Replies to post #122 on GRAVITY CO LTD SPONSORED ADR (GRVY)

[10 bagger]

GRVY... $2.20


GRAVITY REPORTS SECOND QUARTER OF 2009 RESULTS

Seoul, South Korea — August 27, 2009 — GRAVITY Co., Ltd. (NasdaqGM: 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, 2009, prepared in accordance with generally accepted accounting principles in the United States.

Revenues for the second quarter ended June 30, 2009 was KRW 14,018 million (US$11,453 thousand), representing a 15.6% decrease from KRW 16,607 million for the first quarter ended March 31, 2009 (“QoQ”) and a 10.7% increase from KRW 12,662 million for the second quarter ended June 30, 2008 (“YoY”).

REVIEW OF FINANCIAL RESULTS
Revenues
Royalty and licensing fee revenues for the second quarter ended June 30, 2009 were KRW 8,350 million (US$6,822 thousand), representing a 22.8% decrease QoQ from KRW 10,816 million but a 23.9% increase YoY from KRW 6,742 million. The decrease QoQ was primarily due to the decreased revenues in Japan and the strengthening of the Korean Won against the Japanese Yen. The increase YoY was mainly resulted from the higher revenues in Japan due to the weakening of the Korean Won against the Japanese Yen and increased revenues in Japan.


Subscription revenues for the second quarter of 2009 was KRW 2,980 million (US$2,435 thousand), representing a 14.2% decrease QoQ and a 3.3% decrease YoY compared to KRW 3,475 million and KRW 3,082 million, respectively. The decrease QoQ and YoY was primarily resulted from the decreased revenues in Korea. The decrease YoY was partially offset by the growth in revenues from the U.S., Canada, Russia and CIS countries.


Mobile game revenues was KRW 1,752 million (US$1,431 thousand) for the second quarter of 2009, representing a 5.4% decrease QoQ from KRW 1,852 million and a 15.6% decrease YoY from KRW 2,076 million.


Character merchandising, animation and other revenue was KRW 936 million (US$765 thousand) for the second quarter of 2009, representing a 101.7% increase QoQ from KRW 464 million and a 22.8 % increase YoY from KRW 762 million. The QoQ and YoY revenue growth were primarily driven by revenues from sales of Ragnarok DS and the increased royalty revenues from Ragnarok character merchandising for the second quarter of 2009.


Cost of Revenue and Operating Expenses
Cost of revenue were KRW 5,441 million (US$4,446 thousand) for the second quarter of 2009, representing a modest increase for QoQ from KRW 5,427 million and a 27.5% decrease YoY from KRW 7,505 million. Such decrease in YoY result was mainly attributed to i) decrease in salaries of the Company’s subsidiaries in the U.S. mainly resulting from the salaries of L5 Games Inc. for the second quarter of 2008 which did not occur in the second quarter of 2009 due to the liquidation proceedings taken place in August 2008; and decrease in salaries at the headquarters; ii) decline in commission paid ; and iii) fully completed amortization of intangible assets in December 2008, which occurred when the Company acquired NeoCyon in November and December 2005.








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Operating expenses were KRW 5,389 million (US$4,402 thousand) for the second quarter of 2009, representing a 4.9% decrease QoQ from KRW 5,667 million and a 8.4% decrease YoY from KRW 5,881 million. The decrease in operating expenses QoQ was mostly resulting from decrease in fringe benefit as expenses for social insurance are incurred only in the first quarter of each year as well as from decrease in severance benefits. The decrease in operating expenses YoY was attributed to decrease in advertising and R&D expenses.


Income before income tax expenses and others was KRW 3,327 million (US$2,718 thousand) for the second quarter of 2009. The Company recorded income before income tax expenses and others in the first quarter of 2009 and the second quarter of 2008, which were KRW 6,997 million and KRW 220 million, respectively.


As a result of the foregoing factors, Gravity recorded net income of KRW 1,938 million (US$1,583 thousand) for the second quarter of 2009 compared to net income of KRW 5,253 million for the first quarter of 2009 and net loss of KRW 782 million for the second quarter of 2008.


The balance of cash and cash equivalents and short-term financial instruments was KRW 69,952 million (US$57,151 thousand) as of June 30, 2009.


Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the rate of KRW 1,224.0 to US$1.00, the noon buying rate in effect on August 7, 2009 as quoted by the Federal Reserve Bank of New York.


About GRAVITY Co., Ltd.

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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 38 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.


Contact:
Mr. Heung Gon Kim
Chief Financial Officer
Gravity Co., Ltd.


Email: [e-mail]

Ms. Yoon Joo Lee
IR Manager
Gravity Co., Ltd.


Email: [e-mail]
Telephone: [phone]

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[riskanalyst]

Earnings/Revenues are impacted by currency. I did not think they are going to post better earnings than last Q. Last Q had some JPY appreciation built in to revenues. I'd like to see the breakdown in revenues by games, but we don't get that in the Q. What I do know is that Requiem is a fairly successful game. One main gaming website that has over 300 of these MMOPG rated has the game listed as a top 10 free to play game and top 25 overall. The question is how successful are they at converting that to a revenue stream, since the players pay for premium features. We know that their main property Ragnarok is a fading property and the key is for them to finally get Ragnarok II out. Given all the delays, maybe the mid 2010 date is an actual launch date. I think the stock has already discounted their launch given that this trades barely above cash value. Being a former video gamer, I'm sure they will win back some of their former fan base. The loyalty to a game is strong enough where some will switch and stay.