Gravity Reports First Quarter of 2023 Results and Business Update

May 11, 2023 at 07:10 AM EDT

Seoul, Korea, May 11, 2023 (GLOBE NEWSWIRE) -- Seoul, South Korea – May 11, 2023 – 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, 2023, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

FIRST QUARTER 2023 HIGHLIGHTS

Total revenues were KRW 164,947 million (US$ 126,513 thousand), representing an 6.3% decrease from the fourth quarter ended December 31, 2022 (“QoQ”) and an 86.2% increase from the first quarter ended March 31, 2022 (“YoY”).
Operating profit was KRW 43,318 million (US$ 33,225 thousand), representing a 11.1% increase QoQ and a 94.1% increase YoY.
Profit before income tax expenses was KRW 46,226 million (US$ 35,456 thousand), representing a 20.4% increase QoQ and a 99.1% increase YoY.
Net profit attributable to parent company was KRW 36,466 million (US$ 27,969 thousand), representing a 9.9% increase QoQ and a 121.9% increase YoY.

REVIEW OF FIRST QUARTER 2023 FINANCIAL RESULTS

Revenues

Online game revenues for the first quarter of 2023 were KRW 22,696 million (US$ 17,408 thousand), representing a 4.3% decrease QoQ from KRW 23,711 million and a 5.8% increase YoY from KRW 21,447 million. The decrease QoQ was mainly attributable to decreased revenues from Ragnarok Online in Taiwan and Thailand. Such decrease was partially offset by increased revenue from Ragnarok Online in Japan. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and Korea.

Mobile game revenues were KRW 138,994 million (US$ 106,607 thousand) for the first quarter of 2023, representing a 6.1% decrease QoQ from KRW 148,046 million and a 119.8% increase YoY from KRW 63,241 million. The decrease QoQ resulted primarily decreased revenues from Ragnarok Origin in Taiwan, Hong Kong and Macau. Such decrease was partially offset by increased revenues from Ragnarok X: Next Generation in Korea which was launched on January 5, 2023. The increase YoY was due to increased revenues from Ragnarok Origin in Taiwan, Hong Kong and Macau and Ragnarok X: Next Generation in Korea. This increase was partially offset by decreased revenues from Ragnarok Origin in the United States and Canada, and Ragnarok X: Next Generation in Southeast Asia.

Other revenues were KRW 3,257 million (US$ 2,498 thousand) for the first quarter of 2023, representing a 25.3% decrease QoQ from KRW 4,358 million and a 16.9% decrease YoY from KRW 3,919 million.

Cost of Revenue

Cost of revenue was KRW 105,485 million (US$ 80,906 thousand) for the first quarter of 2023, representing a 5.6% decrease QoQ from KRW 111,707 million and a 133.1% increase YoY from KRW 45,254 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok Origin in Taiwan, Hong Kong and Macau and Ragnarok M: Eternal Love. The increase YoY was primarily due to increased commission paid for mobile game services related to Ragnarok Origin in Taiwan, Hong Kong, Macau and Ragnarok X: Next Generation in Korea.

Operating Expenses

Operating expenses were KRW 16,144 million (US$ 12,382 thousand) for the first quarter of 2023, representing a 36.4% decrease QoQ from KRW 25,402 million and a 23.3% decrease YoY from KRW 21,037 million. The decrease QoQ was mainly due to decreased advertising expenses for Ragnarok Origin in the United States and Canada and Ragnarok Monster’s Arena in Korea and Southeast Asia and salaries. The decrease YoY was mainly due to decreased advertising expenses for Ragnarok: The Lost Memories and Ragnarok Origin in the United States and Canada, and Ragnarok Online in Philippines, Singapore and Malaysia.

Profit Before Income Tax Expenses

Profit before income tax expenses was KRW 46,226 million (US$ 35,456 thousand) for the first quarter of 2023 compared with profit before income tax expense of KRW 38,378 million for the fourth quarter of 2022 and profit before income tax expenses of KRW 23,220 million for the first quarter of 2022.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 36,466 million (US$ 27,969 thousand) for the first quarter of 2023 compared with net profit attributable to parent company of KRW 33,190 million for the fourth quarter of 2022 and a net profit attributable to parent company of KRW 16,431 million for the first quarter of 2022.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 374,229 million (US$ 287,030 thousand) as of March 31, 2023.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,303.80 to US$ 1.00, the noon buying rate in effect on March 31, 2023 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATES

Ragnarok Online IP-based Games

Ragnarok Origin, an MMORPG mobile and PC game

Ragnarok Origin was launched in Southeast Asia on April 6, 2023. The game is being prepared to be launched in global in the fourth quarter of 2023.

Ragnarok X: Next Generation, an MMORPG mobile game

Ragnarok X: Next Generation was launched in Korea on January 5, 2023.

Ragnarok M: Eternal Love, an MMORPG mobile game

Ragnarok M: Eternal Love aims to be launched in Vietnam in the fourth quarter of 2023.

Ragnarok Poring Merge NFT, a blockchain mobile game

Ragnarok Poring Merge NFT was designed as a blockchain game based on P2E systems. The game is prepared to be launched in Global in the fourth quarter of 2023.

Other Ragnarok Online IP-based games

Ragnarok: The Lost Memories, a Cinematic Newtro Story RPG mobile and PC game, is scheduled to be launched in Taiwan, Hong Kong and Macau in May 2023.

Ragnarok V: Returns, an MMORPG mobile and PC game, will cease the service in Oceania on May 25, 2023 for service renewal. It is preparing to provide a renewal version of mobile, PC and Steam services. The game has been developed by Gravity NeoCyon, Inc., Gravity’s subsidiary in Korea.

Ragnarok Landverse was designed as a blockchain game based on P2E systems. Ragnarok Landverse, an MMORPG PC game, is aiming to be launched in the second half of 2023.

Other IP-based games

WITH: Whale In The High, a Healing Idle mobile game, is scheduled to be released in global in the second quarter of 2023. The game is developed by SKYWALK, a mobile game developer, and will be published by Gravity. Gravity entered into a publishing agreement with SKYWALK on December 1, 2022.

Expansion of Game Service

Gravity NeoCyon, Inc. and ME2ON co-developed a blockchain RPG game called, X Heroes: NFT War. X Heroes: NFT War is published by ME2ON, and the game was released in global (except for Korea and China) on April 25, 2023. Gravity NeoCyon, Inc. Gravity’s subsidiary in Korea, entered into a business agreement with a mobile social casino game company, ME2ON on October 14, 2022.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the first quarter in 2023 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. 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, 2022 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. 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-22				31-Mar-23
	KRW		US$		KRW		US$
	(audited)		(unaudited)		(unaudited)		(unaudited)
Assets
Current assets:
Cash and cash equivalents		169,877		130,294		177,924		136,466
Short-term financial instruments		167,000		128,087		196,305		150,564
Accounts receivable, net		77,257		59,255		68,981		52,908
Other receivables, net		140		107		624		479
Prepaid expenses		3,332		2,556		3,014		2,312
Other current financial assets		3,370		2,585		3,744		2,872
Other current assets		791		607		573		439
Total current assets		421,767		323,491		451,165		346,040
Property and equipment, net		8,140		6,243		7,464		5,725
Intangible assets, net		3,869		2,967		3,818		2,928
Deferred tax assets		5,660		4,341		5,226		4,008
Other non-current financial assets		2,176		1,669		2,708		2,077
Other non-current assets		2,482		1,904		3,918		3,005
Total assets		444,094		340,615		474,299		363,783
Liabilities and Equity
Current liabilities:
Accounts payable		73,549		56,411		60,515		46,414
Deferred revenue		18,543		14,222		17,261		13,239
Withholdings		3,201		2,455		3,541		2,716
Accrued expense		2,041		1,565		1,877		1,440
Income tax payable		5,469		4,195		10,976		8,418
Other current liabilities		2,907		2,230		2,833		2,173
Total current liabilities		105,710		81,078		97,003		74,400
Long-term account payables		374		287		376		288
Long-term deferred revenue		30		23		381		292
Other non-current liabilities		4,968		3,810		3,409		2,615
Deferred tax liabilities		2,832		2,172		2,833		2,173
Total liabilities		113,914		87,370		104,002		79,768
Share capital		3,474		2,665		3,474		2,665
Capital surplus		27,098		20,784		27,098		20,784
Other components of equity		2,475		1,898		6,121		4,695
Retained earnings		296,480		227,397		332,946		255,366
Equity attributable to owners of the Parent Company		329,527		252,744		369,639		283,510
Non-controlling interest		653		501		658		505
Total equity		330,180		253,245		370,297		284,015
Total liabilities and equity		444,094		340,615		474,299		363,783

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,303.80 to US$ 1.00, the noon buying rate in effect on March 31, 2023 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-22					31-Mar-22				31-Mar-23
	(KRW)		(US$)			(KRW)		(US$)		(KRW)		(US$)
	(unaudited)		(unaudited)			(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenues:
Online games		23,711		18,186			21,447		16,450		22,696		17,408
Mobile games		148,046		113,550			63,241		48,505		138,994		106,607
Other revenue		4,358		3,342			3,919		3,006		3,257		2,498
Total net revenue		176,115		135,078			88,607		67,961		164,947		126,513
Cost of revenue		111,707		85,678			45,254		34,709		105,485		80,906
Gross profit		64,408		49,400			43,353		33,252		59,462		45,607
Operating expenses:
Selling, general and administrative expenses		21,141		16,215			17,642		13,531		13,271		10,179
Research and development		3,864		2,964			3,232		2,479		2,922		2,241
Others, net		397		304			163		125		(49)		(38)
Total operating expenses		25,402		19,483			21,037		16,135		16,144		12,382
Operating profit		39,006		29,917			22,316		17,117		43,318		33,225
Finance income(costs):
Finance income		4,902		3,760			1,608		1,233		5,461		4,189
Finance costs		(5,530)		(4,241)	)		(704)		(540)		(2,553)		(1,958)
Profit before income tax		38,378		29,436			23,220		17,810		46,226		35,456
Income tax expense		5,161		3,959			6,889		5,284		9,799		7,517
Profit for the year		33,217		25,477			16,331		12,526		36,427		27,939
Profit attributable to:
Non-controlling interest		27		21			(100)		(77)		(39)		(30)
Owners of Parent company		33,190		25,456			16,431		12,603		36,466		27,969
Earning per share
- Basic and diluted		4,776		3.66			2,365		1.81		5,248		4.03
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
Earning per ADS⁽¹⁾
- Basic and diluted		4,776		3.66			2,365		1.81		5,248		4.03

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,303.80 to US$1.00, the noon buying rate in effect on March 31, 2023 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.