 million and a 5.3% increase YoY from KRW 18,295 million. The decrease QoQ was mainly attributable to decreased revenues from Ragnarok Online in Taiwan and Thailand. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and Korea. Such increase was partially offset by decreased revenue from Ragnarok Online in Japan.

Mobile game revenues were KRW 79,443 million (US$ 55,490 thousand) for the third quarter of 2022, representing a 16.8% increase QoQ from KRW 68,042 million and a 25.2% decrease YoY from KRW 106,218 million. The increase QoQ resulted primarily increased revenues from Ragnarok Origin, which was launched on September 15, 2022, in Taiwan, Hong Kong and Macau. Such increase was partially offset by decreased revenues from Ragnarok Labyrinth NFT in Southeast Asia, Ragnarok X: Next Generation in Southeast Asia and Taiwan, Ragnarok Origin in North America and Korea. The decrease YoY was due to decrease revenues from Ragnarok X: Next Generation in Southeast Asia and Ragnarok Origin in Japan and Korea. This decrease was partially offset by increased revenues from Ragnarok Origin in Taiwan, Hong Kong and Macau.

Other revenues were KRW 3,663 million (US$ 2,559 thousand) for the third quarter of 2022, representing a 0.4% increase QoQ from KRW 3,650 million and a 11.9% decrease YoY from KRW 4,157 million.

Cost of Revenue

Cost of revenue was KRW 59,829 million (US$ 41,790 thousand) for the third quarter of 2022, representing a 18.3% increase QoQ from KRW 50,575 million and a 9.6% decrease YoY from KRW 66,146 million. The increase QoQ was mainly due to increased commission paid for mobile game services related to Ragnarok Origin in Taiwan, Hong Kong and Macau. The decrease YoY was primarily due to commission paid for mobile game services related to Ragnarok X: Next Generation in Southeast Asia. Such decrease was partially offset by increased commission paid for mobile game service related to Ragnarok Origin in Taiwan, Hong Kong and Macau.

Operating Expenses

Operating expenses were KRW 21,277 million (US$ 14,862 thousand) for the third quarter of 2022, representing a 10.7% decrease QoQ from KRW 23,829 million and a 4.5% decrease YoY from KRW 22,282 million. The decrease QoQ was mainly due to decreased advertising expenses for Ragnarok Labyrinth NFT in global and commission paid for payment gate way fees related to Ragnarok Online in Taiwan and Thailand. The decrease YoY was mainly due to decreased salaries and advertising expenses for Ragnarok: The Lost Memories in Thailand.

Profit Before Income Tax Expenses

Profit before income tax expenses was KRW 24,410 million (US$ 17,050 thousand) for the third quarter of 2022 compared with profit before income tax expense of KRW 23,874 million for the second quarter of 2022 and profit before income tax expenses of KRW 41,435 million for the third quarter of 2021.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 16,076 million (US$ 11,229 thousand) for the third quarter of 2022 compared with net profit attributable to parent company of KRW 17,465 million for the second quarter of 2022 and a net profit attributable to parent company of KRW 26,351 million for the third quarter of 2021.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 293,684 million (US$ 205,134 thousand) as of September 30, 2022.
Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,431.67 to US$ 1.00, the noon buying rate in effect on September 30, 2022 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online

Ragnarok Online has celebrated its 20th anniversary in Korea in the second half of 2022 since the game was initially launched in Korea on August 1, 2002. As celebrating its 20th anniversary, various kinds of online and offline events and promotions were placed in the third quarter of 2022.

Ragnarok Online IP-based Games

  • Ragnarok Origin, a MMORPG mobile and PC game

Ragnarok Origin was launched in multi-platform including mobile and PC in Taiwan, Hong Kong and Macau in September 15, 2022. The game is scheduled to be launched in Southeast Asia in the first half of 2023.

  • Ragnarok X: Next Generation, a MMORPG mobile game

Ragnarok X: Next Generation has run the CBT in Korea on October 11, 2022 and has started its pre-registration in Korea on November 3, 2022. Ragnarok X: Next Generation is scheduled to be launched in Korea in the first quarter of 2023.

  • Ragnarok M: Eternal Love, a MMORPG mobile game

Ragnarok M: Eternal Love is planned to be launched in Vietnam in the first half of 2023.

  • Ragnarok Labyrinth NFT, a blockchain mobile game

Ragnarok Labyrinth NFT was launched in global on September 22, 2022.

  • Ragnarok Poring Merge, a blockchain mobile game

Ragnarok Poring Merge was designed as a blockchain game based on P2E systems. The game is prepared to be launched in Southeast Asia in the third quarter of 2023.

  • Other Ragnarok Online IP-based games

Ragnarok: The Lost Memories, a Cinematic Newtro Story RPG mobile and PC game, has launched in Korea on August 10, 2022. The game is planned to be launched in Taiwan, Hong Kong and Macau in the first half of 2023.

Ragnarok Monster’s Arena, a Card SRPG mobile game, was launched in Thailand on September 1, 2022. The game also was launched in Korea on September 27, 2022. Ragnarok Monster’s Arena is named differently in Thailand and Korea. The game is as known as Ragnarok Tactics II in Thailand, and it is as known as Ragnarok Arena in Korea. Ragnarok Monster’s Arena is scheduled to be launched in Southeast Asia (except for Thailand), South Asia, Middle East, and Oceania in the fourth quarter of 2022.

Ragnarok Begins, a MMORPG mobile and PC game, has run the second CBT for mobile and PC game version in North America on October 14, 2022. The game is scheduled to be launched in North America in November 15, 2022. The game has been developed by Gravity.

Ragnarok IP Game Jam with The Sandbox

Gravity initially signed a Ragnarok IP partnership agreement with The Sandbox, a metaverse gaming platform, on April 1, 2022. Gravity held the Ragnarok Game Jam with The Sandbox on September 7, 2022.

Business Agreement with Me2On

Gravity Neocyon Inc., a subsidiary of Gravity, has signed a business agreement with a mobile social casino game company, Me2On, on October 14, 2022 and is planned to launch a blockchain NFT game in the first half of 2023.

Investor Presentation
Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the third quarter in 2022 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. ---------------------------------------------------
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 91 markets and regions. 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, 2021 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. Somin Kim
Ms. Jeesun Lim
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-21     30-September-22  
    KRW     US$     KRW     US$  
    (audited)     (unaudited)     (unaudited)     (unaudited)  
Assets                                
Current assets:                                
Cash and cash equivalents     99,105       69,223       107,684       75,216  
Short-term financial instruments     148,000       103,376       186,000       129,918  
Accounts receivable, net     52,615       36,751       78,855       55,079  
Other receivables, net     1,080       754       227       159  
Prepaid expenses     3,164       2,210       2,866       2,002  
Other current assets     2,171       1,516       2,448       1,710  
Total current assets     306,135       213,830       378,080       264,084  
Property and equipment, net     11,338       7,919       9,879       6,900  
Intangible assets, net     3,342       2,334       3,468       2,422  
Deferred tax assets     1,719       1,201       1,494       1,044  
Other non-current financial assets     3,019       2,109       3,366       2,351  
Other non-current assets     1,973       1,379       1,599       1,117  
Total assets     327,526       228,772       397,886       277,918  
Liabilities and Equity                                
Current liabilities:                                
Accounts payable     41,199       28,777       61,640       43,055  
Deferred revenue     13,481       9,416       15,512       10,835  
Withholdings     3,596       2,512       2,712       1,894  
Accrued expense     1,484       1,037       1,367       955  
Income tax payable     10,629       7,424       4,272       2,984  
Other current liabilities     3,608       2,520       3,587       2,505  
Total current liabilities     73,997       51,686       89,090       62,228  
Long-term deferred revenue     98       68       79       55  
Other non-current liabilities     6,590       4,602       5,685       3,971  
Total liabilities     80,685       56,356       94,854       66,254  
Share capital     3,474       2,427       3,474       2,427  
Capital surplus     27,098       18,928       27,098       18,928  
Other components of equity     2,180       1,523       8,440       5,895  
Retained earnings     213,318       148,999       263,290       183,904  
Equity attributable to owners of the Parent      Company     246,070       171,877       302,302       211,154  
Non-controlling interest     771       539       730       510  
Total equity     246,841       172,416       303,032       211,664  
Total liabilities and equity     327,526       228,772       397,886       277,918  

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,431.67 to US$ 1.00, the noon buying rate in effect on September 30, 2022 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     Nine months ended  
    30-Jun-22     30-Sep-21     30-Sep-22     30-Sep-21     30-Sep-22  
    (KRW)     (KRW)     (KRW)     (US$)     (KRW)     (KRW)     (US$)  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Revenues:                                                        
   Online games     24,827       18,295       19,271       13,460       60,133       65,545       45,782  
   Mobile games     68,042       106,218       79,443       55,490       243,796       210,726       147,189  
   Other revenue     3,650       4,157       3,663       2,559       13,411       11,232       7,845  
      Total net revenue     96,519       128,670       102,377       71,509       317,340       287,503       200,816  
Cost of revenue     50,575       66,146       59,829       41,790       169,541       155,658       108,725  
Gross profit     45,944       62,524       42,548       29,719       147,799       131,845       92,091  
Operating expenses:                                                        
   Selling, general and administrative expenses     21,207       18,091       17,624       12,310       47,613       56,473       39,446  
   Research and development     2,956       4,143       3,745       2,616       12,299       9,933       6,938  
   Others, net     (334)       48       (92)       (64)       535       (263)       (184)  
      Total operating expenses     23,829       22,282       21,277       14,862       60,447       66,143       46,200  
Operating profit     22,115       40,242       21,271       14,857       87,352       65,702       45,891  
Finance income(costs):                                                        
   Finance income     4,100       2,128       5,343       3,732       4,325       11,051       7,719  
   Finance costs     (2,341)       (935)       (2,204)       (1,539)       (2,235)       (5,249)       (3,666)  
Profit before income tax     23,874       41,435       24,410       17,050       89,442       71,504       49,944  
Income tax expense     6,462       15,151       8,312       5,806       24,779       21,663       15,131  
      Profit for the year     17,412       26,284       16,098       11,244       64,663       49,841       34,813  
Profit attributable to:                                                        
   Non-controlling interest     (53)       (67)       22       15       (19)       (131)       (92)  
   Owners of Parent company     17,465       26,351       16,076       11,229       64,682       49,972       34,905  
Earning per share                                                        
      - Basic and diluted     2,513       3,792       2,313       1.62       9,308       7,191       5.02  
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     2,513       3,792       2,313       1.62       9,308       7,191       5.02  

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,431.67 to US$1.00, the noon buying rate in effect on September 30, 2022 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.


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