Category: High Tech

GRAVITY Co. Ltd ( GRVY )

Published: 28 October 2016
Written by Editor
Nasdaq   Financial Results   Up on News  

Gravity Reports Third Quarter of 2016 Results

Seoul, Korea, Oct. 28, 2016 -- GRAVITY REPORTS THIRD QUARTER OF 2016 RESULTS
 
Seoul, South Korea – October 28, 2016 – GRAVITY Co., Ltd. (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, 2016, prepared in accordance with generally accepted accounting principles in the United States.
 
FINAICIAL RESULTS FOR THE THIRD QUARTER OF 2016
 
Revenues
Revenues for the third quarter ended September 30, 2016 was KRW 15,746 million (US$ 13,143 thousand), representing a 73.9% increase from KRW 9,057 million for the second quarter ended June 30, 2016 (“QoQ”) and a 81.6% increase from KRW 8,671 million for the third quarter ended September 30, 2015 (“YoY”).
Subscription revenues for the third quarter of 2016 were KRW 8,497 million (US$ 7,093 thousand), representing a 265.8% increase QoQ from KRW 2,323 million and a 332.4% increase YoY from KRW 1,965 million. The increase QoQ and YoY was mainly attributable to increased revenues from Ragnarok Online and Xianjing RO Chuanshuo WEB in Taiwan. The Company commenced its direct game service of Ragnarok Onlineon June 15, 2016 and launched Xianjing RO Chuanshuo WEB on July 13, 2016 in such area.
 
Royalty and license fee revenues for the third quarter of 2016 were KRW 3,736 million (US$ 3,119 thousand), representing a 36.4% increase QoQ from KRW 2,738 million and a 35.1% increase YoY from KRW 2,765 million. The increase QoQ was primarily due to increased revenue from Ragnarok Online in Thailand, which was partially offset by decreased revenue from Ragnarok Online in Japan.  The increase YoY was resulted mainly from increased revenues from Ragnarok Online in Thailand and Japan. Ragnarok Online was relaunched in Thailand by a local licensee on July 13, 2016.
 
Mobile game and application revenues were KRW 2,170 million (US$ 1,811 thousand) for the third quarter of 2016, representing a 13.0% decrease QoQ from KRW 2,495 million and a 31.3% decrease YoY from KRW 3,160 million. The decrease QoQ was primarily from decreased revenue from Ragnarok: Path of Heroes and the decrease YoY was resulted primarily from decreased revenues from Ragnarok: Path of Heroes and Battle Ship.
 
Character merchandising and other revenues were KRW 1,343 million (US$ 1,120 thousand) for the third quarter of 2016, representing a 10.5% decrease QoQ from KRW 1,501 million and a 72.0% increase YoY from KRW 781 million. The decrease QoQ was primarily due to decreased revenues from web site development and operation service provided for third parties and the increase YoY was mainly due to recognition of deferred revenues occurred from a game development and publishing agreement with a third party, which was executed on March 25, 2016.
 
Cost of Revenue
 
Cost of revenue was KRW 6,734 million (US$ 5,621 thousand) for the third quarter of 2016, representing a 1.6% decrease QoQ from KRW 6,846 million and a 6.3% decrease YoY from KRW 7,185 million. The decrease QoQ was mostly attributable to the decreased salaries, which was partially offset by increased commission paid for game service in Taiwan. The decrease YoY was mostly from decreased amortization of capitalized research and development cost of Ragnarok Online II, which had been amortized and fully impaired in December 2015. The decrease YoY, however, was partially offset by increased commission paid for game service in Taiwan.
 
Operating Expenses
 
Operating expenses were KRW 5,466 million (US$ 4,562 thousand) for the third quarter of 2016, representing a 47.1% increase QoQ from KRW 3,717 million and a 32.2% increase YoY from KRW 4,135 million. The increase QoQ and YoY was mainly due to an increase in commission paid and advertising expenses in Taiwan. The increase YoY, however, was partially offset by decreased research and development expenses.
 
Income before income tax expenses and others
 
Income before income tax expenses and others was KRW 3,524 million (US$ 2,942 thousand) for the third quarter of 2016 compared with loss before income tax expenses and others of KRW 1,212 million for the second quarter of 2016 and loss before income tax expenses and others of KRW 2,148 million for the third quarter of 2015.
 
Net Income
 
As a result of the foregoing factors, Gravity recorded a net income attributable to parent company of KRW 3,087 million (US$ 2,577 thousand) for the third quarter of 2016 compared with a net loss attributable to parent company of KRW 1,605 million for the second quarter of 2016 and a net loss attributable to parent company of KRW 2,460 million for the third quarter of 2015.
 
Liquidity
 
The balance of cash and cash equivalents and short-term financial instruments was KRW 35,792 million (US$ 29,877 thousand) as of September 30, 2016.
 
Note: For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,197.98 to US$ 1.00, the noon buying rate in effect on September 30, 2016 as quoted by the Federal Reserve Bank of New York.
 
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 80 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, 2015 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: This email address is being protected from spambots. You need JavaScript enabled to view it.
 
Ms. Ji Hee Kim
IR Manager
Gravity Co., Ltd.
Email: This email address is being protected from spambots. You need JavaScript enabled to view it. 
Telephone: +82-2-2132-7800
 
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GRAVITY Co., Ltd.
Consolidated Balance Sheet

(In millions of KRW and in thousands of US$)

      As of
      31-Dec-15   30-Sep-16
      KRW   US$   KRW   US$
Assets (audited)   (unaudited)   (unaudited)   (unaudited)
Current assets:              
  Cash and cash equivalents   24,909       20,793       9,292       7,756  
  Short-term financial instruments   11,500       9,599       26,500       22,121  
  Accounts receivable, net   5,289       4,415       11,846       9,888  
  Other current assets   1,978       1,651       2,642       2,205  
    Total current assets   43,676       36,458       50,280       41,970  
                   
Property and equipment, net   882       736       587       490  
Leasehold and other deposits   954       796       954       796  
Intangible assets   132       110       101       84  
Other non-current assets   85       71       338       284  
    Total assets   45,729       38,171       52,260       43,624  
                   
Liabilities and Equity              
Current liabilities:              
  Accounts payable   2,971       2,480       8,468       7,069  
  Deferred revenue   4,997       4,171       8,884       7,415  
  Other current liabilities   836       698       631       527  
    Total current liabilities   8,804       7,349       17,983       15,011  
Long-term deferred revenue   6,600       5,509       3,914       3,267  
Accrued severance benefits   123       103       111       93  
Other non-current liabilities   210       175       210       175  
    Total liabilities   15,737       13,136       22,218       18,546  
Common shares   3,474       2,900       3,474       2,900  
Additional paid-in capital   75,076       62,669       75,076       62,669  
Accumulated deficit   (48,761 )     (40,703 )     (48,980 )     (40,885 )
Accumulated other comprehensive income   694       579       1,027       857  
    Total parent company shareholders' equity   30,483       25,445       30,597       25,541  
Non-controlling interest   (491 )     (410 )     (555 )     (463 )
    Total equity   29,992       25,035       30,042       25,078  
    Total liabilities and equity   45,729       38,171       52,260       43,624  

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,197.98 to US$ 1.00, the noon buying rate in effect on September 30, 2016 as quoted by the Federal Reserve Bank of New York.

 

GRAVITY Co., Ltd.
Consolidated Statements of Operations

(In millions of KRW and in thousands of US$, except for share and ADS data)

      Three months ended   Nine months ended
      30-Jun-16   30-Sep-15   30-Sep-16   30-Sep-15   30-Sep-16
      (KRW)   (KRW)   (KRW)   (US$)   (KRW)   (KRW)   (US$)
      (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)   (unaudited)
Revenues:                          
  Online games-subscription revenue   2,323       1,965       8,497       7,093       5,585       12,957       10,816  
  Online games-royalties and license fees   2,738       2,765       3,736       3,119       8,054       9,842       8,215  
  Mobile games and applications   2,495       3,160       2,170       1,811       11,066       7,281       6,078  
  Character merchandising and other revenue   1,501       781       1,343       1,120       2,252       3,817       3,185  
    Total net revenue   9,057       8,671       15,746       13,143       26,957       33,897       28,294  
                               
Cost of revenue   6,846       7,185       6,734       5,621       22,262       20,199       16,861  
                               
Gross profit   2,211       1,486       9,012       7,522       4,695       13,698       11,433  
Operating expenses:                          
  Selling, general and administrative   3,205       2,898       4,982       4,158       8,406       10,875       9,077  
  Research and development   512       1,237       484       404       4,160       1,339       1,118  
  Impairment loss on intangible assets ã…¡   ã…¡   ã…¡   ã…¡      2       5       4  
    Total operating expenses   3,717       4,135       5,466       4,562       12,568       12,219       10,199  
                               
Operating income(loss)   (1,506 )     (2,649 )     3,546       2,960       (7,873 )     1,479       1,234  
                               
Other income (expenses)                          
  Interest income   131       154       128       107       537       391       326  
  Interest expense ã…¡   ã…¡   ã…¡   ã…¡     (3 )   ã…¡   ã…¡
  Foreign currency income (loss), net   163       347       (153 )     (128 )     402       (848 )     (707 )
  Others, net ã…¡   ã…¡     3       3     ã…¡     3       3  
Income(loss) before income tax expenses                          
and equity income(loss) on investments   (1,212 )     (2,148 )     3,524       2,942       (6,937 )     1,025       856  
                               
Income tax expenses   410       338       465       388       976       1,308       1,092  
                               
    Net income(loss)   (1,622 )     (2,486 )     3,059       2,554       (7,913 )     (283 )     (236 )
Net income(loss) attributable to:                          
    Non-controlling interest   (17 )     (26 )     (28 )     (23 )     (62 )     (64 )     (54 )
    Parent company   (1,605 )     (2,460 )     3,087       2,577       (7,851 )     (219 )     (182 )
Income(loss) per share                          
    - Basic and diluted   (231 )     (354 )     444       0.37       (1,130 )     (32 )     (0.03 )
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  
Income(loss) per ADS(1)                          
    - Basic and diluted   (462 )     (708 )     888       0.74       (2,260 )     (64 )     (0.06 )

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,197.98 to US$ 1.00, the noon buying rate in effect on September 30, 2016 as quoted by the Federal Reserve Bank of New York.

(1) Each ADS represents two common shares.