Gravity Reports Third Quarter of 2022 Results and Business Update

Rhea-AI Summary

GRAVITY Co., Ltd. (NasdaqGM: GRVY) reported third-quarter 2022 financials with total revenues at KRW 102,377 million (US$ 71,509 thousand), marking a 6.1% increase QoQ but a 20.4% decrease YoY. Operating profit was KRW 21,271 million (US$ 14,857 thousand), down 3.8% QoQ and 47.1% YoY. Net profit attributable to the parent company decreased by 8.0% QoQ and 39.0% YoY, amounting to KRW 16,076 million (US$ 11,229 thousand). The company also launched several games, including Ragnarok Origin in September 2022, amidst a broader strategy to enhance its online game portfolio.

Positive

• Total revenues increased by 6.1% QoQ to KRW 102,377 million.
• Mobile game revenues grew by 16.8% QoQ primarily due to Ragnarok Origin's launch.
• Ragnarok Online IP-based gaming events celebrated its 20th anniversary.

Negative

• Net profit attributable to the parent company decreased by 39.0% YoY.
• Operating profit fell by 47.1% YoY.
• Online game revenues dropped 22.4% QoQ.

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.

FAQ

What were GRAVITY's total revenues for Q3 2022?

Total revenues for Q3 2022 were KRW 102,377 million (US$ 71,509 thousand).

How did GRAVITY's operating profit change in Q3 2022?

Operating profit for Q3 2022 was KRW 21,271 million, a decrease of 3.8% QoQ and 47.1% YoY.

What were the main factors affecting GRAVITY's online game revenues?

Online game revenues decreased mainly due to lower revenues from Ragnarok Online in Taiwan and Thailand.

What is the status of GRAVITY's mobile game revenues in Q3 2022?

Mobile game revenues reached KRW 79,443 million, up 16.8% QoQ but down 25.2% YoY.

What new games did GRAVITY launch in September 2022?

GRAVITY launched Ragnarok Origin on September 15, 2022, in Taiwan, Hong Kong, and Macau.