Gravity Reports First Quarter of 2021 Results and Business Update

Seoul, Korea, May 14, 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 first quarter ended March 31, 2021, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

FIRST QUARTER 2021 HIGHLIGHTS

• Total revenues were KRW 105,059 million (US$ 93,243 thousand), representing a 6.6% decrease from the fourth quarter ended December 31, 2020 (“QoQ”) and a 43.4% increase from the first quarter ended March 31, 2020 (“YoY”).

• Operating profit was KRW 27,953 million (US$ 24,809 thousand), representing a 2.2% increase QoQ and a 169.9% increase YoY.

• Profit before income tax expenses was KRW 28,620 million (US$ 25,401 thousand), representing a 7.0% increase QoQ and a 154.4% increase YoY.

• Net profit attributable to parent company was KRW 23,565 million (US$ 20,915 thousand), representing a 56.4% increase QoQ and a 154.4% increase YoY.

REVIEW OF FIRST QUARTER 2021 FINANCIAL RESULTS

Revenues

Online game revenues for the first quarter of 2021 were KRW 19,458 million (US$ 17,270 thousand), representing a 26.6 % increase QoQ from KRW 15,370 million and a 44.8% increase YoY from KRW 13,436 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Taiwan and Japan. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and Japan.

Mobile game revenues were KRW 82,438 million (US$ 73,166 thousand) for the first quarter of 2021, representing a 10.9% decrease QoQ from KRW 92,562 million and a 47.3% increase YoY from KRW 55,982 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok Origin in Korea. Such decrease was partially offset by increased revenues from Tera Classic in Japan that was launched on January 29, 2021 and Ragnarok M: Eternal Love in Southeast Asia. The increase YoY was primarily due to revenues from Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok Origin in Korea. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love in Taiwan, Southeast Asia, North America, Japan, Korea and Europe and Ragnarok Tactics.

Other revenues were KRW 3,163 million (US$ 2,807 thousand) for the first quarter of 2021, representing 29.8% decrease QoQ from KRW 4,508 million and an 17.7% decrease YoY from KRW 3,842 million.

Cost of Revenue

Cost of revenue was KRW 57,553 million (US$ 51,080 thousand) for the first quarter of 2021, representing a 11.4% decrease QoQ from KRW 64,966 million and a 17.8% increase YoY from KRW 48,874 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok Origin in Korea. The increase YoY was mostly from increased commission paid for mobile game services related to Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau and Ragnarok Origin in Korea.

Operating Expenses

Operating expenses were KRW 19,553 million (US$ 17,354 thousand) for the first quarter of 2021, representing a 2.9% decrease QoQ from KRW 20,131 million and a 39.4% increase YoY from KRW 14,030 million. The decrease QoQ was mainly attributable to decreased advertising expenses for Ragnarok Origin in Korea and The Labyrinth of Ragnarok in Southeast Asia, and research and development expenses. The increase YoY was mostly resulted from increased advertising expenses for Tera Classic in Japan, The Labyrinth of Ragnarok in global and The Lord in Thailand, research and development expenses and commission paid.

Profit Before Income Tax Expenses

Profit before income tax expenses was KRW 28,620 million (US$ 25,401 thousand) for the first quarter of 2021 compared with profit before income tax expense of KRW 26,751 million for the fourth quarter of 2020 and profit before income tax expenses of KRW 11,250 million for the first quarter of 2020.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 23,565 million (US$ 20,915 thousand) for the first quarter of 2021 compared with net profit attributable to parent company of KRW 15,064 million for the fourth quarter of 2020 and a net profit attributable to parent company of KRW 9,263 million for the first quarter of 2020.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 194,754 million (US$ 172,850 thousand) as of March 31, 2021.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,126.72 to US$ 1.00, the noon buying rate in effect on March 31, 2021 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online IP-based Games

• Ragnarok Origin, a MMORPG mobile game
  

Ragnarok Origin is being prepared for launch in Japan in the second quarter of 2021. The closed beta test (“CBT”) has completed on April 22 with users’ positive feedbacks.

• Ragnarok X: Next Generation, a MMORPG mobile game
  

Ragnarok X: Next Generation has started the CBT and pre-registration on April 23, 2021. The game is being prepared for launch in Southeast Asia in June 2021.

• The Labyrinth of Ragnarok, a Time Effective MMORPG mobile game
  

The Labyrinth of Ragnarok was launched in global including Korea (except Taiwan, Hong Kong, Macau, China and Japan) on March 23, 2021.

• Ragnarok: Poring Merge, a Time Effective RPG
  

Ragnarok: Poring Merge was launched in global on April 12, 2021.

• Other Ragnarok Online IP-based games
  

The Lost Memories: a Song of Valkyrie, a Story RPG mobile game, is expected to be launched in Thailand, North America and global in the second half of 2021. The game was developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Project S (Tentative title), a MMORPG mobile game, is scheduled to start the CBT in the second half of 2021.

Other IP games

The Lord, a SRPG mobile game, is expected to be launched in Indonesia, Vietnam, Taiwan, Hong Kong and Macau in the second half of 2021.

CPBL Pro-baseball 2021, a Sports mobile game, will be launched in Taiwan, Hong Kong and Macau on June 17, 2021.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the first 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 93 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										31-Mar-21
		KRW					US$					KRW				US$
		(audited)					(unaudited)					(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			110,632					98,189					116,754				103,623
Short-term financial instruments			71,000					63,015					78,000				69,227
Accounts receivable, net			59,761					53,040					62,994				55,909
Other receivables, net			8					7					183				162
Prepaid expenses			2,238					1,986					1,989				1,765
Other current assets			2,946					2,615					3,220				2,859
Total current assets			246,585					218,852					263,140				233,545
Property and equipment, net			7,695					6,830					8,286				7,354
Intangible assets, net			3,363					2,985					3,746				3,325
Deferred tax assets			3,590					3,186					2,810				2,494
Other non-current financial assets			1,324					1,175					2,070				1,837
Other non-current assets			2,815					2,498					1,916				1,701
Total assets			265,372					235,526					281,968				250,256
Liabilities and Equity
Current liabilities:
Accounts payable			52,688					46,762					47,651				42,292
Deferred revenue			13,692					12,152					11,902				10,563
Withholdings			2,851					2,530					2,991				2,655
Accrued expense			1,365					1,211					1,261				1,119
Income tax payable			9,470					8,405					8,575				7,611
Other current liabilities			2,654					2,356					2,745				2,436
Total current liabilities			82,720					73,416					75,125				66,676
Long-term deferred revenue			101					90					185				164
Other non-current liabilities			5,203					4,618					4,593				4,077
Total liabilities			88,024					78,124					79,903				70,917
Share capital			3,474					3,083					3,474				3,083
Capital surplus			27,110					24,061					27,110				24,061
Other components of equity			(1,045	)				(927	)				112				99
Retained earnings			147,371					130,796					170,936				151,711
Equity attributable to owners of the Parent Company			176,910					157,013					201,632				178,954
Non-controlling interest			438					389					433				385
Total equity			177,348					157,402					202,065				179,339
Total liabilities and equity			265,372					235,526					281,968				250,256

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,126.72 to US$ 1.00, the noon buying rate in effect on March 31, 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
		31-Dec-20										31-Mar-20										31-Mar-21
		(KRW)					(US$)					(KRW)					(US$)					(KRW)					(US$)
		(unaudited)					(unaudited)					(unaudited)					(unaudited)					(unaudited)					(unaudited)
Revenues:
Online games			15,370					13,641					13,436					11,925					19,458					17,270
Mobile games			92,562					82,152					55,982					49,686					82,438					73,166
Other revenue			4,508					4,001					3,842					3,410					3,163					2,807
Total net revenue			112,440					99,794					73,260					65,021					105,059					93,243
Cost of revenue			64,966					57,659					48,874					43,377					57,553					51,080
Gross profit			47,474					42,135					24,386					21,644					47,506					42,163
Operating expenses:
Selling, general and administrative expenses			15,708					13,941					11,007					9,769					15,508					13,764
Research and development			4,358					3,868					2,872					2,549					4,009					3,558
Others, net			65					58					151					134					36					32
Total operating expenses			20,131					17,867					14,030					12,452					19,553					17,354
Operating profit			27,343					24,268					10,356					9,192					27,953					24,809
Finance income(costs):
Finance income			476					422					1,551					1,377					1,600					1,420
Finance costs			(1,068	)				(947	)				(657	)				(583	)				(933	)				(828	)
Profit before income tax			26,751					23,743					11,250					9,986					28,620					25,401
Income tax expense			11,768					10,444					2,004					1,779					5,059					4,490
Profit for the year			14,983					13,299					9,246					8,207					23,561					20,911
Profit attributable to:
Non-controlling interest			(81	)				(71	)				(17	)				(15	)				(4	)				(4	)
Owners of Parent company			15,064					13,370					9,263					8,222					23,565					20,915
Earning per share
- Basic and diluted			2,168					1.92					1,333					1.18					3,391					3.01
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			2,168					1.92					1,333					1.18					3,391					3.01

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,126.72 to US$1.00, the noon buying rate in effect on March 31, 2021 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.