Gravity Reports First Quarter of 2022 Results and Business Update

Rhea-AI Summary

GRAVITY Co., Ltd. (NasdaqGM: GRVY) reported its first-quarter financial results for 2022, showing total revenues of KRW 88,607 million (US$ 73,135 thousand), an 8.3% decrease QoQ and 15.7% YoY. Operating profit increased to KRW 22,316 million (US$ 18,419 thousand), up 138.2% QoQ yet down 20.2% YoY. Net profit attributable to the parent company reached KRW 16,431 million (US$ 13,562 thousand), marking an impressive 1,198.9% increase QoQ but a decrease of 30.3% YoY. The company also detailed upcoming game launches and updates related to the Ragnarok franchise.

Positive

• Operating profit increased by 138.2% QoQ.
• Online game revenues rose by 40.7% QoQ.
• Ragnarok Online revenues increased in several key markets.

Negative

• Overall revenue decreased by 8.3% QoQ and 15.7% YoY.
• Mobile game revenues decreased by 17.2% QoQ and 23.3% YoY.
• Net profit fell by 30.3% YoY despite a significant QoQ increase.

Seoul, May 13, 2022 (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, 2022, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

FIRST QUARTER 2022 HIGHLIGHTS

• Total revenues were KRW 88,607 million (US$ 73,135 thousand), representing an 8.3% decrease from the fourth quarter ended December 31, 2021 (“QoQ”) and a 15.7% decrease from the first quarter ended March 31, 2021 (“YoY”).
• Operating profit was KRW 22,316 million (US$ 18,419 thousand), representing a 138.2% increase QoQ and a 20.2% decrease YoY.
• Profit before income tax expenses was KRW 23,220 million (US$ 19,166 thousand), representing a 135.5% increase QoQ and a 18.9% decrease YoY.
• Net profit attributable to parent company was KRW 16,431 million (US$ 13,562 thousand), representing a 1,198.9% increase QoQ and a 30.3% decrease YoY.

REVIEW OF FIRST QUARTER 2022 FINANCIAL RESULTS

Revenues

Online game revenues for the first quarter of 2022 were KRW 21,447 million (US$ 17,702 thousand), representing a 40.7 % increase QoQ from KRW 15,238 million and a 10.2% increase YoY from KRW 19,458 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Taiwan, Japan, the Philippines, Singapore and Malaysia. The increase YoY was largely due to increased revenues from Ragnarok Online in Taiwan, the Philippines, Singapore and Malaysia.

Mobile game revenues were KRW 63,241 million (US$ 52,198 thousand) for the first quarter of 2022, representing a 17.2% decrease QoQ from KRW 76,367 million and a 23.3% decrease YoY from KRW 82,438 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok X: Next Generation in Southeast Asia, Ragnarok Origin in Japan and Ragnarok M: Eternal Love. Such decrease was partially offset by increased revenues from Ragnarok Origin in the United States and Canada that was launched on November 10, 2021. The decrease YoY was primarily due to revenues from and Ragnarok Origin in Korea, Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau, and Ragnarok M: Eternal Love. This decrease was partially offset by increased revenues from Ragnarok X: Next Generation in Southeast Asia and Ragnarok Origin in the United States, Canada and Japan.

Other revenues were KRW 3,919 million (US$ 3,235 thousand) for the first quarter of 2022, representing 21.5% decrease QoQ from KRW 4,993 million and a 23.9% increase YoY from KRW 3,163 million.

Cost of Revenue

Cost of revenue was KRW 45,254 million (US$ 37,352 thousand) for the first quarter of 2022, representing a 17.2% decrease QoQ from KRW 54,632 million and a 21.4% decrease YoY from KRW 57,553 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok X: Next Generation in Southeast Asia and Ragnarok Origin in Japan. The decrease YoY was mostly from decreased commission paid for mobile game services related to Ragnarok M: Eternal Love, Ragnarok Origin in Korea and Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau.

Operating Expenses

Operating expenses were KRW 21,037 million (US$ 17,364 thousand) for the first quarter of 2022, representing a 35.5% decrease QoQ from KRW 32,599 million and a 7.6% increase YoY from KRW 19,553 million. The decrease QoQ was mainly attributable to decreased advertising expenses for Ragnarok Origin in the United States and Canada, NBA RISE TO STARDOM in Japan and G-STAR 2021, and research and development expenses. The increase YoY was mostly resulted from increased commission paid and salaries.

Profit Before Income Tax Expenses

Profit before income tax expenses was KRW 23,220 million (US$ 19,166 thousand) for the first quarter of 2022 compared with profit before income tax expense of KRW 9,859 million for the fourth quarter of 2021 and profit before income tax expenses of KRW 28,620 million for the first quarter of 2021.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 16,431 million (US$ 13,562 thousand) for the first quarter of 2022 compared with net profit attributable to parent company of KRW 1,265 million for the fourth quarter of 2021 and a net profit attributable to parent company of KRW 23,565 million for the first quarter of 2021.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 266,369 million (US$ 219,858 thousand) as of March 31, 2022.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,211.55 to US$ 1.00, the noon buying rate in effect on March 31, 2022 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online

Ragnarok Online is going to celebrate its 20th anniversary in Korea in the second half of 2022 since the game was initially launched in Korea on August 1, 2002.

Ragnarok Online IP-based Games

• Ragnarok X: Next Generation, a MMORPG mobile game

Ragnarok X: Next Generation is scheduled to be launched in Korea in the second half of 2022.

• Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin is scheduled to be launched in Taiwan, Hong Kong and Macau in the second half of 2022.

• Ragnarok Labyrinth NFT, a blockchain mobile game

Ragnarok Labyrinth NFT was re-opened in Southeast Asia on April 27, 2022 since it was initially launched in Southeast Asia on April 13. The game ranked as the first in top grossing of Apple App Store in Thailand, and the third in top grossing of Apple App Store in the Philippines and Indonesia after its launching.

• Ragnarok Poring Merge, a blockchain mobile game

Ragnarok Poring Merge was designed as a blockchain game combined with NFT items and P2E systems. The game will start the pre-registration in Southeast Asia and it is preparing to be launched in the second half of 2022.

• Other Ragnarok Online IP-based games

Ragnarok: The Lost Memories, a Cinematic Newtro Story RPG mobile and PC game, was launched for mobile version in South America, Australia and New Zealand on March 29, 2022. The game started to provide PC game service on Steam from April 12, 2022, and has been developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Ragnarok Monster’s Arena, a Card SRPG mobile game, was launched in Taiwan, Hong Kong and Macau on May 11, 2022. The game is scheduled to be launched in Thailand and Korea in the second half of 2022.

Ragnarok V: Returns, a MMORPG mobile and PC game, is scheduled to be launched for mobile version and PC game service in Oceania in the second quarter of 2022. The game is preparing to provide PC game service on Steam in global in the second half of 2022, and has been developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Ragnarok Begins, a MMORPG Mobile and PC game, is scheduled to run the second CBT for mobile and PC game version in September, 2022 and to be launched in Korea in the second half of 2022. The game has been developed by Gravity.

Other IP games

PALADOG TACTICS, a SRPG mobile game, was launched in Korea on March 31, 2022. The game has been developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the first 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 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, 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. Jin Lee
Ms. Hye Ji An
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-21								31-Mar-22
		KRW				US$				KRW				US$
		(audited)				(unaudited)				(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			99,105				81,800				101,369				83,669
Short-term financial instruments			148,000				122,158				165,000				136,189
Accounts receivable, net			52,615				43,428				51,622				42,608
Other receivables, net			1,080				891				241				199
Prepaid expenses			3,164				2,612				2,008				1,658
Other current assets			2,171				1,792				2,489				2,054
Total current assets			306,135				252,681				322,729				266,377
Property and equipment, net			11,338				9,358				10,310				8,510
Intangible assets, net			3,342				2,758				3,071				2,535
Deferred tax assets			1,719				1,419				1,114				919
Other non-current financial assets			3,019				2,492				3,036				2,506
Other non-current assets			1,973				1,628				2,033				1,678
Total assets			327,526				270,336				342,293				282,525
Liabilities and Equity
Current liabilities:
Accounts payable			41,199				34,005				40,355				33,309
Deferred revenue			13,481				11,127				13,787				11,380
Withholdings			3,596				2,968				3,017				2,490
Accrued expense			1,484				1,225				2,704				2,232
Income tax payable			10,629				8,773				9,399				7,758
Other current liabilities			3,608				2,978				3,553				2,932
Total current liabilities			73,997				61,076				72,815				60,101
Long-term deferred revenue			98				81				98				81
Other non-current liabilities			6,590				5,440				5,818				4,802
Total liabilities			80,685				66,597				78,731				64,984
Share capital			3,474				2,867				3,474				2,867
Capital surplus			27,098				22,366				27,098				22,366
Other components of equity			2,180				1,799				2,559				2,111
Retained earnings			213,318				176,070				229,749				189,632
Equity attributable to owners of the Parent Company			246,070				203,102				262,880				216,976
Non-controlling interest			771				637				682				565
Total equity			246,841				203,739				263,562				217,541
Total liabilities and equity			327,526				270,336				342,293				282,525

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,211.55 to US$ 1.00, the noon buying rate in effect on March 31, 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
		31-Dec-21													31-Mar-21														31-Mar-22
		(KRW)						(US$)							(KRW)							(US$)							(KRW)						(US$)
		(unaudited)						(unaudited)							(unaudited)							(unaudited)							(unaudited)						(unaudited)
Revenues:
Online games			15,238							12,577							19,458							16,060						21,447						17,702
Mobile games			76,367							63,032							82,438							68,043						63,241						52,198
Other revenue			4,993							4,121							3,163							2,611						3,919						3,235
Total net revenue			96,598							79,730							105,059							86,714						88,607						73,135
Cost of revenue			54,632							45,093							57,553							47,504						45,254						37,352
Gross profit			41,966							34,637							47,506							39,210						43,353						35,783
Operating expenses:
Selling, general and administrative expenses			28,018							23,126							15,508							12,800						17,642						14,562
Research and development			4,271							3,525							4,009							3,309						3,232						2,668
Others, net			310							256							36							30						163						134
Total operating expenses			32,599							26,907							19,553							16,139						21,037						17,364
Operating profit			9,367							7,730							27,953							23,071						22,316						18,419
Finance income(costs):
Finance income			943							779							1,600							1,321						1,608						1,327
Finance costs			(451)							(372		)					(933)							(770)						(704)						(580)
Profit before income tax			9,859							8,137							28,620							23,622						23,220						19,166
Income tax expense			8,642							7,134							5,059							4,176						6,889						5,686
Profit for the year			1,217							1,003							23,561							19,446						16,331						13,480
Profit attributable to:
Non-controlling interest			(48)							(40)							(4)							(3)						(100)						(82)
Owners of Parent company			1,265							1,043							23,565							19,449						16,431						13,562
Earning per share
- Basic and diluted			182							0.15							3,391							2.80						2,365						1.95
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			182							0.15							3,391							2.80						2,365						1.95

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,211.55 to US$1.00, the noon buying rate in effect on March 31, 2022 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.

FAQ

What were GRAVITY's total revenues for Q1 2022?

GRAVITY reported total revenues of KRW 88,607 million (US$ 73,135 thousand) for Q1 2022.

How did GRAVITY's operating profit change in Q1 2022?

Operating profit increased by 138.2% QoQ to KRW 22,316 million (US$ 18,419 thousand) for Q1 2022.

What led to GRAVITY's online game revenue growth in Q1 2022?

The growth in online game revenue was primarily driven by increased revenues from Ragnarok Online in Taiwan, Japan, the Philippines, Singapore, and Malaysia.

What was the decrease in GRAVITY's mobile game revenues for Q1 2022?

Mobile game revenues decreased by 17.2% QoQ and 23.3% YoY.

What is the outlook for GRAVITY's Ragnarok franchise in 2022?

GRAVITY plans to launch several new games in the Ragnarok franchise, including Ragnarok X: Next Generation and Ragnarok Origin, in the second half of 2022.