Gravity Reports Third Quarter of 2023 Results and Business Updates

November 13, 2023 at 06:10 AM EST

Seoul, Korea, Nov. 13, 2023 (GLOBE NEWSWIRE) -- Seoul, South Korea – November 13, 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 third quarter ended September 30, 2023, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

THIRD QUARTER 2023 HIGHLIGHTS

Total revenues were KRW 176,145 million (US$ 130,685 thousand), representing a 26.3% decrease from the second quarter ended June 30, 2023 (“QoQ”) and a 72.1% increase from the third quarter ended September 30, 2022 (“YoY”).
Operating profit was KRW 37,917 million (US$ 28,131 thousand), representing a 28.1% decrease QoQ and a 78.3% increase YoY.
Profit before income tax expenses was KRW 41,208 million (US$ 30,572 thousand), representing a 25.2% decrease QoQ and a 68.8% increase YoY.
Net profit attributable to parent company was KRW 28,961 million (US$ 21,486 thousand), representing a 35.7% decrease QoQ and an 80.2% increase YoY.

REVIEW OF THIRD QUARTER 2023 FINANCIAL RESULTS

Revenues

Online game revenues for the third quarter of 2023 were KRW 17,316 million (US$ 12,847 thousand), representing an 1.7% increase QoQ from KRW 17,025 million and a 10.1% decrease YoY from KRW 19,271 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Taiwan. Such increase was partially offset by decreased revenue from Ragnarok Online in Japan. The decrease YoY was largely due to decreased revenues from Ragnarok Online in Taiwan, Korea, Philippines, Singapore and Malaysia.

Mobile game revenues were KRW 155,467 million (US$ 115,344 thousand) for the third quarter of 2023, representing a 28.9% decrease QoQ from KRW 218,687 million and a 95.7% increase YoY from KRW 79,443 million. The decrease QoQ was resulted by decreased revenues from Ragnarok Origin in Southeast Asia, Taiwan, Hong Kong and Macau and Ragnarok X: Next Generation in Korea. The increase YoY was mainly due to initial revenue from Ragnarok Origin in Southeast Asia launched in April 6,2023 and Ragnarok X: Next Generation in Korea launched in January 5, 2023. This increase was partially offset by decreased revenues from Ragnarok X: Next Generation in Southeast Asia, Ragnarok Monster's Arena and Ragnarok M: Eternal Love in Southeast Asia.

Other revenues were KRW 3,362 million (US$ 2,494 thousand) for the third quarter of 2023, representing a 5.7% increase QoQ from KRW 3,182 million and an 8.2% decrease YoY from KRW 3,663 million.

Cost of Revenue

Cost of revenue was KRW 117,834 million (US$ 87,423 thousand) for the third quarter of 2023, representing a 30.0% decrease QoQ from KRW 168,309 million and a 97.0% increase YoY from KRW 59,829 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok Origin in Southeast Asia, Taiwan, Hong Kong and Macau and Ragnarok X: Next Generation in Korea. The increase YoY was primarily due to increased commission paid for mobile game services related to Ragnarok Origin in Southeast Asia launched in April 6, 2023 and Ragnarok X: Next Generation in Korea launched in January 5, 2023.

Operating expenses

Operating expenses were KRW 20,394 million (US$ 15,131 thousand) for the third quarter of 2023, representing a 14.0% increase QoQ from KRW 17,884 million and a 4.2% decrease YoY from KRW 21,277 million. The increase QoQ was mainly due to increased commission paid for payment gateway fees related to Ragnarok Online in Taiwan, increased R&D expense and increased advertising expenses for White Chord launched in Japan on August 29, 2023, Ragnarok Landverse launched in Southeast Asia (Thailand and Indonesia excluded), Middle East, India, Africa and Oceania on September 20, 2023 and Ragnarok 20 Heroes launched in Korea on October 12, 2023. The decrease YoY was mainly due to decreased advertising expenses for Ragnarok Monster's Arena in Thailand and Korea, Ragnarok Origin in North America and Korea and Ragnarok Online in Korea.

Profit Before Income Tax Expenses

Profit before income tax expenses was KRW 41,208 million (US$ 30,572 thousand) for the third quarter of 2023 compared with profit before income tax expense of KRW 55,097 million for the second quarter of 2023 and profit before income tax expenses of KRW 24,410 million for the third quarter of 2022.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 28,961 million (US$ 21,486 thousand) for the third quarter of 2023 compared with net profit attributable to parent company of KRW 45,016 million for the second quarter of 2023 and a net profit attributable to parent company of KRW 16,076 million for the third quarter of 2022.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 443,835 million (US$ 329,289 thousand) as of September 30, 2023.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,347.86 to US$ 1.00, the noon buying rate in effect on September 30, 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 officially received a foreign version number from Chinese government on August 29, 2023, and is preparing to be launched in China in the first quarter of 2024. Also, the global version of this game is being prepared to be launched in Central, South America, etc. in the first quarter of 2024

Ragnarok X: Next Generation, an MMORPG mobile and PC game

Ragnarok X: Next Generation is preparing to be launched in China and the publisher of the game is Beihai Leyou Technology Co. Ltd, an affiliate of ZLONGAME.

Ragnarok Begins, an Action Side-scrolling MMORPG mobile and PC game

Ragnarok Begins started its second CBT on November 1, 2023 and is preparing to be launched in South Korea in December 2023.

Ragnarok V: Returns, a 3D MMORPG mobile and PC game

Ragnarok V: Returns will open its second CBT in South Korea and the first CBT in Thailand in the first half of 2024.

Ragnarok 20 Heroes, an Action RPG mobile game

Ragnarok 20 Heroes launched in Korea on October 12, 2023.

Ragnarok Online IP-based Blockchain Games

Ragnarok Landverse, an MMORPG blockchain PC game

Ragnarok Landverse launched in Southeast Asia (Thailand and Indonesia excluded), Middle East, India, Africa and Oceania on September 20, 2023.

Ragnarok Poring Merge NFT, a Time Effective RPG blockchain mobile game

Ragnarok Poring Merge NFT is being prepared to be launched in Global in the first quarter of 2024.

Other IP-based games

Wetory, a 3D Action Adventure Rogue-Like PC and console game

Wetory was released in global on October 26, 2023. The game was developed by PepperStons, a Korean game developer. and published by Gravity.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the third 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, 2023 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
IR Unit
Gravity Co., Ltd.
Email: ir@gravity.co.kr
Telephone: +82-2-2132-7800

Ms. Yiseo Shin
IR Assistant Manager
Gravity Co., Ltd.
Email: ir@gravity.co.kr
Telephone: +82-2-2132-7801

GRAVITY Co., Ltd.
Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

	As of
	31-Dec-22				30-Sep-23
	KRW		US$		KRW		US$
	(audited)		(unaudited)		(unaudited)		(unaudited)
Assets
Current assets:
Cash and cash equivalents		169,877		126,035		207,220		153,740
Short-term financial instruments		167,000		123,900		236,615		175,549
Accounts receivable, net		77,257		57,318		81,046		60,129
Other receivables, net		140		104		232		172
Prepaid expenses		3,332		2,472		2,990		2,218
Other current financial assets		3,370		2,500		4,125		3,060
Other current assets		791		587		5,749		4,265
Total current assets		421,767		312,916		537,977		399,133
Property and equipment, net		8,140		6,039		10,808		8,019
Intangible assets, net		3,869		2,870		5,029		3,730
Deferred tax assets		5,660		4,199		5,574		4,135
Other non-current financial assets		2,176		1,614		1,741		1,292
Other non-current assets		2,482		1,841		6,204		4,603
Total assets		444,094		329,479		567,333		420,912
Liabilities and Equity
Current liabilities:
Accounts payable		73,549		54,567		76,644		56,863
Deferred revenue		18,543		13,757		15,976		11,853
Withholdings		3,201		2,375		3,731		2,768
Accrued expense		2,041		1,514		1,630		1,209
Income tax payable		5,469		4,058		14,320		10,624
Other current liabilities		2,907		2,157		4,197		3,114
Total current liabilities		105,710		78,428		116,498		86,431
Long-term account payables		374		277		74		55
Long-term deferred revenue		30		22		381		283
Other non-current liabilities		4,968		3,686		3,994		2,962
Deferred tax liabilities		2,832		2,101		2,833		2,102
Total liabilities		113,914		84,514		123,780		91,833
Share capital		3,474		2,577		3,474		2,577
Capital surplus		27,098		20,104		27,098		20,104
Other components of equity		2,475		1,837		5,362		3,979
Retained earnings		296,480		219,963		406,923		301,903
Equity attributable to owners of the Parent Company		329,527		244,481		442,857		328,563
Non-controlling interest		653		484		696		516
Total equity		330,180		244,965		443,553		329,079
Total liabilities and equity		444,094		329,479		567,333		420,912

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,347.86 to US$ 1.00, the noon buying rate in effect on September 30, 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								Nine months ended
	30-Jun-23		30-Sep-22		30-Sep-23				30-Sep-22		30-Sep-23
	(KRW)		(KRW)		(KRW)		(US$)		(KRW)		(KRW)		(US$)
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenues:									��
Online games		17,025		19,271		17,316		12,847		65,545		57,037		42,317
Mobile games		218,687		79,443		155,467		115,344		210,726		513,148		380,714
Other revenue		3,182		3,663		3,362		2,494		11,232		9,801		7,270
Total net revenue		238,894		102,377		176,145		130,685		287,503		579,986		430,301
Cost of revenue		168,309		59,829		117,834		87,423		155,658		391,628		290,555
Gross profit		70,585		42,548		58,311		43,262		131,845		188,358		139,746
Operating expenses:
Selling, general and administrative expenses		15,029		17,624		17,190		12,754		56,473		45,490		33,750
Research and development		2,852		3,745		3,964		2,941		9,933		9,738		7,225
Others, net		3		(92)		(760)		(564)		(263)		(806)		(598)
Total operating expenses		17,884		21,277		20,394		15,131		66,143		54,422		40,377
Operating profit		52,701		21,271		37,917		28,131		65,702		133,936		99,369
Finance income(costs):
Finance income		4,213		5,343		7,059		5,237		11,051		16,733		12,415
Finance costs		(1,817)		(2,204)		(3,768)		(2,796)		(5,249)		(8,138)		(6,038)
Profit before income tax		55,097		24,410		41,208		30,572		71,504		142,531		105,746
Income tax expense		10,070		8,312		12,223		9,068		21,663		32,092		23,809
Profit for the year		45,027		16,098		28,985		21,504		49,841		110,439		81,937
Profit attributable to:
Non-controlling interest		11		22		24		18		(131)		(4)		(3)
Owners of Parent company		45,016		16,076		28,961		21,486		49,972		110,443		81,940
Earnings per share
- Basic and diluted		6,478		2,313		4,168		3.09		7,191		15,894		11.79
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
- Basic and diluted		6,478		2,313		4,168		3.09		7,191		15,894		11.79

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,347.86 to US$1.00, the noon buying rate in effect on September 30, 2023 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one common share.