SEOUL, South Korea, Sept. 10, 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 second quarter ended June 30, 2007, prepared in accordance with generally accepted accounting principles in the United States.
Revenues for the second quarter ended June 30, 2007 was KRW 9,408 million (US$ 10,029 thousand), representing a 10.5% decrease from KRW 10,513 million for the first quarter ended March 31, 2007 ("QoQ") and a 16.7% decrease from KRW 11,294 million for the second quarter ended June 30, 2006 ("YoY"). However, revenues for the first half ended June 30, 2007 was KRW 19,921 million (US$ 21,236 thousand), representing a 2.0% increase from KRW 19,529 million for the second half ended December 31, 2006.
REVIEW OF FINANCIAL RESULTS
Revenues
Royalty and licensing fee revenues for the second quarter ended June 30, 2007 were KRW 5,627 million (US$ 5,998 thousand), representing a 22.8% decrease QoQ from KRW 7,285 million and a 19.2% decrease YoY from KRW 6,966 million. The decrease was primarily due to: (1) increased competition in the global online gaming market and (2) the strengthening of the Korean Won against the Japanese Yen. GRAVITY derived KRW 3,873 million of royalty and licensing fee revenues from the Japanese market, which accounted for 68.8% of the total royalty and licensing fee revenues in the second quarter of 2007. However, royalty and licensing fee revenues for the first half ended June 30, 2007 was KRW 12,912 million (US$ 13,764 thousand), representing a 4.6% increase from KRW 12,346 million for the second half ended December 31, 2006.
Subscription revenues for the second quarter of 2007 was KRW 1,846 million (US$ 1,968 thousand), representing a 10.5% decrease QoQ and a 4.6% decrease YoY compared to KRW 2,062 million and KRW 1,935 million, respectively. The decline resulted mainly from decreased Ragnarok Online(tm) revenues which has faced increased competition in Korea.
Mobile game revenues was KRW 1,396 million (US$ 1,487 thousand) for the second quarter of 2007, representing a 77.4% increase QoQ from KRW 787 million and a 9.2% increase YoY from KRW 1,278 million due to the revenues from the mobile item shop of Time N Tales.
Character merchandising, animation and other revenue was KRW 539 million (US$ 576 thousand) for the second quarter of 2007, representing a 42.2% increase QoQ from KRW 379 million and a 51.7% decrease YoY from KRW 1,115 million.
Cost of Revenues and Operating Expenses
Cost of revenues were KRW 4,283 million (US$ 4,566 thousand) for the second quarter of 2007, representing a 8.0% increase QoQ from KRW 3,964 million and a 11.0% decrease YoY from KRW 4,814 million. GRAVITY'S cost of revenues increased primarily as a result of commissions paid relating to Ragnarok Online IITM Concert held in June 2007.
Operating expenses were KRW 7,977 million (US$ 8,503 thousand) for the second quarter of 2007, representing a 4.8% increase QoQ from KRW 7,612 million and a 255.8% increase YoY from KRW 2,242 million. The increase in operating expenses QoQ is attributed to increased advertising expenses for Ragnarok Online IITM and Emil Chronicle Online in the second quarter of 2007 while the increase in operating expenses YoY is due to the reimbursement of fees relating to an investigation into an alleged accounting fraud by the former Chairman, as well as the sale of the company's building in the second quarter of 2006. However, operating expenses for the first half ended June 30, 2007 was KRW 15,589 million (US$ 16,618 thousand), representing a 40.3% decrease from KRW 26,092 million for the second half ended December 31, 2006.
Loss before income tax expenses and others was KRW 2,566 million (US$ 2,735 thousand) for the second quarter of 2007, which represents an 8,453.3% increase QoQ compared with KRW 30 million. GRAVITY recorded KRW 4,910 million of income before income tax expenses and others in the second quarter of 2006. However, losses before income tax expenses and others for the first half ended June 30, 2007 was KRW 2,596 million (US$ 2,767 thousand), representing a 81.9% decrease from KRW 14,304 million for the second half ended December 31, 2006.
As a result of the foregoing factors, GRAVITY recorded a net loss of KRW 3,415 million (US$ 3,640 thousand) for the second quarter of 2007 compared with a net loss of KRW 973 million for the first quarter of 2007 and a net income of KRW 4,469 million for the second quarter of 2006. However, the net loss for the first half ended June 30, 2007 was KRW 4,388 million (US$ 4,677 thousand), representing a 83.3% decrease from KRW 26,294 million for the second half ended December 31, 2006.
The balance of cash and cash equivalents and short-term financial instruments was KRW 75,640 million (US$ 80,631 thousand) as of June 30, 2007.
CONFERENCE CALL
GRAVITY will hold a conference call to discuss the Company's financial results for the second quarter ended June 30, 2007 on Monday, September 10, 2007 at 8:00 P.M. U.S. Eastern Standard Time (Tuesday, September 11, 2007 at 9:00 A.M. Seoul time).
To participate in the conference call, please dial one of the following numbers 10 minutes prior to the call with a verbal pass code VL60201:
U.S. Toll Free Number: 1-877-627-3548 South Korea Toll Free Number: 00-30-813-1585 International Access Number: +1-302-607-2018
Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the rate of KRW 938.10 to US$ 1.00, the noon buying rate in effect on August 31, 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.
GRAVITY Co., Ltd.
Consolidated Balance Sheet
(In millions of KRW and in thousands of US$)
As of
-----------------------------------------------
31-Mar-07 30-Jun-06
---------------------- -----------------------
KRW US$ KRW US$
Assets (unaudited) (unaudited) (unaudited) (unaudited)
Current assets
Cash and cash
equivalents 10,674 11,378 16,825 17,935
Short-term financial
instruments 64,914 69,197 64,705 68,974
Accounts receivable,
net 5,045 5,378 4,570 4,872
Other current assets 4,391 4,681 8,561 9,126
------- ------- ------- -------
Total current assets 85,024 90,634 94,661 100,907
------- ------- ------- -------
Property and equipment,
net 7,544 8,042 10,523 11,217
Leasehold and other
deposits 2,704 2,882 3,121 3,327
Intangible assets 9,886 10,538 12,520 13,346
Goodwill 1,451 1,547 1,451 1,547
Investments 9,605 10,239 10,414 11,101
Other non-current assets 1,042 1,111 6,373 6,794
------- ------- ------- -------
Total assets 117,256 124,993 139,063 148,239
======= ======= ======= =======
Liabilities and
shareholders' equity
Current liabilities
Accounts payable 1,824 1,944 4,799 5,116
Accrued litigation 4,648 4,955 -- --
Deferred income 3,103 3,308 4,218 4,496
Other current
liabilities 557 594 1,471 1,568
------- ------- ------- -------
Total current
liabilities 10,132 10,801 10,488 11,180
------- ------- ------- -------
Long-term deferred
income 7,472 7,965 2,235 2,382
Accrued severance
benefits 682 727 611 651
Deferred income tax
liabilities 934 995 -- --
Other non-current
liabilities 680 725 711 759
------- ------- ------- -------
Total liabilities 19,900 21,213 14,045 14,972
------- ------- ------- -------
Minority interest 35 37 21 22
Common stock 3,474 3,703 3,474 3,703
Additional paid-in
capital 74,818 79,755 75,118 80,075
Retained earnings 19,349 20,626 46,616 49,692
Accumulated other
comprehensive income
(loss) (320) (341) (211) (225)
------- ------- ------- -------
Total shareholders'
equity 97,321 103,743 124,997 133,245
------- ------- ------- -------
Total liabilities
and shareholders'
equity 117,256 124,993 139,063 148,239
======= ======= ======= =======
(In millions of KRW and in thousands of US$)
As of
------------------------
30-Jun-07
------------------------
KRW US$
Assets (unaudited) (unaudited)
Current assets
Cash and cash equivalents 23,712 25,277
Short-term financial instruments 51,928 55,354
Accounts receivable, net 4,262 4,543
Other current assets 3,653 3,894
------- -------
Total current assets 83,555 89,068
------- -------
Property and equipment, net 7,296 7,777
Leasehold and other deposits 2,257 2,406
Intangible assets 9,977 10,635
Goodwill 1,451 1,547
Investments 9,442 10,065
Other non-current assets 1,183 1,261
------- -------
Total assets 115,161 122,759
======= =======
Liabilities and shareholders' equity
Current liabilities
Accounts payable 3,399 3,623
Accrued litigation 4,648 4,955
Deferred income 3,237 3,451
Other current liabilities 632 674
------- -------
Total current liabilities 11,916 12,703
------- -------
Long-term deferred income 7,782 8,295
Accrued severance benefits 686 731
Deferred income tax liabilities 768 819
Other non-current liabilities 60 64
------- -------
Total liabilities 21,212 22,612
------- -------
Minority interest 47 50
Common stock 3,474 3,703
Additional paid-in capital 74,872 79,812
Retained earnings 15,934 16,985
Accumulated other comprehensive income (loss) (378) (403)
------- -------
Total shareholders' equity 93,902 100,097
------- -------
Total liabilities and shareholders' equity 115,161 122,759
======= =======
* For convenience, the KRW amounts are expressed in U.S. dollars at
the rate of KRW938.10 to US$1.00, the noon buying rate in effect on
August 31, 2007 as quoted by the Federal Reserve Bank of New York.
GRAVITY Co., Ltd.
Consolidated Statements of Operations
(In millions of KRW and in thousands of US$)
Three months ended
-----------------------------------------------
31-Mar-07 30-Jun-06 30-Jun-07
(KRW) (KRW) (KRW) (US$)
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues
Online games-
subscription revenue 2,062 1,935 1,846 1,968
Online games-royalties
and license fees 7,285 6,966 5,627 5,998
Mobile games 787 1,278 1,396 1,487
Character merchandising,
animation and other
revenue 379 1,115 539 576
------- ------- ------- -------
Total net revenues 10,513 11,294 9,408 10,029
Cost of revenues 3,964 4,814 4,283 4,566
------- ------- ------- -------
Gross profit 6,549 6,480 5,125 5,463
Operating expenses
Selling, general and
administrative 5,032 5,591 5,745 6,124
Litigation Charges -- -- -- --
Research and
development 2,580 2,679 2,232 2,379
Proceeds from the former
chairman due to fraud -- (4,947) -- --
Gain on disposal of
assets held for sale -- (1,081) -- --
------- ------- ------- -------
Operating income (loss) (1,063) 4,238 (2,852) (3,040)
Other income (expenses)
Interest income 754 690 790 842
Interest expense (9) (19) (6) (6)
Foreign currency gains
(losses), net 288 65 (694) (740)
Gain (loss) on foreign
currency forward
transaction, net -- (39) -- --
Others, net -- (25) 196 209
------- ------- ------- -------
Income (loss) before
income tax expense,
minority interest and
equity in loss of
related joint venture (30) 4,910 (2,566) (2,735)
Income tax expenses 766 426 674 718
------- ------- ------- -------
Income (loss) before
minority interest and
equity in loss of
related joint venture (796) 4,484 (3,240) (3,453)
------- ------- ------- -------
Minority interest 6 -- 12 13
Equity in loss of related
joint venture 171 15 163 174
Cumulative effect of
change in accounting
principle -- -- -- --
------- ------- ------- -------
Net income (loss) (973) 4,469 (3,415) (3,640)
======= ======= ======= =======
(In millions of KRW and in thousands of US$)
Six months ended
-----------------------------------
31-Dec-06 30-Jun-07
(KRW) (KRW) (US$)
(unaudited) (unaudited) (unaudited)
Revenues
Online games-subscription revenue 4,184 3,908 4,166
Online games-royalties and
license fees 12,346 12,912 13,764
Mobile games 1,938 2,183 2,327
Character merchandising,
animation and other revenue 1,061 918 979
------- ------- -------
Total net revenues 19,529 19,921 21,236
Cost of revenues 8,770 8,247 8,791
------- ------- -------
Gross profit 10,759 11,674 12,445
Operating expenses
Selling, general and
administrative 16,657 10,777 11,488
Litigation Charges 4,648 -- --
Research and development 4,787 4,812 5,130
Proceeds from the former
chairman due to fraud -- -- --
Gain on disposal of assets held
for sale -- -- --
------- ------- -------
Operating income (loss) (15,333) (3,915) (4,173)
Other income (expenses)
Interest income 1,485 1,544 1,646
Interest expense (38) (15) (16)
Foreign currency gains (losses),
net (638) (406) (433)
Gain (loss) on foreign currency
forward transaction, net 219 -- --
Others, net 1 196 209
------- ------- -------
Income (loss) before income tax
expense, minority interest and
equity in loss of related
joint venture (14,304) (2,596) (2,767)
Income tax expenses 11,858 1,440 1,535
------- ------- -------
Income (loss) before minority
interest and equity in loss of
related joint venture (26,162) (4,036) (4,302)
------- ------- -------
Minority interest 8 18 19
Equity in loss of related joint
venture 973 334 356
Cumulative effect of change in
accounting principle 849 -- --
------- ------- -------
Net income (loss) (26,294) (4,388) (4,677)
======= ======= =======
* For convenience, the KRW amounts are expressed in U.S. dollars at
the rate of KRW938.10 to US$1.00, the noon buying rate in effect on
August 31, 2007 as quoted by the Federal Reserve Bank of New York.