SEOUL, South Korea, July 16, 2007 (PRIME NEWSWIRE) -- GRAVITY Co., Ltd. (Nasdaq:GRVY), an online game developer and publisher based in South Korea, today announced its unaudited financial results for the first quarter ended March 31, 2007, prepared in accordance with generally accepted accounting principles in the United States.
Revenues for the first quarter ended March 31, 2007 was KRW 10,513 million (US$11,395 thousand), representing an 8.6% increase from KRW 9,683 million (US$10,495 thousand) for the fourth quarter ended December 31, 2006 ("QoQ") and a 3.7% increase from KRW 10,140 million (US$10,990 thousand) for the first quarter ended March 31, 2006 ("YoY").
Mr. Il Young Ryu, Chairman and Chief Executive Officer of GRAVITY, commented, "We are currently conducting the open beta testing of Ragnarok Online(tm) and Emil Chronicle Online and the closed beta testing of Requiem Online and our casual game line-up, which includes Pucca Racing, W Baseball and Bodycheck Online. We anticipate increased revenues upon commercialization of these games beginning in the third quarter of 2007."
REVIEW OF FINANCIAL RESULTS
Revenues
Royalty and licensing fee revenues for the first quarter ended March 31, 2007 were KRW 7,285 million (US$7,896 thousand), representing a 21.2% increase QoQ from KRW 6,010 million (US$6,514 thousand) and a 7.0% increase YoY from KRW 6,811 million (US$7,382 thousand). The increase was primarily driven by: (1) higher Japan revenues resulting from the micro-transaction model which had been implemented in the Japan market since December 2006; and (2) the introduction of micro-transactions in China and Taiwan beginning in January and February of 2007, respectively.
Subscription revenues for the first quarter of 2007 was KRW 2,062 million (US$2,235 thousand), representing a 2.3% decrease QoQ and a 10.3% decrease YoY compared to KRW 2,111 million (US$2,288 thousand) and KRW 2,300 million (US$2,493 thousand), respectively. The decline resulted mainly from decreased Ragnarok Online(tm) revenues which has faced increased competition in Korea.
Mobile game revenues was KRW 787 million (US$853 thousand) for the first quarter of 2007, representing a 31.7% decrease QoQ from KRW 1,153 million (US$1,250 thousand) but a 26.1% increase YoY from KRW 624 million (US$676 thousand).
Character merchandising, animation and other revenue was KRW 379 million (US$411 thousand) for the first quarter of 2007, representing a 7.3% decrease QoQ from KRW 409 million (US$443 thousand) and a 6.4% decrease YoY from KRW 405 million (US$439 thousand).
Cost of Revenues and Operating Expenses
Cost of revenues were KRW 3,964 million (US$4,297 thousand) for the first quarter of 2007, representing a 4.5% decrease QoQ from KRW 4,150 million (US$4,498 thousand) and a 4.8% decrease YoY from KRW 4,162 million (US$4,511 thousand). GRAVITY's cost of revenues decreased QoQ primarily as a result of decreased outsourcing expenses related to the mobile game business and the amortization of intangible assets due to the impairment of certain intangible assets in 2006.
Operating expenses were KRW 7,612 million (US$8,250 thousand) for the first quarter of 2007, representing a 56.3% decrease QoQ from KRW 17,408 million (US$18,868 thousand) and a 7.5% increase YoY from KRW 7,080 million (US$7,674 thousand). The decrease in operating expenses QoQ is attributed to decreased commissions paid in the first quarter of 2007, impairment losses on intangible assets in the fourth quarter of 2006 and a litigation charge in the fourth quarter of 2006 for the upcoming settlement of an outstanding securities class action lawsuit. The increase in operating expenses YoY resulted primarily from increased research and development expenses for developing Ragnarok Online II(tm).
Losses before income tax expenses and others was KRW 30 million (US$33 thousand) for the first quarter of 2007, which represents a 99.7% decrease QoQ compared with KRW 11,480 million (US$12,443 thousand) and a 94.4% decrease YoY compared with KRW 538 million (US$583 thousand). The income tax expenses for the fourth quarter of 2006 which totaled KRW 12,485 million (US$13,532 thousand) was unusually high because GRAVITY's management determined it more likely than not that GRAVITY and certain of its subsidiaries would not realize the benefits of the deferred income tax assets of KRW 16,337 million (US$17,708 thousand) and thereby recognized the full allowance.
As a result of the foregoing factors, GRAVITY recorded a net loss of KRW 973 million (US$1,055 thousand) for the first quarter of 2007 compared with a net loss of KRW 24,096 million (US$26,117 thousand) for the fourth quarter of 2006 and a net loss of KRW 440 million (US$477 thousand) for the first quarter of 2006.
The balance of cash and cash equivalents and short-term financial instruments was KRW 75,588 million (US$81,929 thousand) as of March 31, 2007.
Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the rate of KRW 922.60 to US$1.00, the noon buying rate in effect on June 30, 2007 as quoted by the Federal Reserve Bank of New York.
About GRAVITY Co., Ltd.
Based in Korea, GRAVITY is a developer and publisher of online games. Gravity's principal product, Ragnarok Online(tm), is a popular online game in many markets, including Japan, Taiwan and Thailand, and is currently commercially offered in 22 markets. For more information about Gravity, please visit http://www.gravity.co.kr.
Forward-Looking Statements:
Certain statements in this press release may include, in addition to historical information, "forward-looking statements" within the meaning of the "safe-harbor" provisions of the U.S. Private Securities Litigation Reform Act 1995. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "project," or "continue" or the negative thereof or other similar words, although not all forward-looking statements contain these words. Investors should consider the information contained in our submissions and filings with the United States Securities and Exchange Commission (the "SEC"), including our registration statement on Form F-1, as amended, and our annual reports on Form 20-F, together with such other documents and we may submit to or file with the SEC from time to time, on Form 6-K. The forward-looking statements speak only as of this press release and we assume no duty to update them to reflect new, changing or unanticipated events or circumstances.
This release can also be viewed at http://www.pressreleasenetwork.com/newsroom
GRAVITY Co., Ltd.
Consolidated Balance Sheet
(In millions of KRW and in thousands of US$)
As of
-----------------------------------------------------
31-Dec-06 31-Mar-06 31-Mar-07
------------------ --------------- ---------------
KRW US$ KRW US$ KRW US$
(audited)(unaudited) (unaudited) (unaudited)
Assets
Current assets
Cash and cash
equivalents 35,314 38,277 26,346 28,556 10,674 11,569
Short-term
financial
instruments 45,835 49,680 54,998 59,612 64,914 70,360
Accounts
receivable,
net 2,163 2,344 4,567 4,950 5,045 5,468
Assets held
for sale -- -- 8,099 8,778 -- --
Other current
assets 4,891 5,301 6,167 6,684 4,391 4,759
-------- -------- -------- -------- -------- --------
Total current
assets 88,203 95,602 100,177 108,580 85,024 92,156
-------- -------- -------- -------- -------- --------
Property and
equipment, net 8,472 9,183 11,295 12,243 7,544 8,177
Leasehold and
other deposits 2,719 2,947 3,388 3,672 2,704 2,931
Intangible
assets 10,393 11,265 12,467 13,513 9,886 10,715
Goodwill 1,451 1,573 1,451 1,573 1,451 1,573
Investment 9,776 10,596 889 964 9,605 10,411
Other non-current
assets 1,547 1,676 6,745 7,311 1,042 1,129
-------- -------- -------- -------- -------- --------
Total assets 122,561 132,842 136,412 147,856 117,256 127,092
======== ======== ======== ======== ======== ========
Liabilities and
shareholders'
equity
Current
liabilities
Accounts
payable 4,552 4,934 5,672 6,148 1,824 1,977
Accrued
litigation 4,648 5,038 -- -- 4,648 5,038
Deferred income 6,046 6,553 4,754 5,153 3,103 3,363
Other current
liabilities 946 1,025 1,766 1,914 557 604
-------- -------- -------- -------- -------- --------
Total current
liabilities 16,192 17,550 12,192 13,215 10,132 10,982
-------- -------- -------- -------- -------- --------
Long-term
deferred income 5,863 6,355 2,538 2,751 7,472 8,099
Accrued severance
benefits 649 704 564 611 682 739
Deferred income
tax liabilities 1,077 1,167 -- -- 934 1,012
Other non-current
liabilities 638 694 700 759 680 737
-------- -------- -------- -------- -------- --------
Total
liabilities 24,419 26,469 15,994 17,336 19,900 21,569
-------- -------- -------- -------- -------- --------
Minority interest 29 31 20 22 35 38
Common stock 3,474 3,765 3,474 3,765 3,474 3,765
Additional
paid-in capital 74,694 80,960 75,001 81,293 74,818 81,095
Retained earnings 20,322 22,027 42,146 45,682 19,349 20,972
Accumulated other
comprehensive
income (loss) (377) (409) (223) (242) (320) (347)
-------- -------- -------- -------- -------- --------
Total
shareholders'
equity 98,113 106,343 120,398 130,498 97,321 105,485
-------- -------- -------- -------- -------- --------
Total
liabilities
and
shareholders'
equity 122,561 132,842 136,412 147,856 117,256 127,092
======== ======== ======== ======== ======== ========
* For convenience, the KRW amounts are expressed in U.S. dollars at
the rate of KRW922.60 to US$1.00, the noon buying rate in effect on
June 30, 2007 as quoted by the Federal Reserve Bank of New York.
GRAVITY Co., Ltd.
Consolidated Statements of Operations
(In millions of KRW and in thousands of US$)
Three months ended
----------------------------------------------------
31-Dec-06 31-Mar-06 31-Mar-07
------------------ --------------- --------------
KRW US$ KRW US$ KRW US$
(audited)(unaudited) (unaudited) (unaudited)
Online games-
subscription
revenue 2,111 2,288 2,300 2,493 2,062 2,235
Online games-
royalties and
license fees 6,010 6,514 6,811 7,382 7,285 7,896
Mobile games 1,153 1,250 624 676 787 853
Character
merchandising,
animation and
other revenue 409 443 405 439 379 411
------- ------- ------- ------- ------- -------
Total net
revenues 9,683 10,495 10,140 10,990 10,513 11,395
Cost of revenues 4,150 4,498 4,162 4,511 3,964 4,297
------- ------- ------- ------- ------- -------
Gross profit 5,533 5,997 5,978 6,479 6,549 7,098
Operating
expenses
Selling,
general and
administrative 10,262 11,123 5,307 5,752 5,032 5,454
Litigation
Charges 4,648 5,038 -- -- -- --
Research and
development 2,498 2,707 1,773 1,922 2,580 2,796
------- ------- ------- ------- ------- -------
Operating
income
(loss) (11,875) (12,871) (1,102) (1,195) (1,063) (1,152)
Other income
(expenses)
Interest income 720 780 799 866 754 817
Interest
expense (42) (45) (38) (41) (9) (10)
Foreign
currency gains
(losses), net (331) (359) (155) (168) 288 312
Foreign
currency
forward
transaction,
net 15 16 (28) (30) -- --
Others, net 33 36 (14) (15) -- --
------- ------- ------- ------- ------- -------
Income (loss)
before
income tax
expense,
minority
interest and
equity in
losses of
related
joint
venture (11,480) (12,443) (538) (583) (30) (33)
Income tax
expenses
(benefit) 12,485 13,532 (215) (233) 766 830
------- ------- ------- ------- ------- -------
Income (loss)
before
minority
interest and
equity in
loss of
related
joint
venture (23,965) (25,975) (323) (350) (796) (863)
------- ------- ------- ------- ------- -------
Minority interest 7 8 (1) (1) 6 7
Cumulative effect
of change in
accounting
principle 849 920 -- -- -- --
Equity in loss
of related joint
venture 973 1,054 118 128 171 185
------- ------- ------- ------- ------- -------
Net income
(loss) (24,096) (26,117) (440) (477) (973) (1,055)
======= ======= ======= ======= ======= =======
* For convenience, the KRW amounts are expressed in U.S. dollars at
the rate of KRW922.60 to US$1.00, the noon buying rate in effect on
June 30, 2007 as quoted by the Federal Reserve Bank of New York.