Gravity Reports Third Quarter of 2021 Results and Business Update

Rhea-AI Summary

Gravity Co., Ltd. (Nasdaq GM: GRVY) reported its third-quarter 2021 financial results, showing a total revenue of KRW 128,670 million (US$ 108,702 thousand), a 53.9% increase from Q2 but a 2.4% decrease from Q3 2020. Operating profit reached KRW 40,242 million (US$ 33,997 thousand), up 110.1% QoQ and 17.1% YoY. Net profit attributable to the parent company was KRW 26,351 million (US$ 22,262 thousand), a 78.5% increase QoQ. Online game revenues decreased by 18.3% QoQ, largely due to reduced earnings from Ragnarok Online. However, mobile game revenues surged by 92.6% QoQ, boosted by new launches.

Positive

• Operating profit increased by 110.1% QoQ and 17.1% YoY.
• Mobile game revenues rose by 92.6% QoQ and 11.2% YoY.
• Net profit attributable to the parent company grew by 78.5% QoQ.

Negative

• Online game revenues decreased by 18.3% QoQ and 42.5% YoY, primarily due to lower earnings from Ragnarok Online in Thailand and Japan.
• Cost of revenues increased by 44.3% QoQ.

Seoul, South Korea, Nov. 12, 2021 (GLOBE NEWSWIRE) --

GRAVITY Co., Ltd. (Nasdaq GM: 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, 2021, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

THIRD QUARTER 2021 HIGHLIGHTS

• Total revenues were KRW 128,670 million (US$ 108,702 thousand), representing a 53.9% increase from the second quarter ended June 30, 2021 (“QoQ”) and a 2.4% decrease from the third quarter ended September 30, 2020 (“YoY”).
• Operating profit was KRW 40,242 million (US$ 33,997 thousand), representing a 110.1% increase QoQ and a 17.1% increase YoY.
• Profit before income tax expenses was KRW 41,435 million (US$ 35,005 thousand), representing a 113.7% increase QoQ and a 23.0% increase YoY.
• Net profit attributable to parent company was KRW 26,351 million (US$ 22,262 thousand), representing a 78.5% increase QoQ and a 4.2% increase YoY.

REVIEW OF THIRD QUARTER 2021 FINANCIAL RESULTS

Revenues

Online game revenues for the third quarter of 2021 were KRW 18,295 million (US$ 15,456 thousand), representing a 18.3% decrease QoQ from KRW 22,380 million and a 42.5% decrease YoY from KRW 31,833 million. The decrease QoQ was mainly attributable to decreased revenues from Ragnarok Online in Thailand and Japan. Such decrease was partially offset by increased revenues from Ragnarok Online in Taiwan. The decrease YoY was largely due to decreased revenues from Ragnarok Online in Thailand.

Mobile game revenues were KRW 106,218 million (US$ 89,734 thousand) for the third quarter of 2021, representing a 92.6% increase QoQ from KRW 55,140 million and a 11.2% increase YoY from KRW 95,531 million. The increase QoQ resulted primarily from increased revenues from Ragnarok X: Next Generation in Southeast Asia that was launched on June 18, 2021 and Ragnarok Origin in Japan that was launched on June 28, 2021. Such increase was partially offset by decreased revenues from Ragnarok Origin in Korea, Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok M: Eternal Love in Southeast Asia. The increase YoY was primarily due to revenues from Ragnarok X: Next Generation in Southeast Asia, Taiwan, Hong Kong and Macau, and Ragnarok Origin in Japan. This increase was partially offset by decreased revenues from Ragnarok Origin in Korea and Ragnarok M: Eternal Love.

Other revenues were KRW 4,157 million (US$ 3,512 thousand) for the third quarter of 2021, representing a 31.8% decrease QoQ from KRW 6,091 million and a 6.2% decrease YoY from KRW 4,431 million.

Cost of Revenues

Cost of revenue was KRW 66,146 million (US$ 55,881 thousand) for the third quarter of 2021, representing a 44.3% increase QoQ from KRW 45,842 million and a 10.7% decrease YoY from KRW 74,107 million. The increase QoQ was mainly due to increased 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 and Ragnarok Origin in Korea.

Operating Expenses

Operating expenses were KRW 22,282 million (US$ 18,824 thousand) for the third quarter of 2021, representing a 19.7% increase QoQ from KRW 18,612 million and a 4.5% decrease YoY from KRW 23,332 million. The increase QoQ was mainly attributable to increased advertising expenses for Ragnarok: The Lost Memories in Thailand and Ragnarok Origin in Korea, United States and Canada, and salaries. The decrease YoY was mostly resulted from decreased advertising expenses for Ragnarok Origin in Korea, commission paid for payment gate way fees related to Ragnarok Online in Thailand, and research and development expenses.

Profit before income tax expenses

Profit before income tax expenses was KRW 41,435 million (US$ 35,005 thousand) for the third quarter of 2021 compared with profit before income tax expense of KRW 19,387 million for the second quarter of 2021 and profit before income tax expenses of KRW 33,675 million for the third quarter of 2020.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 26,351 million (US$ 22,262 thousand) for the third quarter of 2021 compared with net profit attributable to parent company of KRW 14,766 million for the second quarter of 2021 and a net profit attributable to parent company of KRW 25,281 million for the third quarter of 2020.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 226,173 million (US$ 191,073 thousand) as of September 30, 2021.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,183.70 to US$ 1.00, the noon buying rate in effect on September 30, 2021 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online

Gravity Game Tech, a subsidiary in Thailand, opened Ragnarok Classic, the new server of Ragnarok Online, in Thailand on October 28, 2021 and Gravity Game Link, a subsidiary in Indonesia, is also preparing to launch the new server, Ragnarok Retro, in Indonesia on December 15, 2021. Ragnarok Online is expected to be relaunched in the Philippines, Singapore and Malaysia in the first half of 2022, and Gravity Game Hub, a subsidiary in Singapore, will publish this game.

Ragnarok Online IP-based Games

• Ragnarok X: Next Generation, a MMORPG mobile game
  
  

Ragnarok X: Next Generation was launched in Vietnam on September 1, 2021.

• Ragnarok Origin, a MMORPG mobile game
  
  

Ragnarok Origin was launched in the United States and Canada on November 10, 2021 and ranked as the second in free download of Google Play in the United States on the launching day. The game is scheduled to be launched in Taiwan, Hong Kong and Macau in the first half of 2022, and in Southeast Asia in the second half of 2022.

• Other Ragnarok Online IP-based games
  
  

Ragnarok: The Lost Memories, a Cinematic Newtro Story RPG mobile game, was launched in Thailand in August 26, 2021. The game is scheduled to be launched in the Philippines, Singapore and Malaysia on December, 2021 and in North America in the first half of 2022. Gravity NeoCyon, Inc., our subsidiary in Korea, has developed the game.

Ragnarok V: Returns, a MMORPG mobile game, is expected to hold the closed beta test (“CBT”) in Oceania in December 2021 and is scheduled to be launched in the first quarter of 2022. The game has been developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Ragnarok Begins, a MMORPG PC game, has completed the CBT on September 7, 2021 with users’ positive feedbacks. The company is preparing to design the game as a cross-platform game across PC and mobile, and the game has been developed by Gravity.

Project T (Tentative title), a Card SRPG mobile game, is expected to be launched in Taiwan, Hong Kong and Macau in the first quarter of 2022.

Other IP games

NBA RISE TO STARDOM, a Sports mobile game, has started the open beta test (“OBT”) and pre-registration on September 28, 2021. The game is expected to be launched in Japan in November, 2021 and in Korea in the first half of 2022.

SADAKO M, a Mystery Solving Horror Escape Adventure mobile game, was launched in Japan on October 26, 2021.

Grandia HD Collection, a RPG console game, was released in Korea, Taiwan and Hong Kong on October 1, 2021. The game consists of a bundle of RPG classics Grandia and Grandia II and supports Korean and Chinese languages. Nintendo Switch is available for the game.

Investor Presentation

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

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 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-Sep-21
		KRW					US$					KRW				US$
		(audited)					(unaudited)					(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			110,632					93,463					118,173				99,834
Short-term financial instruments			71,000					59,981					108,000				91,239
Accounts receivable, net			59,761					50,487					82,071				69,334
Other receivables, net			8					7					11				9
Prepaid expenses			2,238					1,891					2,061				1,741
Other current assets			2,946					2,489					3,958				3,344
Total current assets			246,585					208,318					314,274				265,501
Property and equipment, net			7,695					6,501					10,307				8,707
Intangible assets			3,363					2,841					3,400				2,872
Deferred tax assets			3,590					3,033					787				665
Other non-current financial assets			1,324					1,119					2,388				2,017
Other non-current assets			2,815					2,377					1,578				1,335
Total assets			265,372					224,189					332,734				281,097
Liabilities and Equity
Current liabilities:
Accounts payable			52,688					44,511					56,702				47,902
Deferred revenue			13,692					11,567					11,076				9,357
Withholdings			2,851					2,409					5,162				4,361
Accrued expense			1,365					1,153					1,354				1,144
Income tax payable			9,470					8,000					3,684				3,112
Other current liabilities			2,654					2,242					2,945				2,488
Total current liabilities			82,720					69,882					80,923				68,364
Long-term deferred revenue			101					85					98				83
Other non-current liabilities			5,203					4,397					6,279				5,305
Total liabilities			88,024					74,364					87,300				73,752
Share capital			3,474					2,935					3,474				2,935
Capital surplus			27,110					22,903					27,099				22,894
Other components of equity			(1,045	)				(883	)				2,037				1,721
Retained earnings			147,371					124,500					212,053				179,144
Equity attributable to owners of the Parent Company			176,910					149,455					244,663				206,694
Non-controlling interest			438					370					771				651
Total equity			177,348					149,825					245,434				207,345
Total liabilities and equity			265,372					224,189					332,734				281,097

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,183.70 to US$ 1.00, the noon buying rate in effect on September 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																				Nine months ended
		30-Jun-21					30-Sep-20					30-Sep-21										30-Sep-20							30-Sep-21
		(KRW)					(KRW)					(KRW)					(US$)						(KRW)							(KRW)					(US$)
		(unaudited)					(unaudited)					(unaudited)					(unaudited)						(unaudited)							(unaudited)					(unaudited)
Revenues:
Online games			22,380					31,833					18,295					15,456						74,176							60,133					50,801
Mobile games			55,140					95,531					106,218					89,734						205,762							243,796					205,961
Other revenue			6,091					4,431					4,157					3,512						13,575							13,411					11,330
Total net revenue			83,611					131,795					128,670					108,702						293,513							317,340					268,092
Cost of revenue			45,842					74,107					66,146					55,881						174,079							169,541					143,230
Gross profit			37,769					57,688					62,524					52,821						119,434							147,799					124,862
Operating expenses:
Selling, general and administrative expenses			14,014					18,042					18,091					15,283						46,692							47,613					40,223
Research and development			4,147					4,550					4,143					3,500						10,676							12,299					10,390
Others, net			451					740					48					41						1,041							535					454
Total operating expenses			18,612					23,332					22,282					18,824						58,409							60,447					51,067
Operating profit			19,157					34,356					40,242					33,997						61,025							87,352					73,795
Finance income(costs):
Finance income			597					822					2,128					1,798						3,000							4,325					3,654
Finance costs			(367	)				(1,503	)				(935	)				(790		)				(2,765		)					(2,235	)				(1,888	)
Profit before income tax			19,387					33,675					41,435					35,005						61,260							89,442					75,561
Income tax expenses			4,569					8,390					15,151					12,800						13,687							24,779					20,933
Profit for the year			14,818					25,285					26,284					22,205						47,573							64,663					54,628
Profit attributable to:
Non-controlling interest			52					4					(67	)				(57		)				(66		)					(19	)				(16	)
Owners of Parent company			14,766					25,281					26,351					22,262						47,639							64,682					54,644
Earnings per share
- Basic and diluted			2,125					3,638					3,792					3.20						6,856							9,308					7.86
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
Earnings per ADS(1)
- Basic and diluted			2,125					3,638					3,792					3.20						6,856							9,308					7.86

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,183.70 to US$1.00, the noon buying rate in effect on September 30, 2021 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 Q3 2021?

Total revenues for Gravity Co., Ltd. in Q3 2021 were KRW 128,670 million (US$ 108,702 thousand).

How did Gravity's operating profit change in Q3 2021?

Operating profit increased by 110.1% quarter-over-quarter in Q3 2021.

What was the net profit attributable to Gravity's parent company in Q3 2021?

The net profit attributable to the parent company was KRW 26,351 million (US$ 22,262 thousand) for Q3 2021.

What factors contributed to the increase in mobile game revenues for Gravity?

Mobile game revenues rose due to the success of newly launched games like Ragnarok X: Next Generation in Southeast Asia.

What negative trend was observed in Gravity's online game revenues for Q3 2021?

Online game revenues decreased by 18.3% QoQ and 42.5% YoY, mainly from Ragnarok Online in Thailand.