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GRAVITY Reports First Quarter of 2014 Results

(May 22, 2014)

SEOUL, South Korea, May 22, 2014 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (Nasdaq:GRVY) ("Gravity" or the "Company"), an online game developer and publisher based in South Korea, today announced its unaudited financial results for the first quarter ended March 31, 2014, prepared in accordance with generally accepted accounting principles in the United States.



Revenues for the first quarter ended March 31, 2014 were KRW 10,767 million (US$10,113 thousand), representing a 4.6% increase from KRW 10,294 million for the fourth quarter ended December 31, 2013 ("QoQ") and a 8.7% decrease from KRW 11,796 million for the first quarter ended March 31, 2013 ("YoY").



Review of financial results


Revenues




Royalty and license fee revenue for the first quarter ended March 31, 2014 was KRW 3,575 million (US$3,358 thousand), representing a 25.8% decrease QoQ from KRW 4,821 million and a 46.3% decrease YoY from KRW 6,654 million. The decrease QoQ was mainly due to revenues from a lump-sum recognition of a portion of the license fees for the license and distribution agreement for Ragnarok Online II in China in the fourth quarter of 2013 due to its termination in November 2013, which did not occur in the first quarter of 2014. The decrease YoY was primarily due to decreased revenues from Ragnarok Online in Japan.



Subscription revenue for the first quarter 2014 was KRW 1,890 million (US$1,775 thousand), representing a 107.5% increase QoQ but a 3.0% decrease YoY compared to KRW 911 million and KRW 1,948 million, respectively. The increase QoQ was mostly driven by increased revenues from Ragnarok Online in Korea. The decrease YoY was mainly due to a decrease in revenues from Ragnarok Online in the United States and Canada.



Mobile games and applications revenue was KRW 4,317 million (US$4,055 thousand) for the first quarter 2014, representing a 15.5% increase QoQ from KRW 3,739 million and a 85.8% increase YoY from KRW 2,323 million. The increase QoQ mostly resulted from increased revenues from Ragnarok Online — Uprising: Valkyrie and revenues from Road to Dragons, which was launched in Korea in January 2014. The increase YoY was mainly attributable to increased revenues from mobile applications and mobile game operation service provided to third-party enterprises, and revenues from Road to Dragons.



Character merchandising and other revenue was KRW 985 million (US$925 thousand) for the first quarter 2014, representing a 19.7% increase QoQ from KRW 823 million and a 13.1% increase YoY from KRW 871 million.



Cost of Revenues and Operating Expenses



Cost of revenues was KRW 9,467 million (US$8,892 thousand) for the first quarter 2014, representing a 9.4% decrease QoQ from KRW 10,445 million but a 28.0% increase YoY from KRW 7,397 million. The decrease QoQ was attributable to decrease in amortization on intangible assets and commission paid. The Company's increased cost of revenues YoY primarily resulted from increased commission paid related to our services provided for third-party enterprises and to digital storefronts where our mobile games are offered.



Operating expenses were KRW 4,178 million (US$3,924 thousand) for the first quarter 2014, representing a 61.7% decrease QoQ from KRW 10,904 million and a 29.8% decrease YoY from KRW 5,951 million. The decrease QoQ was mostly due to impairment losses on intangible assets in the fourth quarter of 2013, which did not occur in the first quarter of 2014. The decrease YoY was attributable to decreased salaries as a result of a decrease in the number of employees, and decreased research and development expenses.



Loss before income tax expenses and others was KRW 2,503 million (US$2,351 thousand) for the first quarter of 2014, which represents a 77.3% decrease QoQ from loss before income tax expenses and others of KRW 11,045 million.



As a result of the foregoing factors, Gravity recorded a net loss attributable to parent company of KRW 2,969 million (US$2,789 thousand) for the first quarter of 2014 compared to a net loss attributable to parent company of KRW 13,538 million for the fourth quarter of 2013 and a net loss attributable to parent company of KRW 1,629 million for the first quarter of 2013.



The balance of cash and cash equivalents and short-term financial instruments was KRW 46,776 million (US$43,936 thousand) as of March 31, 2014.



Note: For convenience purposes only, the KRW amounts have been expressed in the U.S. dollars at the exchange rate of KRW 1,064.65 to US$ 1.00, the noon buying rate in effect on March 31, 2014, 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 games. Gravity's principal product, Ragnarok Online, is a popular online game in many markets, including Japan, Taiwan and Thailand, and is currently commercially offered in 60 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 registration statement on Form F-1, as amended, and our annual reports on Form 20-F, together with such other documents and 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.
























































































































































































































































































GRAVITY Co., Ltd.

Consolidated Balance Sheets

 

 

 

 

 

(In millions of KRW and thousands of US$)

 

 

 

 

 

As of

 

31-Dec-13

31-Mar-14

Assets

KRW

(audited)

US$

(audited)

KRW

(unaudited)

US$

(unaudited)

Current assets:

 

 

 

 

Cash and cash equivalents

31,222

29,326

32,776

30,786

Short-term financial instruments

18,000

16,907

14,000

13,150

Accounts receivable, net

5,333

5,009

5,294

4,973

Other current assets

4,096

3,847

3,993

3,750

Total current assets

58,651

55,089

56,063

52,659

 

 

 

 

 

Property and equipment, net

2,315

2,174

1,968

1,848

Leasehold and other deposits

5,569

5,231

5,570

5,232

Intangible assets

13,919

13,074

12,962

12,175

Other non-current assets

7,311

6,868

7,292

6,849

Total assets

87,765

82,436

83,855

78,763

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

4,374

4,108

3,472

3,261

Deferred revenue

5,782

5,431

6,215

5,838

Other current liabilities

1,244

1,169

1,195

1,122

Total current liabilities

11,400

10,708

10,882

10,221

Long-term deferred revenue

6,875

6,458

6,511

6,116

Accrued severance benefits

263

247

206

193

Other non-current liabilities

227

213

190

179

Total liabilities

18,765

17,626

17,789

16,709

Common shares

3,474

3,263

3,474

3,263

Additional paid-in capital(1)

75,076

70,517

63,656

59,791

Accumulated deficit(1)

(10,889)

(10,228)

(2,438)

(2,290)

Accumulated other comprehensive income

1,674

1,573

1,654

1,553

Total parent company shareholders' equity

69,335

65,125

66,346

62,317

Non-controlling interest

(335)

(315)

(280)

(263)

Total equity

69,000

64,810

66,066

62,054

Total liabilities and equity

87,765

82,436

83,855

78,763

 

 

 

 

 

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW1,064.65 to US$1.00, the noon buying rate in effect on March 31, 2014 as quoted by the Federal Reserve Bank of New York.

 

 

 

 

(1) The Company disposed the accumulated deficit by transferring KRW 11,420 million out of KRW 75,076 million of its additional paid-in capital in the fiscal year 2013.

 

 

 

 





































































































































































































































































































































































































































































 

GRAVITY Co., Ltd.

Consolidated Statements of Operations

 

 

 

 

 

 

 

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

 

 

 

 

Three months ended

 

31-Dec-13

31-Mar-13

31-Mar-14

 

(KRW)

(unaudited)

(US$)

(unaudited)

(KRW)

(unaudited)

(US$)

(unaudited)

(KRW)

(unaudited)

(US$)

(unaudited)

Revenues:

 

 

 

 

 

 

Online games-subscription revenue

911

856

1,948

1,830

1,890

1,775

Online games-royalties and license fees

4,821

4,528

6,654

6,250

3,575

3,358

Mobile games and applications(1)

3,739

3,512

2,323

2,182

4,317

4,055

Character merchandising and other revenue(1)

823

773

871

818

985

925

Total net revenue

10,294

9,669

11,796

11,080

10,767

10,113

 

 

 

 

 

 

 

Cost of revenue

10,445

9,811

7,397

6,948

9,467

8,892

 

 

 

 

 

 

 

Gross profit (loss)

(151)

(142)

4,399

4,132

1,300

1,221

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

Selling, general and administrative

4,276

4,016

4,407

4,139

3,366

3,162

Research and development

1,540

1,447

1,392

1,308

812

762

Impairment losses on intangible assets

5,088

4,779

152

143



Total operating expenses

10,904

10,242

5,951

5,590

4,178

3,924

 

 

 

 

 

 

 

Operating loss

(11,055)

(10,384)

(1,552)

(1,458)

(2,878)

(2,703)

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

Interest income

299

281

370

348

282

265

Interest expense

(4)

(4)

(11)

(10)

(3)

(3)

Foreign currency income (loss), net

(285)

(267)

60

56

96

90

 

 

 

 

 

 

 

Loss before income tax expenses and equity loss on investments

(11,045)

(10,374)

(1,133)

(1,064)

(2,503)

(2,351)

 

 

 

 

 

 

 

Income tax expenses

3,034

2,850

875

822

410

385

 

 

 

 

 

 

 

Loss before equity loss on investments

(14,079)

(13,224)

(2,008)

(1,886)

(2,913)

(2,736)

 

 

 

 

 

 

 

Equity income (loss) on investments

5

5

(23)

(22)



Net loss

(14,074)

(13,219)

(2,031)

(1,908)

(2,913)

(2,736)

Net income (loss) attributable to:

 

 

 

 

 

 

Non-controlling interest

(536)

(503)

(402)

(378)

56

53

Parent company

(13,538)

(12,716)

(1,629)

(1,530)

(2,969)

(2,789)

Loss per share

 

 

 

 

 

 

- Basic and diluted

(1,948)

(1.83)

(234)

(0.22)

(427)

(0.40)

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

Loss per ADS(2)

 

 

 

 

 

 

- Basic and diluted

(487)

(0.46)

(59)

(0.06)

(107)

(0.10)

 

 

 

 

 

 

 

  * For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW1,064.65 to US$1.00, the noon buying rate in effect on March 31, 2014 as quoted by the Federal Reserve Bank of New York.

 

 

 

 

 

 

  (1) The Company reclassified certain revenue within Mobile games and applications revenue as Character merchandising, animation and other revenue in 2013 as this better represents the nature of the revenue, and the effect of such reclassification was reflected in each quarter of 2013. The reclassification has no effect on the Company's previously reported total net revenue and other line items on the consolidated financial statements.

 

 

 

 

 

 

  (2) Each ADS represents one-fourth of a common share.

 

 

 

 

 

 

CONTACT: Mr. Heung Gon Kim
Chief Financial Officer
Gravity Co., Ltd.
Email: kheung@gravity.co.kr

Ms. Yoon Joo Lee
IR Manager
Gravity Co., Ltd.
Email: yoonjoo.lee@gravity.co.kr
Telephone: +82-2-2132-7800

Page: 1


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