SEOUL, South Korea, Aug. 19, 2010 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (Nasdaq:GRVY) ("Gravity" or "Company"), an online game developer and publisher based in South Korea, today announced its unaudited financial results for the second quarter ended June 30, 2010, prepared in accordance with generally accepted accounting principles in the United States.

Revenues for the second quarter ended June 30, 2010 was KRW 11,326 million (US$ 9,756 thousand), representing a 1.9% increase from KRW 11,119 million for the first quarter ended March 31, 2010 ("QoQ") and a 19.2% decrease from KRW 14,018 million for the second quarter ended June 30, 2009 ("YoY").

REVIEW OF FINANCIAL RESULTS

Revenues

Royalty and licensing fee revenues for the second quarter of 2010 were KRW 6,572 million (US$ 5,661 thousand), representing a 1.4% increase QoQ from KRW 6,484 million but a 21.3% decrease YoY from KRW 8,350 million. The decrease YoY was primarily due to the decreased revenues in the Japanese market.

Subscription revenues for the second quarter of 2010 were KRW 2,691 million (US$ 2,317 thousand), representing a 10.5% increase QoQ from KRW 2,435 million but a 9.7% decrease YoY from KRW 2,980 million. The increase QoQ was driven by the increased revenues in the United States and Canada. The decrease YoY was primarily driven by the decreased revenues in Korea.

Mobile game revenues were KRW 1,840 million (US$ 1,585 thousand) for the second quarter of 2010, representing a modest increase QoQ from KRW 1,839 million and a 5.0% increase YoY from KRW 1,752 million.

Character merchandising, animation and other revenues were KRW 223 million (US$ 193 thousand) for the second quarter of 2010, representing a 38.2% decrease QoQ from KRW 361 million and a 76.2% decrease YoY from KRW 936 million. The decreases QoQ and YoY were primarily due to decreased revenues from sales of Ragnarok DS and decreased royalty revenues from Ragnarok character merchandising.

Cost of Revenue and Operating Expenses

Cost of revenues was KRW 4,942 million (US$ 4,257 thousand) for the second quarter of 2010, representing a 1.7% increase QoQ from KRW 4,861 million and a 9.2% decrease YoY from KRW 5,441 million. The decrease YoY was mainly attributable to the decrease in cost of goods sold by NeoCyon and decrease in rent expenses of the subsidiary in the U.S. due to its relocation in October 2009.

Operating expenses were KRW 6,112 million (US$ 5,265 thousand) for the second quarter of 2010, representing a 22.3% increase QoQ from KRW 4,996 million and a 13.4% increase YoY from KRW 5,389 million. The increases in operating expenses QoQ and YOY were mainly as a result of increased advertising expenses and increase in employee separation costs. The increases in operating expenses QoQ and YoY were partially offset by decreases in salaries and commission paid, respectively.  

Income before income tax expenses and others was KRW 1,384 million (US$ 1,192 thousand) for the second quarter of 2010, which represents a 8.5% decrease QoQ from KRW 1,512 million and a 58.4% decrease YoY from KRW 3,327 million.

As a result of the foregoing factors, Gravity recorded a net income attributable to parent company of KRW 465 million (US$ 401 thousand) for the second quarter of 2010 compared to KRW 381 million for the first quarter of 2010 and KRW 1,938 million for the second quarter of 2009.

The balance of cash and cash equivalents and short-term financial instruments was KRW 66,534 million (US$ 57,308 thousand) as of June 30, 2010.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,161.0 to US$ 1.00, the noon buying rate in effect on August 6, 2010 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 59 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$)  
  As of
  31-Dec-09 30-Jun-10
  KRW US$ KRW US$
Assets (audited) (unaudited) (unaudited) (unaudited)
Current assets:        
Cash and cash equivalents 51,333 44,214 41,034 35,344
Short-term financial instruments 16,000 13,781 25,500 21,964
Short-term available-for-sale investments 4,973 4,283 5,066 4,364
Accounts receivable, net 5,907 5,088 5,457 4,700
Other current assets 4,686 4,037 6,899 5,942
Total current assets 82,899 71,403 83,956 72,314
         
Property and equipment, net 2,837 2,444 2,247 1,936
Leasehold and other deposits 1,496 1,289 1,558 1,342
Intangible assets 12,455 10,728 13,085 11,270
Equity method investments 1,100 947 1,389 1,197
Other non-current assets 1,651 1,422 1,619 1,393
Total assets 102,438 88,233 103,854 89,452
         
Liabilities and Equity        
Current liabilities:        
Accounts payable 3,205 2,761 3,636 3,131
Deferred revenue 3,750 3,230 3,985 3,433
Other current liabilities 1,293 1,113 1,199 1,033
Total current liabilities 8,248 7,104 8,820 7,597
Long-term deferred income 9,658 8,319 9,254 7,971
Accrued severance benefits 478 412 559 482
Other non-current liabilities 444 382 430 369
Total liabilities 18,828 16,217 19,063 16,419
Common shares 3,474 2,992 3,474 2,992
Additional paid-in capital 75,395 63,940 75,395 64,940
Retained earnings 1,265 1,090 2,111 1,819
Accumulated other comprehensive income 3,262 2,809 3,569 3,073
Total parent company shareholders' equity 83,396 71,831 84,549 72,824
Non-controlling interest 214 185 242 209
Total equity 83,610 72,016 84,791 73,033
Total liabilities and equity 102,438 88,233 103,854 89,452
         
* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,161.0 to US$1.00, the noon buying rate in effect on August 6, 2010 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$, except for share and ADS data)
 
  Three months ended Six months ended
  31-Mar-10 30-Jun-09 30-Jun-10 30-Jun-09 30-Jun-10
  (KRW) (KRW) (KRW) (US$) (KRW) (KRW) (US$)
  (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenues:              
Online games-subscription revenue 2,435 2,980 2,691 2,317 6,455 5,125 4,415
Online games-royalties and license fees 6,484 8,350 6,572 5,661 19,165 13,056 11,246
Mobile games 1,839 1,752 1,840 1,585 3,604 3,679 3,169
Character merchandising, animation and other revenue 361 936 223 193 1,401 585 503
Total net revenue 11,119 14,018 11,326 9,756 30,625 22,445 19,333
               
Cost of revenue 4,861 5,441 4,942 4,257 10,869 9,803 8,444
               
Gross profit 6,258 8,577 6,384 5,499 19,756 12,642 10,889
               
Operating expenses:              
Selling, general and administrative 4,335 4,953 5,291 4,558 10,270 9,626 8,291
Research and development 661 436 821 707 785 1,482 1,277
Operating income 1,262 3,188 272 234 8,701 1,534 1,321
               
Other income (expenses):              
Interest income 520 537 508 437 1,274 1,028 885
Interest expense (5) (11) (3) (3) (26) (8) (7)
Foreign currency gains (losses), net (315) (430) 596 513 333 281 242
Others, net 50 43 11 11 42 61 54
               
Income before income tax expenses and equity loss of joint venture and partnership 1,512 3,327 1,384 1,192 10,324 2,896 2,495
               
Income tax expenses 947 1,103 796 686 2,508 1,743 1,502
               
Income before equity loss of related joint venture and partnership 565 2,224 588 506 7,816 1,153 993
               
Equity loss of joint venture and partnership 159 267 120 102 587 279 240
Net income 406 1,957 468 404 7,229 874 753
 LESS: Net income attributable to the non-controlling interest 25 19 3 3 38 28 24
Net income attributable to parent company 381 1,938 465 401 7,191 846 729
Earnings per share              
- Basic and diluted 55 279 67 0.06 1,035 122 0.11
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 (1)              
- Basic and diluted 14 70 17 0.02 259 31 0.03
               
* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,161.0 to US$1.00, the noon buying rate in effect on August 6, 2010 as quoted by the Federal Reserve Bank of New York.
(1) Each ADS represents one-fourth of a common share.
CONTACT:  GRAVITY Co., Ltd.          Mr. Heung Gon Kim, Chief Financial Officer            kheung@gravity.co.kr          Ms. Yoon Joo Lee, IR Manager            yoonjoo.lee@gravity.co.kr            +82-2-2132-7800