Gravity Reports Second Quarter of 2022 Results and Business Update

Rhea-AI Summary

GRAVITY Co., Ltd. (NasdaqGM: GRVY) reported second-quarter 2022 results, revealing revenues of KRW 96,519 million (US$ 74,305 thousand), an 8.9% QoQ and 15.4% YoY increase. Operating profit reached KRW 22,115 million (US$ 17,025 thousand), a slight 0.9% QoQ decline but a 15.4% YoY rise. Net profit also saw an increase to KRW 17,465 million (US$ 13,445 thousand), reflecting growth across key titles like Ragnarok Online. The company maintains strong liquidity with KRW 282,748 million (US$ 217,674 thousand) in cash. Additionally, GRAVITY announced partnerships and upcoming game launches, enhancing its market position.

Positive

• Total revenues increased by 8.9% QoQ and 15.4% YoY to KRW 96,519 million.
• Net profit rose to KRW 17,465 million, marking an 18.3% YoY increase.
• Online game revenues grew by 15.8% QoQ driven by Ragnarok Online.
• Mobile game revenues increased by 7.6% QoQ and 23.4% YoY.
• Strong liquidity position with KRW 282,748 million in cash.
• Successful launches of multiple Ragnarok titles and new partnerships.

Negative

• Operating profit decreased by 0.9% QoQ to KRW 22,115 million.
• Other revenues fell by 6.9% QoQ and 40.1% YoY.

Seoul, Korea, Aug. 10, 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 second quarter ended June 30, 2022, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

SECOND QUARTER 2022 HIGHLIGHTS

• Total revenues were KRW 96,519 million (US$ 74,305 thousand), representing an 8.9% increase from the first quarter ended March 31, 2022 (“QoQ”) and a 15.4% increase from the second quarter ended June 30, 2021 (“YoY”).
• Operating profit was KRW 22,115 million (US$ 17,025 thousand), representing a 0.9% decrease QoQ and a 15.4% increase YoY.
• Profit before income tax expenses was KRW 23,874 million (US$ 18,379 thousand), representing a 2.8% increase QoQ and a 23.1% increase YoY.
• Net profit attributable to parent company was KRW 17,465 million (US$ 13,445 thousand), representing a 6.3% increase QoQ and a 18.3% increase YoY.

REVIEW OF SECOND QUARTER 2022 FINANCIAL RESULTS

Revenues

Online game revenues for the second quarter of 2022 were KRW 24,827 million (US$ 19,113 thousand), representing a 15.8% increase QoQ from KRW 21,447 million and a 10.9% increase YoY from KRW 22,380 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Taiwan and Thailand. The increase YoY was largely due to increased revenue from Ragnarok Online in Taiwan, the Philippines, Singapore and Malaysia.

Mobile game revenues were KRW 68,042 million (US$ 52,382 thousand) for the second quarter of 2022, representing a 7.6% increase QoQ from KRW 63,241 million and a 23.4% increase YoY from KRW 55,140 million. The increase QoQ resulted primarily increased revenues from Ragnarok Labyrinth NFT, which was launched on April 27, 2022, in Southeast Asia and Ragnarok Monster's Arena launched on May 11, 2022, in Taiwan. Such increase was partially offset by decreased revenues from Ragnarok Origin in North America and Japan and Ragnarok X: Next Generation in Southeast Asia. The increase YoY was primarily due to revenues from Ragnarok X: Next Generation in Southeast Asia, Ragnarok Origin in North America and Ragnarok Monster's Arena launched on May 11, 2022, in Taiwan. Such increase was partially offset by decreased revenues from Ragnarok Origin in Korea, Ragnarok M: Eternal Love in Southeast Asia and Ragnarok X: Next Generation in Taiwan.

Other revenues were KRW 3,650 million (US$ 2,810 thousand) for the second quarter of 2022, representing a 6.9% decrease QoQ from KRW 3,919 million and a 40.1% decrease YoY from KRW 6,091 million.

Cost of Revenue

Cost of revenue was KRW 50,575 million (US$ 38,935 thousand) for the second quarter of 2022, representing a 11.8% increase QoQ from KRW 45,254 million and a 10.3% increase YoY from KRW 45,842 million. The increase QoQ was mainly due to increased commission paid for mobile game services related to Ragnarok Monster's Arena in Taiwan and Ragnarok Labyrinth NFT in Southeast Asia. The increase YoY was mostly from the increased commission paid for mobile game services related to Ragnarok X: Next Generation in Southeast Asia, Ragnarok Origin in North America and Ragnarok Monster's Arena in Taiwan.

Operating Expenses

Operating expenses were KRW 23,829 million (US$ 18,345 thousand) for the second quarter of 2022, representing a 13.3% increase QoQ from KRW 21,037 million and a 28.0% increase YoY from KRW 18,612 million. The increase QoQ was mainly due to increased advertising expenses for Ragnarok Monster's Arena in Taiwan and Ragnarok Labyrinth NFT in Southeast Asia. The increase YoY was mainly due to increase advertising expenses for Ragnarok Monster's Arena in Taiwan, Ragnarok Labyrinth NFT in Southeast Asia and Ragnarok Origin in North America.

Profit Before Income Tax Expenses

Profit before income tax expenses was KRW 23,874 million (US$ 18,379 thousand) for the second quarter of 2022 compared with profit before income tax expense of KRW 23,220 million for the first quarter of 2022 and profit before income tax expenses of KRW 19,387 million for the second quarter of 2021.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 17,465 million (US$ 13,445 thousand) for the second quarter of 2022 compared with net profit attributable to parent company of KRW 16,431 million for the first quarter of 2022 and a net profit attributable to parent company of KRW 14,766 million for the second quarter of 2021.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 282,748 million (US$ 217,674 thousand) as of June 30, 2022.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,298.95 to US$ 1.00, the noon buying rate in effect on June 30, 2022 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok IP Partnership with The Sandbox

Gravity signed a Ragnarok IP partnership agreement with The Sandbox, a metaverse gaming platform, on April 1, 2022.

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, an offline event has placed in Seoul, Korea in July 31, 2022. Various kinds of programs were placed at the venue including developer showcase, K-pop concert, RO arcades, etc. More in-game events and promotions are going to be placed throughout the third quarter of 2022.

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 fourth quarter of 2022.

• Ragnarok Origin, a MMORPG mobile and PC game

Ragnarok Origin is scheduled to be launched in multi-platform including mobile and PC in Taiwan, Hong Kong and Macau in September, 2022.

• Ragnarok Labyrinth NFT, a blockchain mobile game

Ragnarok Labyrinth NFT is scheduled to be launched in global in the third quarter of 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 fourth quarter of 2022.

• 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.

Ragnarok Monster’s Arena, a Card SRPG mobile game, was launched in Taiwan, Hong Kong and Macau on May 11, 2022. Ragnarok Monster’s Arena is scheduled to be launched in Thailand and Korea in September, 2022. Ragnarok Monster’s Arena is also scheduled to be launched in Southeast Asia (except for Thailand) in the fourth quarter of 2022.

Ragnarok V: Returns, a MMORPG mobile and PC game, was launched for mobile version and PC game service in Oceania in May 25, 2022. The game is preparing to provide PC game service on Steam in the fourth quarter 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 October, 2022, and to be launched in North America in the fourth quarter of 2022. The game has been developed by Gravity.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the second 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. Jeesun Lim
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								30-Jun-22
		KRW				US$				KRW				US$
		(audited)				(unaudited)				(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			99,105				76,296				112,748				86,799
Short-term financial instruments			148,000				113,938				170,000				130,875
Accounts receivable, net			52,615				40,506				53,234				40,982
Other receivables, net			1,080				831				380				293
Prepaid expenses			3,164				2,436				2,302				1,772
Other current assets			2,171				1,671				2,644				2,035
Total current assets			306,135				235,678				341,308				262,756
Property and equipment, net			11,338				8,728				10,700				8,237
Intangible assets, net			3,342				2,573				3,849				2,963
Deferred tax assets			1,719				1,323				1,165				897
Other non-current financial assets			3,019				2,324				3,347				2,577
Other non-current assets			1,973				1,519				1,668				1,284
Total assets			327,526				252,145				362,037				278,714
Liabilities and Equity
Current liabilities:
Accounts payable			41,199				31,717				44,116				33,963
Deferred revenue			13,481				10,378				13,424				10,335
Withholdings			3,596				2,768				3,317				2,554
Accrued expense			1,484				1,142				1,574				1,212
Income tax payable			10,629				8,183				6,877				5,294
Other current liabilities			3,608				2,778				3,900				3,001
Total current liabilities			73,997				56,966				73,208				56,359
Long-term deferred revenue			98				75				89				69
Other non-current liabilities			6,590				5,074				6,095				4,692
Total liabilities			80,685				62,115				79,392				61,120
Share capital			3,474				2,674				3,474				2,674
Capital surplus			27,098				20,861				27,098				20,861
Other components of equity			2,180				1,678				4,208				3,240
Retained earnings			213,318				164,223				247,214				190,318
Equity attributable to owners of the Parent Company			246,070				189,436				281,994				217,093
Non-controlling interest			771				594				651				501
Total equity			246,841				190,030				282,645				217,594
Total liabilities and equity			327,526				252,145				362,037				278,714

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,298.95 to US$ 1.00, the noon buying rate in effect on June 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																Six months ended
		31-Mar-22				30-Jun-21				30-Jun-22								30-Jun-21						30-Jun-22
		(KRW)				(KRW)				(KRW)				(US$)					(KRW)						(KRW)				(US$)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)					(unaudited)						(unaudited)				(unaudited)
Revenues:
Online games			21,447				22,380				24,827				19,113					41,838						46,274				35,624
Mobile games			63,241				55,140				68,042				52,382					137,578						131,283				101,069
Other revenue			3,919				6,091				3,650				2,810					9,254						7,569				5,827
Total net revenue			88,607				83,611				96,519				74,305					188,670						185,126				142,520
Cost of revenue			45,254				45,842				50,575				38,935					103,395						95,829				73,774
Gross profit			43,353				37,769				45,944				35,370					85,275						89,297				68,746
Operating expenses:
Selling, general and administrative expenses			17,642				14,014				21,207				16,326					29,522						38,849				29,908
Research and development			3,232				4,147				2,956				2,276					8,156						6,188				4,764
Others, net			163				451				(334)				(257)					487						(171)				(132)
Total operating expenses			21,037				18,612				23,829				18,345					38,165						44,866				34,540
Operating profit			22,316				19,157				22,115				17,025					47,110						44,431				34,206
Finance income(costs):
Finance income			1,608				597				4,100				3,156					2,917						5,708				4,394
Finance costs			(704)				(367)				(2,341)				(1,802)					(1,300)						(3,045)				(2,344)
Profit before income tax			23,220				19,387				23,874				18,379					48,007						47,094				36,256
Income tax expense			6,889				4,569				6,462				4,975					9,628						13,351				10,278
Profit for the year			16,331				14,818				17,412				13,404					38,379						33,743				25,978
Profit attributable to:
Non-controlling interest			(100)				52				(53)				(41)					48						(153)				(117)
Owners of Parent company			16,431				14,766				17,465				13,445					38,331						33,896				26,095
Earning per share
- Basic and diluted			2,365				2,125				2,513				1.93					5,516						4,878				3.76
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			2,365				2,125				2,513				1.93					5,516						4,878				3.76

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,298.95 to US$1.00, the noon buying rate in effect on June 30, 2022 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.

FAQ

What were GRAVITY's second-quarter 2022 revenues?

GRAVITY's revenues for the second quarter of 2022 were KRW 96,519 million (US$ 74,305 thousand).

How did GRAVITY's net profit change in Q2 2022?

The net profit for GRAVITY in Q2 2022 was KRW 17,465 million, a 6.3% increase QoQ and 18.3% increase YoY.

What contributed to the increase in GRAVITY's online game revenues in Q2 2022?

The increase in online game revenues was mainly driven by higher revenues from Ragnarok Online in Taiwan and Thailand.

What is the cash position of GRAVITY as of June 30, 2022?

As of June 30, 2022, GRAVITY had KRW 282,748 million (US$ 217,674 thousand) in cash and cash equivalents.

What are the upcoming game launches by GRAVITY?

GRAVITY has several upcoming launches including Ragnarok Labyrinth NFT and Ragnarok Origin scheduled for Q3 2022.