Gravity Reports Second Quarter of 2021 Results and Business Update

Rhea-AI Summary

GRAVITY Co., Ltd. (NasdaqGM: GRVY) announced its second quarter 2021 financial results, reporting total revenues of KRW 83,611 million (US$ 73,965 thousand), a 20.4% decrease QoQ and 5.5% YoY. Operating profit was KRW 19,157 million (US$ 16,947 thousand), a 31.5% QoQ decline but a 17.4% YoY increase. Net profit attributable to the parent company dropped 37.3% QoQ to KRW 14,766 million (US$ 13,062 thousand), despite a 12.8% YoY increase. Key developments include the launch of Ragnarok Online in Vietnam and continued performance of Ragnarok X: Next Generation.

Positive

• Operating profit increased 17.4% YoY.
• Net profit attributable to parent increased 12.8% YoY.
• Ragnarok Origin launched in Japan, ranking first in downloads.

Negative

• Total revenues decreased 20.4% QoQ.
• Mobile game revenues dropped 33.1% QoQ.
• Net profit decreased 37.3% QoQ.

Seoul, South Korea, Aug. 13, 2021 (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, 2021, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

SECOND QUARTER 2021 HIGHLIGHTS

• Total revenues were KRW 83,611 million (US$ 73,965 thousand), representing a 20.4% decrease from the first quarter ended March 31, 2021 (“QoQ”) and a 5.5% decrease from the second quarter ended June 30, 2020 (“YoY”).
• Operating profit was KRW 19,157 million (US$ 16,947 thousand), representing a 31.5% decrease QoQ and a 17.4% increase YoY.
• Profit before income tax expenses was KRW 19,387 million (US$ 17,150 thousand), representing a 32.3% decrease QoQ and a 18.7% increase YoY.
• Net profit attributable to parent company was KRW 14,766 million (US$ 13,062 thousand), representing a 37.3% decrease QoQ and a 12.8% increase YoY.

REVIEW OF SECOND QUARTER 2021 FINANCIAL RESULTS

Revenues

Online game revenues for the second quarter of 2021 were KRW 22,380 million (US$ 19,798 thousand), representing a 15.0% increase QoQ from KRW 19,458 million and a 22.6% decrease YoY from KRW 28,907 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Thailand. The decrease YoY was largely due to decreased revenues from Ragnarok Online in Thailand and revenues from collaboration event with Garena’s Free Fire items based on Ragnarok Online IP.

Mobile game revenues were KRW 55,140 million (US$ 48,778 thousand) for the second quarter of 2021, representing a 33.1% decrease QoQ from KRW 82,438 million and a 1.6% increase YoY from KRW 54,249 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau, Ragnarok Origin in Korea and Ragnarok M: Eternal Love in Southeast Asia. Such decrease was partially offset by increased revenues from Ragnarok X: Next Generation in Southeast Asia that was launched on June 18, 2021. The increase YoY was primarily due to revenues from Ragnarok X: Next Generation in Taiwan, Hong Kong, Macau and Southeast Asia and Ragnarok Origin in Korea. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love and Ragnarok Tactics.

Other revenues were KRW 6,091 million (US$ 5,389 thousand) for the second quarter of 2021, representing 92.6% increase QoQ from KRW 3,163 million and a 14.9% increase YoY from KRW 5,302 million.

Cost of Revenue

Cost of revenue was KRW 45,842 million (US$ 40,554 thousand) for the second quarter of 2021, representing a 20.3% decrease QoQ from KRW 57,553 million and a 10.3% decrease YoY from KRW 51,098 million. The decrease QoQ was mainly due to 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. The decrease YoY was mostly from decreased commission paid for mobile game services related to Ragnarok M: Eternal Love and Ragnarok Tactics.

Operating Expenses

Operating expenses were KRW 18,612 million (US$ 16,464 thousand) for the second quarter of 2021, representing a 4.8% decrease QoQ from KRW 19,553 million and a 11.6% decrease YoY from KRW 21,047 million. The decrease QoQ was mainly attributable to decreased advertising expenses for Tera Classic in Japan, The Lord in Thailand and The Labyrinth of Ragnarok in global. The decrease YoY was mostly resulted from decreased advertising expenses for Ragnarok Origin and Ragnarok Tactics in Korea, Sacred Blade in Japan, Ragnarok Online in Thailand and Ragnarok H5 in Indonesia.

Profit before income tax expenses

Profit before income tax expenses was KRW 19,387 million (US$ 17,150 thousand) for the second quarter of 2021 compared with profit before income tax expense of KRW 28,620 million for the first quarter of 2021 and profit before income tax expenses of KRW 16,335 million for the second quarter of 2020.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 14,766 million (US$ 13,062 thousand) for the second quarter of 2021 compared with net profit attributable to parent company of KRW 23,565 million for the first quarter of 2021 and a net profit attributable to parent company of KRW 13,095 million for the second quarter of 2020.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 202,631 million (US$ 179,253 thousand) as of June 30, 2021.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,130.42 to US$ 1.00, the noon buying rate in effect on June 30, 2021 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online

Gravity opened Ragnarok Online in Vietnam on July 8, 2021 with VTC Technology and Digital Content Company as a joint publisher.

Ragnarok Online IP-based Games

• Ragnarok Origin, a MMORPG mobile game
  

Ragnarok Origin was launched in Japan on June 28, 2021 and ranked as the first in free download of Google Play games and Apple’s App Store games after its launching. The game is scheduled to be launched in the United States and Canada in October 2021 and in Taiwan, Hong Kong and Macau in the first half of 2022.

• Ragnarok X: Next Generation, a MMORPG mobile game
  

Ragnarok X: Next Generation was launched in Southeast Asia on June 18, 2021 and ranked as the first in top grossing of Apple App Store in Thailand, Indonesia and the Philippines. The game is being prepared for launch in Vietnam in September 2021 and in Korea in the first half of 2022.

• Other Ragnarok Online IP-based games
  

Ragnarok Project S (Tentative title), a MMORPG mobile game, is scheduled to be launched in Oceania in the fourth quarter of 2021 and has been developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Ragnarok The Lost Memories, a Cinematic Newtro Story RPG mobile game, is expected to be launched in Thailand in the third quarter of 2021 and in North America in the fourth quarter of 2021. Gravity NeoCyon, Inc., our subsidiary in Korea, has developed the game.

Ragnarok Begins, a MMORPG PC game, is expected to start the first closed beta test(“CBT”) in September 2021 and the launching schedule will be disclosed in G-STAR 2021. The game has been developed by Gravity.

Other IP games

NBA RISE TO STARDOM, a Sports mobile game, is scheduled to run the CBT in September 2021 and is expected to be launched in Japan in the fourth quarter of 2021. Both mobile platforms, iOS and Android, will be available for the game.

Sadako M, an Adventure mobile game, is expected to be launched in Japan in September 2021.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the second quarter in 2021 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, 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. Hye Ji An
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-20										30-June-21
		KRW					US$					KRW				US$
		(audited)					(unaudited)					(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			110,632					97,868					101,631				89,906
Short-term financial instruments			71,000					62,809					101,000				89,347
Accounts receivable, net			59,761					52,866					58,874				52,082
Other receivables, net			8					7					60				53
Prepaid expenses			2,238					1,980					1,946				1,721
Other current assets			2,946					2,606					2,301				2,035
Total current assets			246,585					218,136					265,812				235,144
Property and equipment, net			7,695					6,807					9,459				8,368
Intangible assets, net			3,363					2,975					3,788				3,351
Deferred tax assets			3,590					3,176					3,072				2,718
Other non-current financial assets			1,324					1,171					2,071				1,832
Other non-current assets			2,815					2,490					1,844				1,631
Total assets			265,372					234,755					286,046				253,044
Liabilities and Equity
Current liabilities:
Accounts payable			52,688					46,609					40,271				35,625
Deferred revenue			13,692					12,112					12,030				10,642
Withholdings			2,851					2,522					2,680				2,371
Accrued expense			1,365					1,208					1,219				1,078
Income tax payable			9,470					8,377					4,273				3,780
Other current liabilities			2,654					2,348					2,567				2,271
Total current liabilities			82,720					73,176					63,040				55,767
Long-term deferred revenue			101					89					98				87
Other non-current liabilities			5,203					4,604					5,782				5,114
Total liabilities			88,024					77,869					68,920				60,968
Share capital			3,474					3,073					3,474				3,073
Capital surplus			27,110					23,982					27,110				23,982
Other components of equity			(1,045	)				(924	)				11				10
Retained earnings			147,371					130,368					185,702				164,277
Equity attributable to owners of the Parent Company			176,910					156,499					216,297				191,342
Non-controlling interest			438					387					829				734
Total equity			177,348					156,886					217,126				192,076
Total liabilities and equity			265,372					234,755					286,046				253,044

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,130.42 to US$ 1.00, the noon buying rate in effect on June 30, 2021 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-21					30-Jun-20					30-Jun-21									30-Jun-20					30-Jun-21
		(KRW)					(KRW)					(KRW)					(US$)					(KRW)					(KRW)					(US$)
		(unaudited)					(unaudited)					(unaudited)					(unaudited)					(unaudited)					(unaudited)					(unaudited)
Revenues:
Online games			19,458					28,907					22,380					19,798					42,343					41,838					37,011
Mobile games			82,438					54,249					55,140					48,778					110,231					137,578					121,705
Other revenue			3,163					5,302					6,091					5,389					9,144					9,254					8,187
Total net revenue			105,059					88,458					83,611					73,965					161,718					188,670					166,903
Cost of revenue			57,553					51,098					45,842					40,554					99,972					103,395					91,467
Gross profit			47,506					37,360					37,769					33,411					61,746					85,275					75,436
Operating expenses:
Selling, general and administrative expenses			15,508					17,643					14,014					12,397					28,650					29,522					26,116
Research and development			4,009					3,254					4,147					3,669					6,126					8,156					7,215
Others, net			36					150					451					398					301					487					430
Total operating expenses			19,553					21,047					18,612					16,464					35,077					38,165					33,761
Operating profit			27,953					16,313					19,157					16,947					26,669					47,110					41,675
Finance income(costs):
Finance income			1,600					627					597					528					2,178					2,197					1,943
Finance costs			(933	)				(605	)				(367	)				(325	)				(1,262	)				(1,300	)				(1,150	)
Profit before income tax			28,620					16,335					19,387					17,150					27,585					48,007					42,468
Income tax expense			5,059					3,293					4,569					4,042					5,297					9,628					8,517
Profit for the year			23,561					13,042					14,818					13,108					22,288					38,379					33,951
Profit attributable to:
Non-controlling interest			(4	)				(53	)				52					46					(70	)				48					42
Owners of Parent company			23,565					13,095					14,766					13,062					22,358					38,331					33,909
Earning per share
- Basic and diluted			3,391					1,884					2,125					1.88					3,217					5,516					4.88
Weighted average number of shares outstanding
- Basic and diluted			6,498,000					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			3,391					1,884					2,125					1.88					3,217					5,516					4.88

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,130.42 to US$1.00, the noon buying rate in effect on June 30, 2021 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.

FAQ

What were GRVY's revenue results for Q2 2021?

GRVY reported total revenues of KRW 83,611 million (US$ 73,965 thousand) for Q2 2021, a 20.4% decrease QoQ.

How did GRVY's net profit change in Q2 2021?

GRVY's net profit attributable to the parent company was KRW 14,766 million (US$ 13,062 thousand), a decline of 37.3% QoQ.

What were the main factors behind GRVY's decreased revenues?

The decrease was attributed to reduced revenues from Ragnarok Online in Thailand and declines in mobile games like Ragnarok X: Next Generation.

Which new games did GRVY launch in 2021?

GRVY launched Ragnarok Online in Vietnam and Ragnarok Origin in Japan, with more launches scheduled in late 2021.

What was the operating profit for GRVY in Q2 2021?

GRVY's operating profit was KRW 19,157 million (US$ 16,947 thousand), down 31.5% QoQ.